SPX Extended Weekly Options with PM Settlement – Comments from a Fund Manager

CBOE now offers both AM-settled and PM-settled options on the S&P 500® (SPXSM) with a variety of expirations www.cboe.com/SPX

Mr. Sean Bonner is Chief Investment Officer of the Pennsylvania-based Carne Large Cap Value Fund (WVLIX).* Earlier this year Sean suggested to CBOE that the exchange explore the possibility of listing SPX Weekly options with a number of different end-of-week expirations. On May 31, 2012, CBOE began extending the listings of SPX WeeklysSM, and maintaining five consecutive expiration weeks available for trading options on the S&P 500 www.cboe.com/SPXW

Mr. Bonner recently noted that –

“CBOE was very resourceful in responding to our needs as a long equity portfolio manager running our strategy in both a Mutual Fund and Separate Accounts.

SPX extended weekly options allow our Fund to be much more flexible when implementing our Managed Volatility Program. With multiple short term tenors and strikes, the Fund can take advantage of changing implied volatilities and directional moves in the S&P 500 Index much faster than previously.

Selling a portion of our targeted SPX calls on weekly basis makes gives us a risk reducing portfolio hedge with multiple maturities and multiple strikes. Over the longer term this should reduce path dependency and make for a smoother option pay-out for our investors.”

* Please note that CBOE does not provide solicitations or endorsements for mutual funds, and investors should read closely the applicable prospectus before investing in any fund.

PM-SETTLED OPTIONS ON THE S&P 500 INDEX – LAST DAYS OF TRADING

The last days of trading for PM-settled options on the S&P 500 Index with different expiration dates include —

 

July 6, 2012       SPXW **

July 13, 2012     SPXW

July 20, 2012  SPXpm **

July 27, 2012   SPXW

Aug 3, 2012      SPXW

Aug 17, 2012  SPXpm

Sep 21, 2012  SPXpm

Sep 28, 2012 SPXQ **

Oct 19, 2012   SPXpm

Nov 16, 2012  SPXpm

Dec 21, 2012  SPXpm

Dec 31, 2012 SPXQ

 

Mar 15, 2013 SPXpm

Mar 28, 2013 SPXQ

June 21, 2013 SPXpm

June 28, 2013 SPXQ

Dec 20, 2013 SPXpm

Dec 19, 2014 SPXpm

Dec 18, 2015 SPXpm

Dec 16, 2016 SPXpm

 

** “SPXW” is the trading symbol for SPX Weekly options (in the “SPX” options chain), offered on CBOE www.cboe.com/SPXW

“SPXPM” is the trading symbol for SPXPM options (in the “SPXPM” options chain) offered on C2 Exchange www.cboe.com/SPXPM

“SPXQ” is the trading symbol for SPX Quarterly options (in the “SPX” options chain), offered on CBOE www.cboe.com/SPXQ

 

 

VOLUME ON LAST FRIDAY, JUNE 29

This past Friday (June 29) the trading volumes were 114,575 for the expiring SPX Quarterly options, and 94,165 for the nearby SPX Weekly options with the last trading day of July 6.

DAILY VOLUME THE PAST WEEK FOR SPXW AND SPXQ OPTIONS

Last week the average combined daily volume for SPXW and SPXQ options was 159,377.

PAPER BY RUSSELL INVESTMENTS

A paper by Russell Investments, “Capturing the Volatility Premium through Call Overwriting” (December 2010) (available at www.cboe.com/benchmarks) notes that —

“ … Exhibit 6 compares the 15-year historical annual premiums received by rolling weekly, monthly, quarterly, and annual ATM options. This historical data shows that shorter term options maximize the total amount of premium received on an annual basis.  …”

LINKS TO ADDITIONAL INFORMATION