Mini-SPX Index Options (XSPSM) www.cboe.com/XSP

  • XSP 266.43 2.66

About XSP Options

The Cboe Mini-SPX options contract, known by its symbol XSP, is an index options product designed to track the underlying S&P 500 index. At 1/10 the size of the standard SPX options contract, XSP options offer traders the flexibility to implement their S&P 500 index option strategy, using a smaller contract size.

For example, if the SPX options were priced at 2,700, XSP would be expected to be trading at approximately 270. Both indexes have a multiplier of 100. The smaller contract size may be especially useful to new index options traders or traders managing an individual portfolio.

The structure of the XSP options contract may provide many benefits over alternative ETF options choices, such as SPY options, including:

  • European exercise - No risk of early assignment
  • Cash settlement - Your trading account is credited/debited in cash, not ETF shares
  • A mini contract size - A smaller contract size may provide more trading flexibility
  • Potentially favorable tax treatment - Check with your tax advisor on section 1256 of the tax code to determine if you're eligible for more 60/40 capital gains benefits.

XSP options continue to experience significant annual Average Daily Volume (ADV) growth, as traders recognize the utility these options can provide. Whether your interest is in hedging or speculating, if you’re trading SPY options, XSP may be a good fit for your trading activities.

Updated Price Charts

XSP:



Average Daily Volume for XSP Options

*Through July 2018

Introduction

Cboe® offers Mini-SPX options based on the S&P 500® Stock Index.

Key features of Mini-SPX options include the following:

1. TICKER SYMBOL

  • The ticker symbol for Mini-SPX options is XSP.

2. CONTRACT SIZE

  • Mini-SPX options have 1/10th the value of the S&P 500® (SPX) Index options (e.g. if the S&P 500 Index is at 2800, the Mini-SPX would have a value of 280, and notional value covered by the Mini-SPX options (with a $100 multiplier) would be $28,000).
  • At 1/10th the size of SPX options, Mini-SPX options provide added flexibility. For example, if an investor is looking to hedge a specific amount of broad U.S. stock market exposure, Mini-SPX options may be helpful to achieve a specific desired exposure.

3. PM-SETTLEMENT

  • XSP options are PM-settled.
  • 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 settlement day.
  • The last trading day for the standard XSP options generally is on the third Friday of the expiration month.

4. 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,
  • 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.

5. MARGIN

  • Cboe Regulatory Circular RG15-183 notes that Cboe rules allow a short position in a cash-settled-index option established and carried in a margin account to receive covered margin treatment, if the short option position is offset in the same account by an equivalent position in an index-tracking ETF that is based on the same index that underlies the short option(s).

    In order to receive covered margin treatment, the market value of the offsetting ETF position must be equivalent or exceed the current aggregate index value of the option being covered. One should note that not all ETFs are managed so as to maintain a share price that is a constant fraction (e.g., 1/10 th, 1/100 th, 1/1,000 th, etc.) of the index being tracked.

6. TAX TREATMENT

  • Under section 1256 of the Tax Code, profit and loss on transactions in certain exchange-traded options, including SPX, SPXpm and XSP, are entitled to be taxed at a rate equal to 60% long-term and 40% short-term capital gain or loss, provided that the investor involved and the strategy employed satisfy the criteria of the Tax Code. Investors should consult with their tax advisors to determine how the profit and loss on any particular option strategy will be taxed. Tax laws and regulations change from time to time and may be subject to varying interpretations.

7. TRADING PLATFORM

  • Mini-SPX options trade on Cboe's Hybrid Trading System, which includes Remote Market Makers. Trading XSP options on Cboe's Hybrid Trading System offers investors a smaller-sized S&P 500 contract with the combined advantages of electronic trading and the open-outcry market on a single platform.

Trading XSP Weeklys Options

Cboe XSP Weeklys options provide traders flexibility in terms of options contracts duration. Standard option contract have a term of 30 days. In 2005 Cboe launched "Weeklys" to provide traders with an alternative option contract duration designed to more closely meet their trading needs. In the years since their launch, Weeklys options have experienced tremendous growth and have become an industry standard due to the flexibility they provide to market participants.

