As May came to close, some trends in Cboe’s Mini-SPX Index (XSP) options emerged, including higher volumes and record open interest. For background, Mini-SPX options are just as their name implies, a smaller contract, 1/10th the value of S&P 500 Index (SPX) options. This smaller size provides added flexibility, which may help an investor hedge a specific desired exposure or facilitate accurate allocations of index trades among many customer accounts –among other uses.

I’ve recently spoken with multiple institutional investors who have expressed new interest in the cash-settled Mini-SPX options (ticker: XSP), which now are traded on both Cboe Options Exchange and Cboe EDGX Options Exchange.

New Mini-SPX Options Records

New records established in late May include:

  • Mini-SPX (XSP) Options One-Day Volume Record: 208,254 contracts on May 24, 2019
  • Mini-SPX (XSP) Options Open Interest: 2,346,828 contracts on May 31, 2019
  • Mini-SPX (XSP) FLEX® Options Open Interest: 1,231,568 contracts on May 28, 2019

Growth in Mini-SPX Index (XSP) Options Volume and Open Interest

Volume is trending higher in Mini-SPX options. Average daily volume (ADV) in the product was 19,423 contracts for full-year 2018, which then jumped to 37,822 contracts in the first quarter of 2019. In the past two months, the ADV of 71,022 contracts was more than 260% higher than full-year 2018’s ADV.

Mini-SPX 1

Open interest for Mini-SPX options has seen tremendous growth in 2019, rising from 548,764 contracts in January to over 2.35 million contracts in May, a 328% increase. As shown in the chart below, Mini-SPX FLEX options grew from 109,001 contracts in January to 1.23 million contracts in May -- a 1,030% increase!

Mini-SPX 2


Volatility Skew for Mini-SPX Options

According to the chart below, Bloomberg’s estimates for 30-day Mini-SPX Index (XSP) option implied volatility at the close on June 3 were around 17.6 for at-the-money XSP options, and 24.4 for 10% out-of-the-money XSP put options. Implied volatility for out-of-the-money put options often is higher because these options can be bought for equity portfolio protection, and some investors are concerned about a huge black swan drop in stock prices. Other long-term investors explore the possibility of writing cash-secured out-of- the-money index put options because of their higher implied volatilities.

Mini-SPX 3

More Information

To learn more about the many ways in which Mini-SPX Index options can help you manage your portfolio, please visit www.cboe.com/XSP and www.cboe.com/strategies.