This means that as time to expiration grows shorter, the mini Dow September calls will expire with a value of either zero or intrinsic value (futures price less strike price) well before a similar loss of time-premium value for the higher-priced calls for the mini Russell 2000 and Nasdaq 100. Only changes in portfolio composition or market perception of the indexes themselves could change the progression of call prices as the four “waves” move toward the “shore” represented by the horizontal axis and intrinsic value.
At the heart of this difference in market perception of relative volatilities among the four mini call options is the actual performance of the index futures. “Cumulative percent changes” (below) shows the price changes for the September futures from April 3 to June 5, 2012. During this period of overall declining stock prices, the Russell and Nasdaq September minis raced each other to the bottom, followed by the less-volatile Dow and S&P 500 minis. From Jan. 4 to March 30, the indexes showed approximately the same pattern with positive percentages: Dow, +6.94%; S&P 500, +10.68%; Russell 2000, +11.39%; and the Nasdaq 100, +18.16%.