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Product of the month: The ongoing success story of weekly options

Release date: 25 Nov 2014 | Eurex Exchange

Product of the month: The ongoing success story of weekly options

In 2005, 32 years after the call option was introduced, the CBOE launched "weekly" options. These options behaved like monthly options in every respect, except that the series were only listed for eight days. They are introduced each Thursday and expire eight days later on Friday (with adjustments for holidays). Now, investors who historically enjoyed 12 monthly expirations - the third Friday of each month – could now utilize 52 expirations per year. The market participants were immediately attracted by the new product, and the interest has grown ever since.

Over the last 9 years, various exchanges started listing weekly options not only on indexes, but also on various other asset classes. Today, more than 13 exchanges in the world have weekly derivative products. In Asia, the Eurex partners TAIFEX and BSE offer TAIEX and Sensex index options, respectively. Shortly after TAIFEX introduced weekly options in 2013, they attained high liquidity very quickly.

Eurex started to introduce weeklys in 2006 and today offers weekly index options on the benchmark indexes EURO STOXX 50®, EURO STOXX Banks and DAX®. In addition we offer weeklys on currently 4 single stocks: (Daimler, Deutsche Bank, Deutsche Telekom, and Nokia).

Eurex’ weekly options are set up as separate products from the regular options contracts that expire on the third Friday of each month, so that specific parameters for trading and market making can be applied EUROfor these series. Besides the regular EURO STOXX 50® Index Options (OESX) that expire on the third week of the calendar month, Eurex also lists a EURO STOXX 50®, 1st Friday Weekly Options (OES1), EURO STOXX 50®, 2nd Friday Weekly Options (OES2) etc. On the expiration day of the 1st Friday Weekly Options for the current month, the next month’s 1st Friday Weekly Options will already be listed on Eurex. This makes all weekly expirations of each month always simultaneously available, so that the total lifespan of each expiry is 4 -5 weeks. The 5th Friday options have an even longer lifespan, because not every month has a 5th Friday.

This approach gives investors a high degree of flexibility: They can hold the weekly expirations longer, build spreads between different weekly expiries, and comfortably roll positions from one weekly expiry to the next.

Our offer of weeklys has been supported by market makers and been well received by the investors: within the last 5 years, our weekly options have grown around 65% annually to high liquidity levels.

What makes weekly options so successful?
For all Eurex options, the traded volume increases when they come close to maturity. Weekly options therefore provide investors with a number of advantages in addition to the standard monthly expiries:

  • opportunities for short-term bets on the underlying’s performance, e.g. on a particular news item or an anticipated sudden price movement
  • smaller premiums due to lower time value
  • continuous provision of high sensitivity to underlying prices throughout the calendar month



What strategies to use?
Simply put, one can apply just about any strategy used with longer dated options also for weekly’s, except now it can be done four times each month. One strategy to receive a dividend-like premium every week is to hold a basket of DAX® or EURO STOXX 50® stocks and write weekly call options on DAX® or EURO STOXX 50® respectively. Or to use long-at-the-money options in regular monthly expirations and sell weekly options of the same strike that expire in the nearest week against that monthly option. This is a way to sell options for income with a hedge to limit losses. There is a relatively faster decay of time value in weekly options and maximized profit when the underlying price equals the strike price at expiration.

Eurex’ weekly options on the DAX®, EURO STOXX 50® and EURO STOXX Banks Sector indexes can be traded in Eurex’s order book, supported by Eurex market makers. They can also be traded in off-book transactions and then entered into Eurex via the Trade Entry Services. Please see the attached graphs for the respective order book shares in the monthly volumes per underlying index of weeklys as well as a table for the volumes of all weekly expiring Eurex contracts along with the regular 3rd week products.

ContractEurex Product CodeTraded Contracts (Oct 2014)Daily average for Oct 2014Traded Contracts (Sep 2014)Change MoMDaily Average YtD
(Jan-Oct 2014)
Eurex Equity Index Options with weekly expiries      
EURO STOXX 50® Index Options (regular expiry on 3rd Friday)OESX30,981,0591,347,00319,444,55659.33%922,220
EURO STOXX 50® Index Options - 1st FridayOES1262,24411,402602,012-56.44%16,445
EURO STOXX 50® Index Options - 2nd FridayOES2345,13515,006262,37331.54%12,496
EURO STOXX 50® Index Options - 4th FridayOES4397,38617,278401,918-1.13%20,220
EURO STOXX 50® Index Options - 5th FridayOES5428,92618,649  7,859
EURO STOXX® Banks Options (regular expiry on 3rd Friday)OESB1,768,92776,9101,469,31920.39%47,119
Euro STOXX® Banks 1st FridayOEB18,03734926,160-69.28%253
Euro STOXX® Banks 2nd FridayOEB2 0  193
Euro STOXX® Banks 4th FridayOEB43,959172500691.80%25
Euro STOXX® Banks 5th FridayOEB512,279534  153
DAX® Options (regular expiry on 3rd Friday)ODAX5,327,012231,6093,171,39967.97%146,146
DAX® Options - 1st FridayODX146,7962,035174,701-73.21%3,580
DAX® Options - 2nd FridayODX2111,3634,84262,62477.83%3,039
DAX® Options - 4th FridayODX4139,6046,070106,27131.37%3,948
DAX® Options - 5th FridayODX5127,6355,54971823257.14%1,737
Eurex Single Equity Options with weekly expiries      
Daimler Options (regular expiry on 3rd Friday)DAI550,78523,947525,4324.83%23,351
DAIMLER - 1st Friday DAI110138-99.28%1
DAIMLER - 2nd Friday DAI22741223417.09%4
DAIMLER - 4th Friday DAI458726212695.24%12
DAIMLER - 5th Friday DAI53929333.33%1
Deutsche Bank Options (regular expiry on 3rd Friday)DBK777,65033,811576,83534.81%29,128
Deutsche Bank - 1st Friday DBW19,4124093882325.77%67
Deutsche Bank - 2nd Friday DBW238117116228.45%2
Deutsche Bank - 4th Friday DBW484418300.00%4
Deutsche Bank - 5th Friday DBW598843  12
Nokia Options (regular expiry on 3rd Friday)NOA31,002,57443,5901,033,573-3.00%58,549
Nokia - 1st Friday NOA12,06590  20
Nokia - 2nd Friday NOA22,800122  13
Nokia - 4th Friday NOA470030  8
Nokia - 5th Friday NOA52009  1
Deutsche Telekom Options (regular expiry on 3rd Friday)DTE883,32538,405677,33230.41%35,864
Deutsche Telekom - 1st Friday DTE1351151,212-71.04%10
Deutsche Telekom - 2nd Friday DTE22019  6
Deutsche Telekom - 4th Friday DTE41,90483  9
Deutsche Telekom - 5th Friday DTE52029  2