Explore the benefits of Short-Dated options
EVOLUTIONS IN SHORT-DATED OPTIONS
- CME Group has recently seen growing interest in shorter-dated options trading, particularly in maturities with less than one week until expiration.
- The addition of new weekly options has provided market participants expanded capability to grow their trading using these options closer to expiry; material ADV growth has resulted.
- Traders have harnessed newfound risk management and view expression potential, leveraging the unique “Greek” profile of these near-maturity options.
- Customers can execute a variety of option strategies on-screen, ranging from directionally focused “outright” option trades to complex, multi-leg strategies available on the CME Globex platform.
- Index choice matters when managing portfolio risk. Operational and capital efficiencies across multiple indices are available, benefitting options traders regardless of risk tolerance, maturity focus, or account size.
Short-Dated options trends
The increased interest in managing rapidly evolving risks has transformed options markets, providing greater trading opportunities and risk management needs for participants looking to manage near-term exposures. Short-Dated options at CME Group are a flexible alternative to trades executed over-the-counter (OTC), and are particularly useful when trading key economic and market events.
With the launch of Tuesday and Thursday E-mini S&P 500 options on futures in April 2022, the marketplace for options on futures continued an evolution that has been in place for several years. As this trend towards near-term risk management has unfolded, many market participants have concentrated focus on maturities within zero to five days. In fact, a notable percentage of the trading community is particularly concerned with same-day expiry risk as macroeconomic and geopolitical risks change rapidly.
CME Group Equity Index options on futures volume has recently grown dramatically, particularly amongst maturities between zero and five days until expiration. For reference, two years ago, zero to five DTE (days to expiration) E-mini S&P 500 option expirations saw ADV (average daily volume) of 350K. This zero to five DTE volume number grew to nearly 650K contracts in 2022, an 85% increase.
Stepping back, one can see a similar pattern over recent history when reviewing all maturity types across E-mini S&P 500 options. Evaluating trends over the previous five years, it becomes apparent how the marketplace focus has shifted to managing near term hazards as the ZIRP (zero interest rate policy) era moves further into the rear-view mirror for investors. Inflation and rising interest rates are having a profound impact on investor risk appetite and risk management needs.
