On February 23, 2016, CBOE launched trading of weekly options on the S&P 500® Index which expire on Wednesdays.
The average daily volume for SPXW Wednesday-Expiring Weekly Options grew from 74,114 in May, to 105,768 so far this month (through June 14).
POTENTIAL BENEFITS – PRESS RELEASE
CBOE’s February press release noted –
"We are pleased to further expand our SPX product complex with the introduction of SPX Weeklys with Wednesday expirations," said CBOE Holdings CEO Edward T. Tilly. "Wednesday Weeklys, in addition to end-of-the-week expirations, will increase opportunities to trade SPX and enable investors to better target specific expirations. Wednesday Weeklys will align with VIX Weeklys futures and options, which also expire on Wednesdays, to provide greater trading flexibility for the increasing number of customers who use both our SPX and VIX product suites."
POTENTIAL BENEFITS – MORE GROSS PREMIUM
Exhibit 8 of a paper by UIC Professor Oleg Bondarenko - An Analysis of Index Option Writing with Monthly and Weekly Rollover. (2016) shows that the gross premiums generated by writing SPX weekly options 52 times a year could be greater than the gross premiums generated by writing SPX standard expiration options 12 times per year. One important caveat – taking in more gross premiums does not necessarily mean that net returns will be higher; net returns can be negative with a strategy of selling weekly options.
EXPIRATIONS AND IMPLIED VOLATILITY
On May 24 CBOE issued Regulatory Circular RG 16-102 that provided in part –
“… Going forward, CBOE will continue to list new SPXW Wednesday-Expiring Weekly Options, generally on Tuesdays, to maintain expirations in at least four consecutive weeks. A vendor notice listing the new strikes for the mentioned expirations can be found by accessing the following link on the business day prior to the listing date: http://www.cboe.com/tradtool/DailyNewListings.aspx. … “
The table below shows the expriation dates and estimated implied volatility over the next month for the out-of-the money SPX 2050 puts --
Key features of the SPXW Wednesday-Expiring Weekly Options include –
- SPXW Wednesday-Expiring Weekly Options may expire on any Wednesday of the month, other than a Wednesday that coincides with an End-of-Month (“EOM”) expiration date.
- SPXW Wednesday-Expiring Weekly Options are PM-settled; that is, their exercise settlement value is based on the closing level of the S&P 500 Index on the day the options expire.
- Their series will be available for trading under option symbol SPXW.
- SPXW Wednesday-Expiring Weekly Options expirations will typically be listed to begin trading on Tuesdays at least one week prior to their expiration date.
- SPX Wednesday Weeklys will cease trading at 3:00 p.m. Central time on their expiration date. All nonexpiring SPX Wednesday Weekly options will continue to trade until 3:15 p.m. Central time.
- SPXW Wednesday-Expiring Weekly Options are cash-settled, have European-style exercise and have a $100 multiplier.
- Margin requirements, including customer portfolio margin requirements, are the same as those that apply to other SPX options. Please refer to CBOE Rules 12.3 and 12.4 for more information.
To learn more about S&P 500 options, please visit www.cboe.com/SPX.