By Matt Moran
This week I received inquiries about the trends in options volume.
The large-sized SPXW Weekly options have successfully seen volume growth over each the past seven years. Key points about SPXW Weekly options include –
- VOLUME. Average daily volume (a.d.v.) in the first four months of 2017 was 500,964 contracts, (up 30% over the a.d.v. for the full year of 2016; see Exhibit 1 below);
- MANY EXPIRATIONS. SPXW Weeklys options have expirations on ten upcoming dates in May (see Exhibit 2 below);
- THIRD FRIDAYS. On May 1, 2017, CBOE changed the symbol for existing SPXPM option series to option symbol SPXW. For the first time ever for a third Friday, for the May 19 expiration date, CBOE is offering both SPX options with a.m.-settlement, and SPXW options with p.m.-settlement (see Exhibit 2 below);
- IMPLIED VOLATILITY. An SPX skew chart by Livevol showed that the estimates of SPXW implied volatility ranged from around 5 to more than 41 (see Exhibit 3 below);
- HIGHER PREMIUMS. A research paper by Professor Oleg Bondarenko. An Analysis of Index Option Writing with Monthly and Weekly Rollover. (2016) showed that the gross premiums generate by writing SPXW options once a week (using the WPUT Index) could be higher than the premiums generated by writing SPX options once a month (using the PUT Index) (see Exhibit 4 below).
For more information on SPXW Weekly options, please visit www.cboe.com/SPXW.
EXHIBIT 1 – GROWTH IN VOLUME FOR SPXW WEEKLY OPTIONS
EXHIBIT 2 – EXPIRATION DATES IN MAY
EXHIBIT 3 – SPX IMPLIED VOLATILITY
EXHIBIT 4 – HIGHER GROSS PREMIUMS FOR WPUT INDEX