2023 year-to-date E-mini S&P 500 options ADV recently reached nearly 1.2M contracts¹, and a variety of option expiries are available to suit hedging needs. For short-term strategies, market participants can access contracts spanning Monday through Friday. To address longer-dated risk management needs, end-of-month, Week 3, and quarterly varieties are available spanning five years. Over 60 option maturities are available in all; traders can access contract codes for Bloomberg here.

Liquidity during the U.S. overnight hours² continues to grow, as options on E-mini S&P 500 futures traded a record average of 188K (16% of daily volume) contracts during non-U.S. trading hours YTD in 2023.

For fine-tuning positions and precision trading needs, options on Micro E-mini S&P 500 futures were launched in 2020. These products enable traders additional flexibility, with a smaller multiplier of $5, at one-tenth the notional value of flagship E-mini S&P 500 option contracts. YTD ADV is 18K, a 32% increase compared to 2022 volumes³.

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E-mini S&P 500 options on futures became block eligible in June 2021. This block execution capability has a newly reduced minimum quantity per leg of 100 contracts as of July 2023. This privately negotiated execution functionality allows market participants to access deep pools of liquidity from trusted counterparties for varying strategy types, around the clock.

Price takers can access liquidity for large-sized transactions without information leakage and slippage, whereas liquidity providers can avert break-up risk associated with execution at other venues. Over 3M contracts have traded since block eligibility, with 2023 block ADV at 81.3K. Additionally, market participants can block E-mini S&P 500 futures as part of a delta-neutral strategy with E-mini S&P 500 options on futures to gain greater capital efficiency.

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E-mini S&P 500 futures (ES) trade $3B notional per day – 10.7% greater than the notional value traded amongst 500 underlying index constituents and ~10 times the value traded across S&P 500 ETFs. Micro E-mini S&P 500 futures (MES) trade $2B notional per day, contributing further to liquidity.

While the cash index is only calculated for 6.5 hours daily, E-mini S&P 500 and Micro E-mini S&P 500 futures are available 23 hours a day.  More notional value is traded in E-mini S&P 500 futures before the U.S. cash market opens than is transacted across all S&P 500 ETFs over the course of an entire day.

Additionally, technical levels are defined in the futures, not the underlying cash market. Trade options on the product that global investors are utilizing to manage their risk around the clock.

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The delta of options on futures remains constant through expiry. In-the-money options deliver into physical futures positions while out-of-the-money contracts expire “worthless.” In-the-money cash index options do not physically settle, forcing investors to replace the expiring delta with new index positions which creates slippage risk on the execution.

Futures options expire to a 30-second VWAP of the underlying future – a price completely contained within the futures complex.⁴ Weekly and end-of-month options are exercised automatically, providing greater certainty for investors by removing the risk of abandonment or contrarian exercise.

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Clients can achieve considerable margin savings by netting options on futures with offsetting futures hedges. Portfolio margining results in a single performance bond requirement and daily variation margin adjustment. Capital efficiencies are furthered by the physical settlement into the underlying futures that requires substantially less margin/capital than trading the cash securities basket at expiration.

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¹ Data through June 30, 2023
² Overnight hours are defined as 5:00 p.m. CT – 8:30 a.m. CT. Data through June 30, 2023
³  Data through June 30, 2023
⁴ The only exceptions are the American-style quarterly options, which expire against the underlying futures Final Settlement Price.