FTSE 100 Weekly Options

Transcription

1 FTSE 100 Weekly Options Precise & Focussed

2 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.

3 Key features THU 15 CALENDAR DAY MATURITY 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 GBP 10 MULTIPLIER per Index Point 12:02 EXPIRATION TIME

4 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 s covering the mid and long-term maturities as they allow investors to take positions with more precision. Low premium 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. Trading 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. Time decay 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. Strategies 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 Week 1 Week 2 Monthly First week of the month Second week of the month Week 4 Third week of the month Week 5 Fourth week of the month (M + 1) Fifth week of the month (if relevant) (M + 1) (M + 1) UK Weekly Options

5 FTSE 100 Index weekly options specification Contract Underlying Type of Contract Central Counterparty Trading Hours Multiplier The FTSE 100 Index. The benchmark Index for the United Kingdom. European Style, Cash settled Call and Put Option Contracts. LCH.Clearnet 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 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 Tick Value: GBP 5 Settlement style Option style Listing Day Contract lifetimes Expiration Day and Week End of Day Price Premium Settlement Exercise Settlement Price Exercise Window Exercise Settlement LSEDM codes Bloomberg codes Reuters codes Cash Settlement. European Style. Each Thursday of the month, except the first Thursday. Where this is not a normal Trading Day, the preceding Trading Day shall be used. Out to 2 weeks Each Friday of the month, except the third Friday. Where this is not a normal Trading Day, the preceding Trading Day shall be used. 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. One Bank Day after the Trade Day. 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. 18:10 18:40 London time on Expiration Day. One Bank Day after Expiration Day for payment of Exercise Settlement Amount. W1UKX, W2UKX, W4UKX, W5UKX WUKXA Index, WUKXB Index, WUKXD Index, WUKXE Index W1UKX, W2UKX, W4UKX, W5UKX UK Weekly Options

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