Lance Ippolito is an expert trader specializing in trading institutional order flow, also known as unusual options activity and catalyst-based events. He has hosted several trading rooms for the past seven years, where he focuses on educating and mentoring traders.
Below, Lance Ippolito shares whether or not trading options on ETFs is a waste of time.
Below are some of the best ETFs for trading options:
S&P 500 SPDR (SPY)
This ETF currently has the most liquid options on any market. The ETF is very popular, and its bid-ask price is usually very narrow.
Nasdaq QQQ Invesco ETF (QQQ)
By Market capitalization, Nasdaq is the second largest stock exchange in the world. Its quarterly returns have been substantial in the new year. This made quite a recovery from their plunge in 2018.
Emerging Markets iShares MSCI ETF (EEM)
This share combines large and medium-sized companies from emerging markets, I.e., from countries that are not yet highly developed. This includes Asia, North Africa, South America, and Eastern Europe. The countries more exposed to EEM include Mexico, Hong Kong, Taiwan, South Korea, Brazil, Russia, India, China, and South Africa.
Russell 2000 iShares ETF (IWM)
Russell 2000 iShares is the biggest ETF to invest in if you are interested in U.S. small-cap stocks. This ETF can turn out to be a high-reward investment for those who can bear short-term uncertainty. It is, however, a high-risk stock.
High Yield Corp Bond Ishares Iboxx $ ETF (HYG)
The HYG is also a very popular ETF for high-yield corporate bonds with denominations in U.S. dollars. Its low-credit quality bonds mean investors face high market risk and the possibility of higher returns.
ETF Options Trading Hours
Most ETF options will trade at the exact times as the Exchange Traded Fund (ETF). This is mainly between 9:30sm to 4:00 pm ET. For some broad-based ETFs, the trading hours are between 9:30 am-4:00 pm ET.
Is Trading Options On ETFs A Waste Of Time?
ETFs have their place when it comes to investing. They pool some types of securities together to reproduce the broader move in certain commodities, indexes, and equities. According to Lance Ippolito, he won’t be caught playing in ETF options as there just isn’t enough money to make.
The issue is that they are made up of so many different elements. So, if any of them has a sudden rise, downturn, or crash, the ETF will move but not with the same intensity. It only makes sense if you’re looking at investing for months or years.
Many people are after the big moves and crashes. They would instead buy stocks in the fund like Citigroup Inc. (NYSE: C) or Deutsch Bank AG (NYSE: DB), where they’re more likely to see a more dramatic move than buy an options play in an ETF like the Financial Select Sector SPSR Fund (NYSE Arca: XLF)