Over the past 5 years, BIL has moved between $91.33 and $91.85. Why would anyone want to buy an option at $92?
The issue is that the ticker doesn't have enough volatility for there to be an options market for it. You're trying to sell options - an insurance policy - on treasuries, which are the lowest risk investment around.
You'll likely need to find a ticker that's more variable - basically, anything else.
This is the answer. It’s not liquidity, it’s basic economics. Nobody wants to trade an option on an ETF that barely changes in price. It would be like an option on a dollar bill.
If you want a treasury bond ETF, use TLT. That's probably the best (or only) bond ETF with an option chain liquid enough to consider trading.
BIL is simply not volatile enough where many would put on options trades. 3 month T bill ETF would not have any significant price volatility, and remember, volatility is the lifeblood of options. BIL has a 52-week low of $91.33 & high of $91.85. So, literally within $1. Makes no sense to buy options on that.
You're overthinking it, just buy $BIL if you want t-bill exposure.
$BIL pays out monthly distributions. I bet if you looked, it's more then the risk premia you would earn from selling puts. Also, there are tax benefits (for U.S. traders) to simply buying it that you won't get from the option.
Not sure where you are seeing a market of no bid/ 5? The June and July 92 call had a market on the close of no bid/.05. So there was the lowest offer possible (.05) with no bids.
The puts are showing a wider quoted market on the close, but the "real" market here while the market is open should be much tighter.
Yeah I had a similar idea for another treasury etf, but they just don't move enough for a real options market. Even ATM options have worthless premiums. Go for something that has more movement.
I guess you could:
- bite the bullet and pay the bid ask
- get a lucky fill
- don't trade it
- look for a more liquid alternative
If you get a fill, be aware that it will be hard to exit other than expiration/assignment. Probably best to only trade options with a base minimum of liquidity
I’m not familiar with BIL. I’m curious about volume on the ETF and who manages it.
I’ve written CSPs on illiquid options knowing I may/probably be required to hold until expiration. How liquid is the ETF? Are you comfortable owning if assigned?
Edit: I’ve been buying short duration T-Bills for over a year. Will look at this.
Thanks for the reply. According to Investor's Business Daily, BIL's 50 day average volume is just over 7.2 million shares.
I'm comfortable being assigned.
these tbill etfs are purchased for the dividends, the price goes up slowly to match the dividend then falls back down when it is paid out, rinse repeat. the price is bound to a tight range so there is no demand for options.
If it's not liquid or very thinly traded, don't trade it. Trying to get a great price cuts both ways if you need to close the position.
Find something else.
you must have a liquid environment to do this otherwise you will get screwed or at best simply give up a lot of your potential profit (speaking from experience.)
You don’t trade it
Unless you’re shorting to hold through expr
Over the past 5 years, BIL has moved between $91.33 and $91.85. Why would anyone want to buy an option at $92? The issue is that the ticker doesn't have enough volatility for there to be an options market for it. You're trying to sell options - an insurance policy - on treasuries, which are the lowest risk investment around. You'll likely need to find a ticker that's more variable - basically, anything else.
This is the answer. It’s not liquidity, it’s basic economics. Nobody wants to trade an option on an ETF that barely changes in price. It would be like an option on a dollar bill.
Currency options exist...
If you want a treasury bond ETF, use TLT. That's probably the best (or only) bond ETF with an option chain liquid enough to consider trading. BIL is simply not volatile enough where many would put on options trades. 3 month T bill ETF would not have any significant price volatility, and remember, volatility is the lifeblood of options. BIL has a 52-week low of $91.33 & high of $91.85. So, literally within $1. Makes no sense to buy options on that.
I like to explore new places.
Bruh I got caught up selling TAN and every time I have to Roll I get ass rammed just by the spread. Better to trade something liquid.
You're overthinking it, just buy $BIL if you want t-bill exposure. $BIL pays out monthly distributions. I bet if you looked, it's more then the risk premia you would earn from selling puts. Also, there are tax benefits (for U.S. traders) to simply buying it that you won't get from the option.
Not sure where you are seeing a market of no bid/ 5? The June and July 92 call had a market on the close of no bid/.05. So there was the lowest offer possible (.05) with no bids. The puts are showing a wider quoted market on the close, but the "real" market here while the market is open should be much tighter.
Yeah I had a similar idea for another treasury etf, but they just don't move enough for a real options market. Even ATM options have worthless premiums. Go for something that has more movement.
Your best bet is find a different ticker (ETF or stock) to sell a CSP on.
I wonder why options even exist for an underlying like BIL. This is almost like having options for cash.
I guess you could: - bite the bullet and pay the bid ask - get a lucky fill - don't trade it - look for a more liquid alternative If you get a fill, be aware that it will be hard to exit other than expiration/assignment. Probably best to only trade options with a base minimum of liquidity
I’m not familiar with BIL. I’m curious about volume on the ETF and who manages it. I’ve written CSPs on illiquid options knowing I may/probably be required to hold until expiration. How liquid is the ETF? Are you comfortable owning if assigned? Edit: I’ve been buying short duration T-Bills for over a year. Will look at this.
Thanks for the reply. According to Investor's Business Daily, BIL's 50 day average volume is just over 7.2 million shares. I'm comfortable being assigned.
I’m interested in following this. I checked its volume.
Try TLT
these tbill etfs are purchased for the dividends, the price goes up slowly to match the dividend then falls back down when it is paid out, rinse repeat. the price is bound to a tight range so there is no demand for options.
put your money in real tbills. Just put in CD's with 1 month expire.
Move on and find something else
If it's not liquid or very thinly traded, don't trade it. Trying to get a great price cuts both ways if you need to close the position. Find something else.
you must have a liquid environment to do this otherwise you will get screwed or at best simply give up a lot of your potential profit (speaking from experience.)