CBOE - A Contract For Every Trader: Exploring Cboe's Standard Mini And Nano Options
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In 1983, CboeGlobal Markets Inc. (BATS: CBOE) revolutionized the financialmarkets by introducing options contracts on broad-based stock indexes.Over the next 40 years, options contracts on the S&P500 Index(denoted “SPX”) would become the most actively traded index optionin the U.S.
According to the WorldFederation of Exchanges , the dominance of the SPX option trulybegan during the 1987 crash, when the S&P 500 Index gaineddominance over its S&P 100 counterpart as the leading marketproxy. Today, the SPX commands an average daily volume (ADV) of 2.3million contracts , allowing thousands of investors from allover the world to benefit from the options market.
The SPX Index options, along with SPX Weeklyand End of Month options, continue to provide both institutions andretail investors access to alpha-generating and portfolio-hedgingtools upon which many strategies are based.
A RetailRevolution
In thelast two years, the number of retail investors participating in stockmarkets has grown exponentially.
According to one study ,retail investors accounted for 19.5% of all stock market shares tradedin the first six months of 2020, a truly unprecedented occurrence instock market history. The figure represented a 4.5% increase over 2019and was almost double the amount in 2010.
While retail growth has slowly subsided sincelate 2021, the generally agreed-upon vision is that retail investorswill continue to participate more in the stock market. Betterdissemination of information, affordable and accessible entries intomarkets, and quality trading tools have been cited as the reasons forsustained retail investors' growth. Cboe has played its part inall of these developments, but it has particularly stood out from thecrowd in its creation of Mini and Nano options.
At 1/10th the size ofstandard options contracts, the Mini-S&P500 Index (XSPSM) and Mini-Russell2000 (MRUTSM) Index options are set at a price that is meantto be more friendly for retail traders to easily participate in, assmaller versions of the SPX and RUT indices. Cboe’s Nanos takes this affordability one step further, offering contracts1/100th the size of standard options contracts.
Aside from their highaffordability, Cboe’s Mini and Nano options have a host of benefitscompared to standard options contracts including:
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Potentially favorable tax treatment
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Access to global tradinghours
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Cash-settled options
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European exercisestyle
Since it was founded in 1973, Cboe Global Markets has created asteady stream of innovative products for participants in the financialmarkets. Today, the division between institutional and retailinvestors is far smaller with retail traders exerting significantinfluence on the market and comprising a large number of itsconstituents.
Tofind out which products work best for you, check out Cboe’s optionscontracts here .
This article was originallypublished on Benzinga here .
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