The Newest Innovation in SPX Options

01/24/2012 10:10 am EST


James Bittman

Senior Instructor, Chicago Board Options Exchange

New Friday-afternoon-settled options on the S&P 500 (SPX) have hit the marketplace, says Jim Bittman of the Chicago Board Options Exchange (CBOE), who describes the benefits and helpful tips for trading them.

As an option trader, you are probably aware of the SPX options, but there’s a new product from the CBOE, the SPXpm options.

Our guest today is Jim Bittman to talk about that. So, Jim, first of all, what is the new product?

Well, the traditional S&P 500 index options called SPX came out of the 80s, where the options stopped trading on Thursday and they settled Friday morning, which is very unusual compared to options on stocks that continue trading all the way through Friday afternoon. 

So, we added a new all-electronically-traded contract. It’s the same size, but it settles on Friday afternoon—the same way other ETF options, stock options, and some other index options settle. 

With institutional money looking at the S&P 500 index, we wanted to make this product available for them, so for quarter ends, for year ends, we have the afternoon settlement. 

How’s the open interest so far?

It is growing very well. You know, the whole business is subject to inertia, and if a typical investor has been using one product, it’s very difficult to get them to change, but the SPXpm, it’s all electronic. 

See, people have been trading electronically now for five to seven years, so that’s not new, but they’ve been trading SPX options for 30 years. Well, that’s not new either at this point. So, what we’re doing is we’re melding the two together. 

You’re used to trading electronically, so we have a slightly different contract for the S&P 500, and we’ll see how it goes.

Alright. Where do I find out more information about it? Click on the Products tab and we’ve got a whole line devoted to SPXpm.

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