Weekly & End-of-Month (EOM) Options on E-mini S&P 500 Futures

Weekly and end-of-month (EOM) options on futures provide European-style alternatives that complement our existing American-style options on E-mini S&P 500 futures. These options offer greater access, flexibility and precision for trading the U.S. large-cap market using the leading benchmark. Below are answers to common questions on how these contracts work.

As a complement to American-style quarterly options on E-mini S&P 500 futures, EOM options and weekly options – with Monday, Wednesday and Friday expirations – are European-style contracts that offer expanded date flexibility for trading the benchmark S&P 500 Index.

EOM options are designed to expire on the last business day of each calendar month, offering alignment with month-end accounting cycles. Weekly options are designed to expire on each Friday of the month, with the exception of the third Friday if a quarterly option is already listed for that Friday, while Monday and Wednesday options expire on the Monday and Wednesday of each week, respectively.

Between weekly, EOM and quarterly options, there can be up to 15 listed options expirations per calendar month: the first, second, third and fourth Fridays and the last business day of the month plus Mondays and Wednesdays each week.

In addition to offering European-style alternatives (which by definition can only be exercised on expiration day), both the weekly and EOM options prohibit contrarian instructions (the abandonment of in-the-money options, or the exercise of out-of-the-money options). Thus, at expiration, all in-the-money options are automatically exercised, whereas all options not in-the-money are automatically abandoned.

Without the possibility of contrarian instruction, both the options buyer and the writer know immediately following the expiration their positions in the underlying futures contract. In particular, the writer does not need to wait for assignment notices – thus offering a degree of certainty around exercise.

All options at CME Group offer market participants flexible, secure trading alternatives to over-the-counter (OTC) market instruments. The central counterparty clearing model of CME Clearing provides for substantially mitigated counterparty risk.

Firms with OTC trades tied to month-end dates will be able to hedge those trades using EOM options. Weekly options provide an alternative to OTC trades for capitalizing on market movements related to economic releases or events.

On their expiration day, weekly and EOM options will be automatically exercised if the options are determined to be “in-the-money” using a volume-weighted average fixing price calculated by the exchange at 3:00 p.m. Central Time (CT). This special fixing price is calculated and disseminated by CME daily under the symbol “ESF.”

For example, at expiration, if the volume-weighted average price of the underlying futures contract was determined to be 1000.01, an E-mini S&P 500 EOM or weekly call option with a strike price of 1000.00 would be automatically exercised. This means that the seller of the 1000.00 call option would be automatically assigned. As discussed earlier, contrarian instructions are prohibited for these contracts.

Pending all regulatory approval, CME Group will extend the listing cycle in all E-mini S&P 500 and S&P 500 Monday and Wednesday options on July 28, 2019 for trade date July 29^th.

European-style options can be exercised only on the option’s expiration day. This reduces some of the uncertainty for option sellers, as they cannot be assigned prior to expiration (American-style options can be exercised and assigned at any time up to expiration).

The fixing price is the volume-weighted average price in E-mini S&P 500 futures, traded during the 30-second period leading up to 3:00 p.m. CT. Only outright trades of the E-mini S&P 500 futures in the corresponding contract month shall be included in the calculation. Spread trades involving the corresponding contract month of the E-mini S&P 500 futures shall be disregarded for the purpose of the fixing calculation.

This fixing price will be disseminated immediately using the symbol “ESF”.

The underlying instrument for the E-mini S&P 500 weekly and EOM options is the nearest-expiring quarterly E-mini S&P 500 futures contract as of the expiration of the option.

All options, whether Quarterly, EOM, Weeklies, Wednesdays, or Mondays will adhere to the following schedule.

• 10-point intervals will be brought in roughly six months prior to expiration
• 5-point intervals will be brought in roughly seven weeks prior to expiration

The position limits for these options contracts are determined in conjunction with the positions in the underlying futures, and thus are identical to those for quarterly options on E-mini S&P 500 futures –300,000 E-mini S&P futures-equivalent contracts net on the same side of the market in all contract months combined as of March 9, 2017.

Under normal conditions, EOM and weekly options settlement will be fixed against the 3:00 p.m. CT average weighted volume traded price of the E-mini S&P 500 futures contract.

In the event that the CME Globex system is operating normally but no trades have been recorded during the 30-second fixing period, the 30-second average of the mid-point of the bid-ask spread will be used as the fixing price.

In the event of a disruption to the E-mini S&P 500 futures market, either systems failure or otherwise, within the last two minutes leading up to 3:00 p.m. CT, the fixing price shall be determined by the 30-second average of the S&P 500 futures contract.

If the preceding procedures fail to produce a fixing price, the exchange shall determine a fixing price using any reasonable information and basis at its disposal

The fixing price, ESF, is used to determine exercise and assignment of the expiring option. It has two-decimal digit precision. Any options that are at least 0.01 index point in the money will be exercised. The futures positions created as a result of the exercise of the options and are not otherwise offset with other futures positions will be marked to market at the daily settlement price of the underlying futures. The daily settlement price of S&P 500 and E-mini S&P 500 index futures daily settlement price is in increments of 0.10 index point. The daily settlement price of the futures do not factor into the exercise and assignment of the weekly and EOM options.  

Yes. Traditional floor-traded spreads are available for the S&P 500 EOM and weekly options. Additionally, five E-mini S&P 500 options spreads are available on EOM and weekly options, including strangles, straddles, verticals, horizontals and butterflies.

Monday options are meant to capture the weekend risk. The “Monday” expiration will be listed with the ensuing Tuesdays as the expiration, should the Monday be a holiday.