Derivatives and securities exchange network Cboe Global Markets has expanded its S&P 500 toolkit with the launch of trading in S&P 500 Equal Weight Index (EWI) options, providing investors additional choice and diversification.
The S&P 500 EWI is the equal-weight version of the S&P 500 Index, with each constituent of the S&P 500 EWI allocated a fixed weight of 0.2% of the index total at each quarterly rebalance. While including the same constituents, the S&P 500 EWI and the capitalisation-weighted S&P 500 Index often differ in sector and factor exposures including smaller-cap vs mega-cap stocks, momentum bias, and realised volatility.
The S&P 500 EWI options are designed to provide different exposure and complement Cboe’s S&P 500 Index (SPX) options, which are one of the most actively traded and liquid options in the world. Market participants will be able to utilise the S&P 500 EWI options to make directional trades based on their views of macro trends and shifts in equity market dynamics and for additional hedging and income-generating opportunities.
The S&P 500 EWI options are based on 1/10th the value of the S&P 500 EWI. With a standard contract multiplier of $100, the notional value of an S&P 500 EWI options contract would be approximately $63,200 as of market close on 7 April. The mid-sized notional value potentially allows for a wider range of market participants to access the options. Similar to Cboe’s other proprietary index options, S&P 500 EWI options are cash-settled and will have European-style exercise. Cash settlement eliminates concerns over physical delivery as profits and losses are settled as a debit or credit at expiration, and the European-style expiration removes the risk of early assignment and provides more certainty when implementing hedging strategies.
On 14 April, Cboe listed standard monthly options expiring on the third Friday. SPEQX options are available to trade during regular trading hours (RTH) between 9:30am ET and 4:15pm ET. FLEX options are offered on SPEQX. Cboe plans to list PM-settled weekly options at a later date, pending regulatory approval.
