LSE to offer weekly FTSE 100 options contracts
11 May 2016 London
Image: Shutterstock
A ‘first-of-its-kind’ weekly options contract based on the FTSE 100 Index will launch on 31 May.
According to an London Stock Exchange statement on the product launch, its introduction will complement the London Stock Exchange Derivatives Market (LSEDM) existing product offering on the FTSE 100 Index and is a first of its kind for the UK-listed derivatives market.
The weekly options contract aims to offer more precise hedging and trading and greater flexibility to leverage market volatility and hedge short term decline than the more traditional monthly options contract.
The contracts will expire every Friday, except the third Friday of the month when monthly contracts expire.
FTSE Russell, the global index provider, will calculate the official uncross price of the FTSE 100 after the auction the new London Stock Exchange intra-day auction at midday, which LSEDM will then use to determine the exercise settlement price of the contracts.
The liquidity will initially provided by SIG Susquehanna, which will offer continuous two-way prices on the order book and LCH will offer clearing services.
Nicolas Bertrand, head of LSE equity and derivatives markets, said: “LSEDM was created to bring true innovation and cost efficiency to the UK equity derivatives market.”
“We believe the unique characteristics of weekly options on the FTSE 100 will appeal to a wide swathe of UK investors. This launch represents a true collaborative approach across London Stock Exchange Group, reflecting our Open Access philosophy.”
Cathal Hardiman, options sales trader at Susquehanna International Securities, added: “As well as providing more precise hedging, weekly options afford investors more direct exposure to events and we tend to see index weekly volumes jump around large macro events.”
According to an London Stock Exchange statement on the product launch, its introduction will complement the London Stock Exchange Derivatives Market (LSEDM) existing product offering on the FTSE 100 Index and is a first of its kind for the UK-listed derivatives market.
The weekly options contract aims to offer more precise hedging and trading and greater flexibility to leverage market volatility and hedge short term decline than the more traditional monthly options contract.
The contracts will expire every Friday, except the third Friday of the month when monthly contracts expire.
FTSE Russell, the global index provider, will calculate the official uncross price of the FTSE 100 after the auction the new London Stock Exchange intra-day auction at midday, which LSEDM will then use to determine the exercise settlement price of the contracts.
The liquidity will initially provided by SIG Susquehanna, which will offer continuous two-way prices on the order book and LCH will offer clearing services.
Nicolas Bertrand, head of LSE equity and derivatives markets, said: “LSEDM was created to bring true innovation and cost efficiency to the UK equity derivatives market.”
“We believe the unique characteristics of weekly options on the FTSE 100 will appeal to a wide swathe of UK investors. This launch represents a true collaborative approach across London Stock Exchange Group, reflecting our Open Access philosophy.”
Cathal Hardiman, options sales trader at Susquehanna International Securities, added: “As well as providing more precise hedging, weekly options afford investors more direct exposure to events and we tend to see index weekly volumes jump around large macro events.”
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