CBOE Offers Traders Quickies

In a culture of diminishing attention spans, where people choose instant gratification over long-term commitment, and where the concept that everyone should be famous for 15 minutes has become frighteningly achievable, it makes perfect sense to turn options expiration, which had been a once-a-month event, into a weekly occurrence.

Filling this gaping need on Oct. 28, the Chicago Board Options Exchange will begin listing Weeklies, or Quickies in industry parlance, which are options that have just a one-week life span.

Like other new products that take advantage of electronic technology and accelerate the rate at which trades and strategies can be implemented, weekly options are a logical and innovative addition to an existing trading tool. But they come with a their own set of limitations, obstacles and risks.

The new options will be tied to the Mini-SPX Index, a newly created index that is based on the S&P 500 but will be based on one-tenth the value of the S&P 500 stock index. For example, if the S&P 500 Index is at 1220, the Mini-SPX would have a value of 122. The Mini-SPX Options (XSP) contract option specifications will be consistent with standard SPX index options: a multiplier of $100, cash settlement and European-style exercise (meaning options can be exercised only on expiration Friday), but as with SPX options, the last day of trading will be the Thursday prior to expiration. ...