"Options generally fall under three categories: income generation, portfolio protection and leveraged speculation," says Kalt. This is not to say that weekly options won't ultimately offer new ways to apply hedging time-related trading strategies such as calendar spreads or strangles. Until weekly options prove they have liquidity and expand their listings, their purpose will be mainly restricted to the third category of short-term speculation and therefore will not being promoted as "a must-be-used trading tool," concludes Kalt.
The success and proliferation of weekly options will greatly depend on investor response to the first SPX Weekly option contract. If the initial response is not overwhelming, the exchange might wait before launching any more weeklies. Ironically, the fact that the CBOE has chosen the SPX could be an obstacle to its success. The SPX is one of the few options that remain singly listed, so the new contracts will trade only on the CBOE, which has about a 32% share of the entire options market. That limited market exposure could hinder the Quickies' success by making them a less-competitive market that multi-exchange-listed options.
"If this was launched using the QQQQs or even the SPYs, we might see a very different approach and results," says OptionsXpress' Kalt, which would presumably include a bigger push among retail traders.
But maybe the CBOE's decision to use its competitive advantage and be the first mover on this new type of product will benefit investors and other exchanges in the long run. The CBOE can incur the costs associated with the initial launch, iron out the kinks and logistics and gather the data to determine the best uses for the weekly options.Then, if interest warrants expanding weekly options to other products, such as additional indices, ETFs or even individual equities, the Quickies will likely be listed across multiple exchanges, which will create a more competitive, liquid and efficient market, and that will be good for everyone involved and can only help the longevity of weekly options.