Friday, September 10, 2010

CBOE Wants Daily Expiring Options??

They already have Weeklys (options that expire weekly) on major indices and select stocks, which may have caused the range-bound market since June, when the Weeklys for individual stocks and some sector ETFs were first introduced.

Now they want Dailys. The US financial markets are on the solid track to self-destruct by becoming nothing but a casino for traders, not the place for price discovery.

By the way, CBOE is set to introduce Weekly options on VIX futures later this month, too. So now the market volatility will be range-bound forever.

What's next? Hourly options? How about Second options for algo bots? Since they can stuff 5,000 quotes in one second, that's enough duration to trade volatility for them, isn't it?

The market's dead, long live the dead market!

From Dow Jones Newswires:

"The country's biggest options-trading venue wants regulators' permission to list options that expire in as little as a day.

"If approved, CBOE Holdings Inc.'s (CBOE) Chicago Board Options Exchange would be the first U.S. exchange to offer options contracts that expire so quickly. The most heavily traded U.S. options are structured around monthly time frames. The proposed new ones have time frames ranging from one to four days.

"CBOE called the idea "a flexible and valuable tool to manage risk exposure, minimize capital outlays, and be more responsive to the timing of events" in a filing with the Securities & Exchange Commission dated Aug. 24. A CBOE spokeswoman had no further comment on Friday.

"The move, first reported by Bloomberg News, reflects the push for ever-shorter trading horizons, as well as exchanges' competition to lure customers." [The article continues.]

(h/t liveup, again)


The Optioneer said...

Dear Ex-Skf,

Ha ha... No reason to be so sarcastic about "second options"...

Don't be so sure that the Daily Series is a bad Idea. In fact, it is an excellent one and would further advancement of financial derivatives, not undermine them. Options didn't exist in 1970 and there people like you who wrote dissertations on why the exchanges shouldn't allow for them to traded. =)

I can think of dozens of scenarios where daily expiring contracts would serve a great purpose for traders, investors, or risk arbitrageurs.

Open your 'financial mind' my friend.


arevamirpal::laprimavera said...

Thanks for your input, Shaun.

I'm not that Luddite, I trade options. But I do not see the proliferation of derivatives as healthy for the financial markets.

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