SPXPM Weekly Options
A fairly new weekly options trading product that was recently introduced is the SPXPM options.
Before this new SPX trading product was introduced, option traders could either trade the SPX options – which are not electronically traded and that have an ‘awkward’ Friday morning settlement – or the SPY options, which are a tenth of the size of the actual SPX and have an American Style way of expiring that could potentially wind up causing the option trader to find themselves with a bunch of unwanted stock.
Here’s a great video on the basics of this cool new CBOE SPX trading product…
Some of the highlights of this new SPXPM weekly options trading vehicle are:
1. These new options are electronically traded giving weekly option traders fast and accurate ‘point and click’ access to the SPX market. Many option traders consider this method to be far superior to the old school pit method.
2. The Settlement method for the new SPXpm options are settled at the close of trading on Friday just like most options on stocks – rather than at the opening print like the SPX and RUT options. I think most option traders would agree this is far superior as well as these options can be played right up to the closing bell and we know exactly where the options will expire – and if they will be in or out of the money. With options that trade on the opening print – no one ever knows where the opening print will be at – and in cases where there is a news event or some other type of market moving event – option traders could (and have) get burned with options that were out of the money at the close the previous day – but suddenly at the opening print because of a big opening move or opening gap – are suddenly IN the money and options positions are at a loss. The new SPXpm options will now keep that from happening.
3. Cash Settled Remains the same. Most options that expire on the close of day Friday have been American Style options – which means that if they are in the money they can be exercised which would cause the option trader holding the position to suddenly find themselves either long or short a ton of stock that they never wanted. The SPXpm options – just like the SPX and RUT options – are Cash Settled – meaning that there is no exercise of stock possible. The positions are simply settled at the end for cash in the account.
4. An advantage of trading SPXpm options versus trading SPY options include both the cash settled aspect touched on in the previous point – and also the issue of size. SPY is one tenth the size of the SPX and SPXpm – meaning that you could trade the same amount of capital with many less contracts saving a lot on commissions.
If you like to trade option income strategies on the SPX or RUT – be sure to check out these new SPXpm options as a great potential alternative way to trade the SPX.
And if you haven’t already, be sure to join our free option income trading newsletter / website to discover how to learn a ton of unique option income trading strategies that can be used with weekly options as well as standard options on a variety of stocks and indexes including these new SPXpm options.
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