More "Weekly" Options on the Way (CME, CBOE)
More ìWeeklyî Options on the Way (CME, CBOE)
Data and opinion on just how successful the new weekly stock and index options are is still a work in progress. Opinion aside, the recent CBOE Holdings (NASDAQ: CBOE) move to introduce weekly stock options in addition to regular ìold-wayî options that expire on the third Friday of each month is about to get some competition.
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CME Group (NYSE: CME) has announced the launch of NASDAQ-100 weekly options. These wonít start trading immediately though (the press release is saying they will start on October 18, 2010) and will be listed with CME rules and regulations.
The NASDAQ-100 weekly options will expand the number of expirations with more trading opportunities and increased position management. The difference here is that these standard and e-mini weekly options will be ìEuropean-style,î which translates to the ìbetî being where the price will be at the close of trading on expiration date rather than during the time frame of ìanytime between now and expiration date.î
A weekly expiration will be available for every Friday of the contract month except for the third Friday, as this is the same week as traditional ìAmerican-styleî expiration day.
This is not the only ìnewî weekly option news. The CBOE just launched on September 28, 2010 a new weekly options series covering the VIX (CBOE Volatility Index).
Weekly options seem to be a mix between the traditional monthly expiration options and a synthetic options market. We still have a very short operating history on these as well and that makes judging the long-term success of these more of a work in progress.
It is hard to discuss the idea of weekly options without drawing a comparison to single stock futures. OneChicago is an all-electronic exchange for trading Single Stock Futures that was founded in 2002, and it had much of the same goal: making trading access cheaper than buying the underlying security. Having a weekly expiration makes buying options cheaper than buying monthly options, at least in theory, because of less time value. After all, there are never more than five days to expiration.
Leave it to Wall Street and the mathematicians. Even with all the new financial regulations passed, and still pending, Wall Street will always figure out a way to dice things up and trade on it.
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