Eurex will launch a new options contract based on the EURO STOXX 50® Dividend Points (DVP) future as of 25 May 2010.
This latest options product joins Eurex’s family of listed dividend derivatives and is designed to complement the underlying Eurex future contract. Eurex worked closely with market participants to ensure that the options are suitable to both sell-side market makers and as well as buy-side participants.
“Options on our EURO STOXX 50 dividend futures will allow investors to hedge the income streams from the dividends of the euro zone’s leading equity index”, says Peter Reitz (pictured), member of the Eurex Executive board. “Our new dividend options will improve the transparency and risk management of expected dividends in the investors’ portfolios.”
In line with the existing dividend futures, the new options will have annual expiries in December until 2019. These contracts reflect the annual dividends paid by companies included in the EURO STOXX 50 Index in the form of index point equivalents. The contract will be cash settled based upon the actual ordinary gross dividends declared and paid by the index constituents during each contract period. The final value of the dividend calculation will be undertaken by STOXX Ltd.
Since their launch in 2008, Eurex’s on-exchange traded and centrally cleared dividend derivatives have captured approximately 50 percent of the market share for dividend swaps in Europe by turnover. Currently, the average daily volume is more than 15,000 contracts, while open interest is over 550,000 contracts representing more than 6 billion euros in implied dividends. In 2009, the constituents of the EURO STOXX 50 Index in total distributed over 60 billion euros in dividend payments.