Tag Archives | SPX Weeklys

SPX Weeklys Options

No, it’s not a spelling error. The CBOE refers to these short-term options as ‘Weeklys.’

Last night, a simple question from a reader resulted in my first learning about something that has been going on since early December 2010. To me it’s gigantic news. However, when I googled, I found almost nothing.

My correspondent is short the SPX Feb 1290/1300 Put spread. Here’s the key line from that e-mail:
“I wonder whether it is a good idea to close the deal Thursday evening?”

Yes, it’s a good idea

I’ve cautioned traders (many times) that it’s foolish to take the risk of holding OTM index option positions overnight – when settlement is determined by the next day’s opening prices. Thus, I’m a big fan of closing Thursday.

I took a quick look at the (CBOE Micro site for Weeklys), just to be certain that I was not missing anything in my reply – when I discovered a few innocent looking lines:

NEW – SPX Weeklys Now PM Settled

On Thursday, December 2, 2010, CBOE commenced trading of PM-settled End-of-Week (“Week-Ends”) SPX Options for expiration on Friday, December 10, 2010. With the commencement of trading in PM-settled End-of-Week SPX options CBOE discontinued the listing of SPX AM-settled Short Term Options. For additional information please refer to the following circular https://www.cboe.org/publish/InfoCir/IC10-174.pdf

I’ve argued for a long time that A.M. settlement is a very unfair method for determining the ‘final closing price’ for any index. There is too much opportunity for market manipulation. Thus, this change is a good thing and makes it a more viable product for trading.
Continue Reading →

Read full story ยท Comments are closed