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I need to work with option prices in my master's thesis. Specifically, I investigate index options (S&P 500). Which kind of options could you recommend to use? I have seen that there are options written on the index itself, but also options written on index futures or ETF's.

Therefore I would like to ask if someone knows which kind of options are the most liquid or exhibit the most strikes/expiration dates.

Thanks in advance!

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  • $\begingroup$ First of all these 3 markets are of course inter-related and they are plenty liquid.. The Index options at CBOE are probably the most liquid. A disadvantage of the CME options on futures is that they are American which makes them slightly more complicated for research, an advantage for trading purposes is that they have smaller margin requirements. The options on ETFs are the newest (=> less history), their liquidity is increasing and approaching the other two from below. Choose whichever you can most easily get data for. (PS: these are opinions of a trader not hard data). $\endgroup$ – noob2 May 25 '20 at 20:30
  • $\begingroup$ Thanks! Do you know if there is historical data available on Bloomberg terminal or Thomson Reuters Eikon? I spent the whole day searching for it, but I could only find current prices. Unfortunately I don't have access to Optionmetrics $\endgroup$ – elemenope May 25 '20 at 20:36
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In terms of bid-ask spread (in vol points) in the electronic market, I would say SPY options are the most liquid.

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  • $\begingroup$ A carefully done study comparing liquidity (from various points of view) for these 3 markets and recommending (in an unbiased objective manner) which is better for what purpose would be an interesting project in itself IMHO. $\endgroup$ – noob2 May 25 '20 at 20:45
  • $\begingroup$ noob2: fully agree. $\endgroup$ – CABLE May 25 '20 at 20:49
  • $\begingroup$ I believe you are right on bid-ask spread and my info was out of date. Thanks. $\endgroup$ – noob2 May 26 '20 at 19:58

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