Equity Options Trading for the Weekend

The world is watching the 2017 French Presidential election to see if political trends in the United States and United Kingdom extend to France and the European Union.  Futures traders find it significant for an additional reason: the first and second rounds of the election take place on a Sunday.

The importance of the date can be gauged in the fact that a new options contract at CME Group has seen high levels of trading volume. Monday Weekly options on the S&P 500 have averaged about 19,000 contracts per day since launching on April 3, and were climbing to new highs each day approaching the French vote.

 

Trading Around the News

With Monday weeklies, investors can trade with more precision around weekend news. The contract opens at 5 p.m. Central on Sundays, allowing participants to immediately take a position based on the most recent news or events.

Volume in Monday options saw a spike in early April when the VIX volatility index reached a five-month high. Until April, the only futures options listed to take a short term position were in weekly options that expired on Wednesday or Friday.  CME Group also lists quarterly and month-end options.

Weekly options were widely used during the U.S. Presidential and Brexit votes, trading 3.8 and 3.2 times the average on those days, respectively. But those votes were on a Tuesday and Thursday.

For news that comes over the weekend, investors and traders have found an alternative. On April 17, the young contract reached a new high with more than 50,000 contracts traded. Some of this may have been tied to the volatility spike a week earlier and to the approaching French election.

 

 

The election dates aren’t the only Sunday events with the potential to move markets.  Sandwiched between them on the April 30 weekend is the U.S. budget resolution.  And in June, French parliamentary elections. After that, plenty more. Traders are showing a taste for hedging those events as the news breaks.

Thomas Boggs is senior director of equity products at CME Group.

Additional Recent Articles in News