by Ian Harvey
June 10, 2010
Weekly Options, or commonly called “Weeklys”, are options listed with approximately one week to expiration, different from traditional options that have a life of months or years before expiration.
New series for Weeklys are listed each Thursday and expire the following Friday except that no Weeklys will be listed that would expire during the expiration week for standard options (the third Friday of each month).
Except for time to expiration, Weeklys generally have the same contract specifications and offer the same continuous, two-sided quotes as standard options.
Weeklys carry the same rights and obligations as standard calls and puts. The only difference is that the expiration time frame is shorter. Weeklys are typically released on Thursday (eg. If issued on Thursday, June 24th) and will expire the following Friday (July 2nd).
October 2005 - Weekly Options, first introduced by the Chicago Board Options Exchange (CBOE.O), the largest U.S. options market, which are one-week options as opposed to traditional options that have a life of months or years before expiration.
These Weeklys are based on the index options: SPX, XSP, OEX, and XEO. These are cash-settled options.
At this time, Weeklys were listed each Friday and expired the following Friday, except that no Weeklys will be listed that would expire during the expiration week for standard options (the third Friday of each month).
As of June 04, 2010, the Chicago Board Options Exchange (CBOE) announced that it will begin trading new Weekly Options on four exchange traded funds (ETF's): Standard and Poor’s Depositary Receipts (SPY), Nasdaq-100 Index Tracking Stock (QQQQ), DIAMONDS Trust, Series 1 (DIA), and iShares Russell 2000 Index Fund (IWM), are now traded.
June 25, 2010 - The Chicago Board Options Exchange (CBOE.O), introduced one-week options, or weekly’s, on four individual equities -- Bank of America (BAC.N), Apple (AAPL.O) and Citigroup (C.N) and U.S-listed shares of BP (BP.L) (BP.N).
Beginning on Thursday, July 1, 2010 - all new Weeklys series at CBOE will begin trading on Thursdays and expire the following Friday. Previously, new series were listed each Friday and expired the following Friday.
July 5, 2010 - the Weekly Options on the following became available: GLD, XLF, EEM, C, BAC, AAPL, BP, F, and GOOG.
The CBOE offers the following Weekly Options:-
1/ Cash-settled Index Weeklys:
• SPX : S&P 500 Index Weeklys with European-style options on the S&P 500 Index with Friday A.M. settlement (last day of trading is a Thursday).
• XSP (Mini-SPX) Weeklys : A 1/10th size version of SPX Weeklys traded on the CBOE Hybrid Trading System.
• OEX Weeklys : One-week, American-style options on the S&P 100 Index with Friday P.M. settlement (last day of trading is a Friday).
• XEO Weeklys : A European-style version of OEX Weeklys.
2/ Exchange Traded Funds and Equities Weekly Options:
• SPY - Standard & Poor's Depositary Receipts
• QQQQ - Nasdaq-100 Index Tracking Stock
• IWM - iShares Russell 2000 Index Fund
• GLD - Options on SPDR® Gold Shares
• XLF - Financial Select Sector SPDR
• EEM - iShares MSCI Emerging Markets Index
• C - Citigroup Inc
• BAC - Bank of America Corp
• AAPL - Apple Inc
• BP - BP PLC
• F - Ford
• GOOG - Google Inc.
The addition of Weeklys provides greater trading flexibility and precision timing from shorter durations.
Expirations are available every Friday(except the third week), plus the last business day of the month.
Expanded expiration choices offer greater access, flexibility
Designed to expire on the first, second, and now fourth Fridays of every month, the expanded line-up of European-style Weekly Options complement existing quarterly, serial and end-of-month options to give you up to five expirations each month on the benchmark S&P 500 Index.
Precision timing from shorter durations.
Weekly expirations provide precise, strategic tools to help you capitalize on market movements stemming from new economic releases or market events and continue to grow in popularity with market participants.
Certainty of exercise
Like end-of-month options, Weeklys offer European-style exercise and prohibit contrarian instructions -- meaning that, at expiration, all in-the-money options are automatically exercised and all out-of-the money options are automatically abandoned.
ESF fixing price.
Also like end-of-month options, at expiration, CME calculates a special fixing price (applied to both the E-mini and standard-size S&P 500 Weeklys) based on the weighted-average trading price of E-mini S&P 500 futures in the last 30 seconds (2:59:30 – 3:00:00) before the 3:00 p.m. Chicago time option expiration. This price will be disseminated immediately using the symbol ESF, and is used to determine which weekly and EOM options are in the money.
Using Weekly Options
Weeklys can be used in various strategies, just like standard options. These strategies include Covered Calls, Collars, Married Puts, Vertical Spreads, condors and Butterfly Positions. The premiums will be slightly lower compared to the standard expiration options, due to the lower time value.
Volume of Weekly Options
For SPX Weeklys, the average daily volume (ADV) year to date through May was 16,031 contracts or 2.0 percent of standard SPX ADV.
Average daily volume for OEX Weeklys for the same period totaled 15,489 contracts or 31.0 percent of standard OEX trading.
The weeklys are popular among investors who know what they are doing. As long as you understand that this could be something or nothing very quickly, that this is a more purified bet, it is a great way to focus on short-term movements in the market.
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