Efforts to trade options tied to a larger number of shares have fizzled in the past. The American Stock Exchange offered contracts based on 1,000 shares of the SPDR S&P MidCap 400 ETF Trust in the late 1990s, according to Michael Bickford, who was senior vice president for options at Amex before NYSE Euronext bought it in 2008. The so-called grand options weren’t popular and were de-listed around 2000, he said. They traded on what is now known as NYSE Amex Options alongside S&P MidCap 400 ETF contracts based on 100 shares.
Since then the options business has changed. Most options are now listed on multiple exchanges and can be traded on any venue. New rules oversee electronic linkages among markets and dictate how orders must be handled by an exchange.
“I’m not saying the product will be successful, but I think people would be interested to hear what the value proposition is,” Peter Cecchini, global head of institutional equity derivatives at New York-based Cantor Fitzgerald LP, said in an interview. “I’m interested.”
The strike prices, or levels at which a contract can profitably be converted into shares in the underlying ETF, and the bids and offers will be the same for the jumbo and regular- size contracts to limit investor confusion, BOX said. The larger product will use the symbol SPYJ.
Approval for the jumbo contracts follows the introduction of mini versions of higher-priced options to cater to individual investors. Exchanges began offering products one-tenth as large as regular-size contracts for Google Inc., Amazon.com Inc., Apple Inc., SPDR Gold Shares and the S&P 500 ETF in March. Those contracts are based on 10 shares of the underlying stock or ETF.
Mini options traded 1.24 million contracts in April, or more than 56,000 contracts per day, according to data compiled by OCC. They averaged 1.5 percent of the volume in the options that have mini versions, the data showed.