Many times, big moves occur around scheduled announcements based on investor expectations and whether or not those expectations are met or missed. With a shorter duration contract, traders can more closely tailor their XSP options trades to specific trading dates, such as earnings announcements or economic data reports, allowing them to capture a larger share of the ensuing move. A shorter contract life, also means that these options will have a lower premium cost relative to their longer duration (30 day) counterparts, which may provide traders the opportunity to initiate additional trading strategies.

XSP Weeklys options are offered with both Wednesday and Friday settlements. For Friday settlements, options contract expirations occur on non-standard Friday expirations throughout the year. Similarly, Wednesday XSP Weeklys options settlements may expire on any Wednesday of the month, other than a Wednesday that coincides with an End-of-Month (EOM) expiration date. Cboe began offering Wednesday XSP Weeklys options in 2018, following strong annual ADV growth in the product. With XSP Weeklys options, strategies involving collecting premium, such as BuyWrites or spreads, provide the opportunity to collect premium 52 times a year rather than 12. If you’re not familiar with Weeklys, there are a few points to be aware of, including:

  • XSP Friday Weeklys options are typically listed on Thursdays and will expire 8 days from the listing date, generally the Friday of the next business week for all weeks other than the standard options contract settlement week. (The term Weeklys refers to the fact that the contracts are listed every week, not that they are a 7-day contract.
  • Settlement processes are the same as they are for their standard options counterparts. (index, ETF, etc.) For XSP, which are European-style options, this means they are PM settled, which allows traders the opportunity to continue to trade their position on settlement day.
  • XSP settlement is in cash, rather than in physical shares, as is the case for ETF index options. This means your account will be debited or credited in cash rather than in ETF shares.
  • For Friday expiring XSP Weeklys options, if the exchange is closed on that Friday, the option series will expire on the first business day immediately following. For a Wednesday XSP Weeklys options settlement, if the exchange is closed on a Wednesday, the expiration date will be on the preceding Tuesday.
  • On their last trading day, expiring XSP options trade only until 3:00 CT. (Non-expiring XSP options trade until 3:15 p.m. CT.)

Options Greeks

The Greeks, as they are known, are closely followed by options traders, both on and away from the trading floor, as they provide an indication of factors impacting an option’s price and potential directional movement. Greeks are important metrics to follow because they serve as indicators of the major factors that affect an option’s price. Without a solid understanding of the “Greeks”, one’s ability to understand how options prices will move is limited. If you’re trading options, it’s important to understand the Greeks and what they represent.

Delta
Delta represents the change in an option’s theoretical value for every $1 move in the price of the underlying asset, in this case, XSP. The value of an option’s delta ranges from -1 to +1 based on whether the position is long or short or whether it’s a put or a call.

Vega
Vega measures volatility, specifically it represents the change in an option’s theoretical value for every one point change in volatility. Volatility is one of the more important factors impacting an option’s price and is therefore more closely followed. (Of note, Vega is not an actual Greek letter.)

Theta
Theta reflects the change to an option’s value for every one unit change in time, which, given certain circumstances, is normally in one day increments. (All things equal) With each passing day, an option’s value decays because it is one day closer to expiration and therefore, the time value component of an option’s price is decreased. If a trader is long an option, they have negative theta exposure. Conversely if they are short an option, they have positive theta exposure.

Gamma
Gamma is known as the second derivative. It represents the change in an option’s delta for every $1 movement in the underlying asset. Gamma is a second order derivative because it moves the option’s delta, which is a derivative of the underlying asset.

Rho
Rho measures the change in an option’s price given a one point move in a risk-free interest rate. Rho is generally considered one of the lesser Greeks, particularly in a low (or zero) interest rate environment, because interest rates have a lesser impact on an option’s price than many of the other price-determining components.

To learn more about option’s Greeks, go to the option's volatility calculator which allows users to change various price inputs to see what the effect on an option would be.