CBOE listed a Mini-SPX Index options (options symbol: XSP) contract with a new PM-settlement feature on November 5.
In its first eight days of trading, the PM-settled contract (XSP) averaged 3,079 contracts per day, while the AM-settled contract (XSPAM) averaged 2,008 contracts per day during the same period. On November 14 open interest in the PM-settled contract stood at 24,328 contracts.
Key features of the Mini-SPX options include —
CONTRACT SIZE AND ADDED FLEXIBILITY Mini-SPX options have 1/10th the value of the S&P 500® (SPX) Index options. On Nov. 14 the S&P 500 closed at 1790.62, and the Mini-SPX Index closed at 179.06, its all-time record high daily close (see chart below). The notional value covered by the Mini-SPX options (with a $100 multiplier) was $17,906. At 1/10th the size of SPX options, Mini-SPX options provide added flexibility. For example, if an investor is looking to hedge $18,000 to $150,000 of broad U.S. stock market exposure, Mini-SPX options may be helpful to investors as they work to achieve a specific desired exposure.
PM-SETTLEMENT XSP options now have PM settlement. PM settlement aligns with single-stock options and ETF options. PM settlement is preferred by many investors, including those with end-of-day reporting needs. PM settlement gives investors the ability to trade in and out of positions on the third Fridays. The last trading day for the standard XSP options generally is on the third Friday of the expiration month.
CASH-SETTLEMENT, EUROPEAN-STYLE EXERCISE
· Like SPX and most other index options, and unlike SPY and other ETF options
· No risk of early assignment and loss of dividends, no portfolio disruption on assignment,
· CBOE Circulars (RG99-09 and RG00-171) allow SPX options to be written on a “covered” basis against SPY or IVV ETF shares in a margin account, provided the investor’s brokerage firm has such policies in place.
As shown below, the XSP Index has marched upward over the past year.
For more information on Mini-SPX options, please visit www.cboe.com/XSP