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Henry Schwartz Analysis: Live from Las Vegas

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I'm currently attending the Options Industry Council's annual conference, which is taking place in Las Vegas this year. This conference is attended by nearly 500 options professionals, including exchange officials, representatives from the largest broker-dealers and institutional accounts, as well as a mix of industry service providers and journalists, and its a great place to get a glimpse into the future of our markets.

One topic discussed yesterday was the potential expansion of the weekly options offering to include options that expire every day of the week, starting with the seven-day term that has proven so successful (and is nearly 25% of the typical daily volume now).

While the concept of one-day options has been floated a few times, they have failed to pick up wide support because many in the industry feel such a short-term focus can bring problems, especially in volatile markets or amid rapid 'gap' moves. Yesterday's discussion was about listing options that expire in seven days, and listing them every trading day, so you end up with contracts available to trade that expire every day for the next seven days, permitting a very extreme precision on options timing. This might allow a trader to short options ahead of earnings and be long a straddle after earnings all at the same time as a package (that four-way straddle swap will need a catchy name). If we get these contracts (and I bet we will), the entire concept of 'expiration friday' will become a bit of a relic we can explain to our grandkids.

Another interesting issue was that yesterday's Chicago Board Options Exchange (CBOE) floor technical problems were taking place at the same time that CBOE management were taking the stage for a panel. Of course the first question was 'whats going on with your floor?' and while the response was a politically safe 'a software glitch which will be corrected shortly' (and was), the event certainly gave many of the attendees something to talk about. While all the stock and ETF options listed on CBOE are available to trade on other exchanges and therefore did not really cause any problems, the inability for traders and banks to get access to the top tier proprietary SPX and CBOE Volatility Index (VIX) options is a significant issue. One exchange leader I spoke with suggested another exchange should be selected to pick up the listings in just such this case.

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