Options on futures - assignment, hedging, etc.

There is "SUBSTANTIAL tracking error" between futures contracts (e.g., /ES, /NQ) and their related ETFs (e.g., SPY, QQQ). This error makes precise hedging or arbitrage between these instruments risky and complex, as they are not perfect substitutes. The "shaving the fuzz off grapes" analogy implies the profit margins are extremely thin and require high precision. For retail traders seeking precision (e.g., for exact hedging or pairs trading), directly using futures or their related ETFs as simple proxies for one another is a flawed strategy. The substantial tracking error itself is the primary risk, which can lead to unexpected losses even if the overall market direction is correct.