S&P 500® Weekly options (SPXW) offer near-term expirations on Fridays other than the third Friday standard expirations. Average daily volume for the S&P 500 Weekly options grew to 272,939 in 2014.
QUESTION ABOUT WEEKLY OPTIONS - Some options investors and commentators have asked questions such as – “Are the Weekly options merely tools for short-term speculation, or are they also used for prudent income enhancement strategies? Can CBOE create a benchmark index that uses Weekly options?”
RMC PRESENTATION - On Monday, September 28 at the Fourth Annual CBOE Risk Management Conference (RMC) Europe in Geneva, Switzerland, a presentation on several new CBOE strategy benchmark indexes that use index options will be delivered by William Speth, Vice President, Research and Product Development, CBOE.
Two of the new benchmark indexes write S&P 500 Weekly options -
The CBOE S&P 500 Multi-Week BuyWrite Index (BXMW) is designed to track the performance of a weekly covered call strategy with staggered short positions in call options expiring in consecutive four week options. The BXMW Index is constructed as a combined portfolio of four mini BuyWrite indexes. Expirations are staggered so that the BXMW Index sells four-week options on a rolling weekly basis. Data history for the WPUT Index begins in January 2006. www.cboe.com/BXMW
The CBOE S&P 500 One-Week PutWrite Index (WPUT) is designed to track the performance of a strategy that sells an at-the-money (ATM) S&P 500 Index (SPX) put option on a weekly basis. The maturity of the written SPX put option is always one week to expiry. The written SPX put option is fully collateralized by a money market account. Data history for the WPUT Index begins in January 2006. www.cboe.com/WPUT
An intriguing feature of both of these two new indexes is the fact that they can generate a substantial amount of gross options premium by selling the SPXW Weekly options, and the fact that there is more theta, or time decay, that can be favorable to writers of short-dated options.
WPUT INDEX ROSE 69% SINCE INCEPTION
As shown in the chart below, in the period from Jan. 31, 2006 through Aug. 31, 2015, the WPUT Index rose 69%, and often had smoother returns than the other three indexes in the chart.
OPTIONS PREMIUMS HELPED CUSHION THE FALL IN 2008
The chart below shows that in 2008 the S&P 500, MSCI EAFE, and S&P GSCI indexes all fell by 37% or more, but that the drop for the WPUT Index was a more modest 15.2%. The WPUT Index received options premiums every week, and this helped cushion the index’s fall in 2008.
GROWTH IN SPXW VOLUME
Investor interest in and use of SPXW options has increased tremendously in recent years, as average daily volume for the S&P 500 Weekly options grew from 15,133 in 2010 to 272,939 in 2014.
To learn more about S&P 500 Weekly options (SPXW), please visit www.cboe.com/SPXW.