In November 2013 CBOE launched Mini-SPX (ticker XSP) options with PM-settlement, and, as shown in the chart below, the maximum open interest for the XSP options has grown in all 12 months since the contract launch.
In the past month the XSP options hit an all-time high open interest of 292,227 contracts, and the XSP Index hit its all-time daily closing high level of 207.28 on November 26.
Key features of the Mini-SPX (XSP) options include —
CONTRACT SIZE AND ADDED FLEXIBILITY. Mini-SPX options have 1/10th the value of the S&P 500® (SPX) Index options. At 1/10th the size of SPX options, Mini-SPX options provide added flexibility. For example, if an investor is looking to hedge $19,000 to $180,000 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. 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.
COVERED CALLS 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.
COMPARING CBOE INDEXES
Investors can compare the movements of the XSP, SKEW, VVIX, VXST, VXV, and VIX indexes to gain better insights into the pricing and trading of index options at various dates, maturities and strike prices www.cboe.com/index.
TO LEARN MORE
With stock indexes near their all-time highs and interest rates at very low levels, many investors are exploring Mini-SPX (XSP) options for purposes of portfolio management and income generation. To learn more about XSP options and index options strategies, please visit www.cboe.com/XSP.