SPX and SPXPM Options

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• SPX and SPXPM Options

• What are SPXPM Options
• Author Hari Swaminathan

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About OptionTiger

• You may have heard of SPX and SPXPM options.
  They are both Options on the SP 500 Index. The
  SPX is the regular version, and the SPXPM options
  is a variant that expires at the close of
  business after Friday. Whereas the SPX Options
  close at the opening print on Friday. 
• You may have noticed if youre trading the
  regular SPX Options that the Options dont lose
  all their value after close of market on the
  Thursday of expiry. Although they dont trade on
  Friday morning, the closing print for the SPX
  options depends upon the opening print for all
  the SP500 components on that Friday morning.
  This is obviously risky because the next morning
  could be (and often is) a whole new day, and the
  SPX final expiry print could be vastly different
  from the previous days close. Secondly, the
  final print has to wait for all the components to
  trade, which could take upto 12 noon or more on
  Friday. Not only are you left guessing as to the
  final print, your margins are stuck, with no way
  for you to get out of the trade. HmmNot a good
  place to be. 
• So the alternative to this problem is SPXPM
  Options. They expire on the Friday after market
  hours, so there is no guesswork on the final
  print.

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About OptionTiger

• What are the cons of the SPXPM Options ? Its
  mostly the Open Interest. Check out the two
  graphics below for the SPX and SPXPM Options in
  the August series with 30 days to expiry. 
• SPX Open Interest is much more by a magnitude of
  1000. But if youre okay with the low Open
  interest and want to take up small contract
  positions (5 to 10), you should be fine. The
  Bid-ask spread seems to be similar in both cases.
  Hopefully the Open Interest and Volume will catch
  up with the SPXPM Options soon, and the closing
  print can become a less of an uncertain thing. 
• Which really begs the question Why does CBOE
  have all these weird settlement rules ? As far as
  I can see, it provides no benefits.

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• SPX Open Interest

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• SPXPM Open Interest

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