FTSE 100 Weekly Options - London Stock Exchange Group

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FTSE 100
Weekly Options
Precise & Focussed
About LSEDM Offering
Weekly options on the FTSE 100 Index
listed on LSEDM are the first short-dated
options on a UK based underlying, listed on
a UK exchange.
They will expand LSEDM products range on
UK underlying that already includes:
• FTSE100 Index Options
• FTSE100 Index Futures
• UK Single Stock Options
• UK Single Stock Futures
• FTSE Superliquid Futures
As with all other derivatives products offered
by LSE, weekly options are cleared by LCH
Clearnet Ltd and will benefit from the margin
offsets against corresponding futures and
options positions traded on LSEDM.
Key features
15 CALENDAR DAY MATURITY
THU
FRI
SAT
SUN
MON
TUE
WED
THU
FRI
WEEK T-1 CONTRACT
WEEK T CONTRACT
WEEK T+1 CONTRACT
FTSE 100 Weekly options available for trading everyday.
Listing on Thursday. Expiry on Friday.
1
ST
SHORT-DATED OPTIONS
on a UK-based underlying,
listed on a UK exchange
CLEARED BY
LCH
TICK SIZE
0.5
CONTRACT
UNDERLYING
FTSE 100
INDEX
MULTIPLIER
GBP
10 per
Index
Point
12:02
EXPIRATION TIME
Although weekly options can be considered just as options with very short-term
maturities, the fact that they are made available on a weekly basis allow investors
to take advantage of some specific characteristics that differentiate them from
the standard monthly maturity cycle. The benefits of weekly options are more
pronounced when traded along contracts covering the mid and long-term
maturities as they allow investors to take positions with more precision.
Low premium
Time decay
Trading
Strategies
Weekly options have a shorter maturity than
monthly options and therefore the time value
component of their price is relatively small.
This makes them a useful tool to implement
short-term hedging strategies or take
advantage of specific macro events with
a comparably low outlay of premium.
Weekly options allow users to hedge their
short-term risk and take advantage of market
opportunities with precision. Because of their
high gamma, the price of the short-dated
option will respond more than the price of
a long-dated option to a change in
the underlying.
The time component of the options has only
up to 15 days to maturity and time value
decays sharply approaching expiry. This
creates the opportunity to take advantage of
specific option strategies several time in a
calendar month adapting one’s views and
expectation in a more precise way.
The interplay between short-dated and
longer-dated options may be of interest to
users of calendar spreads. The fast time decay
of weekly options can be used to take short
positions and the premium received used
to offset the cost of taking long positions in
longer maturities or to repair outright positions
that are not performing according to plan.
Expiry cycle
Date
First week of the month
Week 1
contract
Week 2
contract
Monthly
contract
√
√
√
√
√
Second week of the month
Week 4
contract
Third week of the month
√
√
Fourth week of the month
√ (M + 1)
√
Fifth week of the month
(if relevant)
UK Weekly Options
√ (M + 1)
√ (M + 1)
Week 5
contract
√
√
FTSE 100 Index weekly options contract specification
Contract Underlying
The FTSE 100 Index. The benchmark Index for the United Kingdom.
Type of Contract
European Style, Cash settled Call and Put Option Contracts.
Central Counterparty
LCH.Clearnet
Trading Hours
08:00 – 17:00 London time for Order Book trading and Block Trading.
07:30 – 17:30 London time for manual Trade Reporting.
On expiry day, trading finishes at 12:02
Multiplier
GBP 10 per Index point.
Currency
GBP, British Pound, £.
Quotation display
Option Premium in Index points
Tick Size and Tick Value
Tick Size: 0.5
Settlement style
Cash Settlement.
Option style
European Style.
Listing Day
Each Thursday of the month, except the first Thursday. Where this is not
a normal Trading Day, the preceding Trading Day shall be used.
Contract lifetimes
Out to 2 weeks
Expiration Day and Week
Each Friday of the month, except the third Friday. Where this is not a
normal Trading Day, the preceding Trading Day shall be used.
End of Day Price
Price used to calculate theoretical value of Option Contract positions in
order to facilitate the margining process at the clearing level. This price is
calculated in accordance with standard Black Scholes options pricing model.
Premium Settlement
One Bank Day after the Trade Day.
Exercise Settlement
Price
Contracts will settle against the official value of the FTSE 100 Expiry
Index, which is calculated by FTSE Russell after 12:02 London time on the
Expiration Day, following the uncrossing at the end of the London Stock
Exchange plc midday Intra-day auction. This will then be rounded by LSEDM
to the nearest 0.5 index point.
Exercise Window
18:10 – 18:40 London time on Expiration Day.
Exercise Settlement
One Bank Day after Expiration Day for payment of Exercise
Settlement Amount.
LSEDM codes
W1UKX, W2UKX, W4UKX, W5UKX
Bloomberg codes
WUKXA Index, WUKXB Index, WUKXD Index, WUKXE Index
Reuters codes
W1UKX, W2UKX, W4UKX, W5UKX
UK Weekly Options
Tick Value: GBP 5
London Stock Exchange Derivatives Team
Telephone +44 (0)20 7382 7650
[email protected]
www.lseg.com/derivatives/uk-weekly-options
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© May 2016 London Stock Exchange Group plc.
www.lseg.com
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