Understanding listings and expirations

As traders get ready to trade the new Micro E-mini options, it is important to understand the listing cycle and the mechanics around options on futures expiration. Let’s look at the listing cycle of options on Micro E-mini S&P 500 and Micro E-mini Nasdaq-100 futures contracts.

There will be two nearest Quarterly options listed on the March, June, September, and December Quarterly Micro E-mini futures contracts, which expire on the third Friday of the month.

For example, in January, the March and June Quarterly options would be available. In August, the September and December Quarterly options would be available. These options will expire and have their moneyness determined by the index’s official opening level at 8:30 a.m. Central Time, based on the Special Opening Quotation of the respective index.

This is calculated using the resultant opening auction price of the constituent stocks within each index and is referred to as the Special Opening Quotation, or SOQ.  Upon expiration, in the money Quarterly options will deliver the respective underlying futures contract, which immediately settles to the cash value of the SOQ.

A trader would no longer have exposure to the market because both the options and futures contracts expire on the same day.

Please note that these Quarterly options are American-style, meaning that the long option holder can exercise the option at any time prior to expiration.

In addition to the Quarterly options, CME Group will list five other Friday options: three of the Friday Weekly options and the nearest two, non-quarterly Third Friday Monthlies, sometimes referred to as serials.

First, let’s review the Third Friday Monthlies that will be listed.

CME Group will list options on the third Friday of months that do not have a quarterly options expiration.  For example, at the beginning of January, the third Fridays in January and February will be available, as well as the March Quarterly.

In August, the Third Friday Monthlies will be available for August and October, as well as the September Quarterly.  

Unlike the quarterly options, these options are European-style, meaning the only time the long holder can exercise is at expiration. They will expire at 3 p.m. Central Time and deliver the nearest expiring Micro E-mini futures contract.  

For example, a January option, that expires in the money, would deliver the March futures contract. Whether traders end up long or short the futures position, they would have exposure to the market until they either trade out of the resultant futures position or until the futures contract expires in March.

At any given time, there will always be three Friday Weekly options listed on the week one, two, and four rotating schedule, where no Weekly Friday option will be listed if that Friday is the third Friday or the end of month option expiration date.

In our example, since there is already a quarterly expiration in June, there is a Weekly option expiration on the fourth Friday of June and the first and second Fridays of July. Since the July week three Friday would already be listed when the June Weekly options expire, a new Weekly listing will be added on the fourth Friday in July.

At any given time, there will be three consecutive End of Month (EOM) options expirations available.

For example, assume it is January. The three consecutive EOM options listed are: January, February, and March. When the January EOM options expire, the April EOM options will be listed.  

The EOM options are also European-style, and all the non-quarterly options will expire at 3 p.m. Central Time and expire based on the special fixing price of the corresponding E-mini future for that day.

The special fixing price is based on the weighted average trading price of E-mini futures in the last 30 seconds of trading before the cash equity markets close. This is referred to as ESF for E-mini S&P 500 futures and NQF for E-mini Nasdaq-100 futures. All European-style Micro E-mini options will auto-exercise at expiration.

This means that CME Clearing will automatically exercise in-the-money options, just like their classic E-mini options counterparts. Long holders will automatically receive the respective Micro E-mini futures contract upon expiration. Short holders of in-the-money options will automatically be assigned the opposing position by the clearinghouse.

Because the underlying futures contract expires at a later date, both long and short positions that expire in-the-money will generate exposure to the futures market. Please remember, both American- and European-style options can always be traded prior to their expiration.

Regardless of the options product that you trade, it’s important to understand the listing and expiration of that product to appropriately manage your portfolio. The details of the listing cycle and expirations can be found on cmegroup.com.  

With the combination of Weekly, Serial, EOM, and Quarterly options, both short-term and long-term strategies can be executed. This allows flexibility and “options” for all traders.