This move marks a significant expansion, allowing investors to benefit from options expirations every trading day of the week.
Cboe has gone live with daily expiries for both the Russell 2000 Index weekly (RUTW) and Mini-Russell 2000 Index weekly (MRUT) options.
The Russell 2000 Index, a renowned benchmark for U.S. small-cap equities, gains enhanced flexibility and precision with these new expiries. Investors can now manage their small-cap U.S. equity exposures more effectively and execute targeted strategies with greater control and accuracy, particularly around key market events.
Short-dated U.S. index options represent 36% of total U.S. index options flow
These new expiries are a response to the substantial uptick in U.S. options trading volumes, expected to surpass previous records. Short-dated U.S. index options, which have become popular among both retail and institutional investors, represent 36% of total U.S. index options flow, according to Cboe data.
The RUTW and MRUT options are European-style, cash-settled at expiration with a P.M. settlement, and cannot be exercised early. The MRUT options, being 1/10th of the standard RUTW options, offer a more cost-effective way for small-cap equity trading strategies.
These options are exclusively listed on Cboe’s options exchanges, contributing to the diversification of their product suite. In 2023, Cboe witnessed significant growth, with 15.2 million RUT options contracts traded and an average daily volume of 63,000 contracts, representing approximately $11 billion in average daily notional value—a 39% increase from the previous year.
The introduction of Tuesday and Thursday expiries further expands Cboe’s product offerings, catering to the dynamic needs of investors in the small-cap U.S. equities market.
FinanceFeeds interview with Cboe’s Richard Barden on options trading
In late 2023, FinanceFeeds spoke with Richard Barden, Director for Market Data sales at Cboe Global Markets, at the Finance Magnates London Summit 2023.
At FMLS:2023, Barden highlighted the cost implications of non-compliance in market data, the growing interest in European options amid a saturated FX space, and brokers’ expansion into B2B territory.
On the impending regulatory shifts in 2024, Barden reflected on their potential to reshape the derivatives market in particular. He foresees a surge in pan-European derivatives trading driven in part by by Cboe’s equity derivatives exchange, Cboe Europe Derivatives (CEDX), which recently expanded into single stock options
“European options have been static for the last decade, whereas you’ve seen almost exponential growth in terms of US options trading. CEDX is trying to reverse that trend […]and we hope it will be one of the vehicles that will drive greater trading volumes in European derivatives over the coming years.”
Looking ahead to 2024, Barden forecasts a shift in the brokerage landscape, with retail brokers expanding into B2B services and a growing interest in options trading in Europe.
“We see a continuation of retail brokers, who have traditionally been B2C, expanding into B2B. So, these are firms who are setting up sort of prime arms and are targeting a wholesale clientele. And as part of that product offering, they want to offer equities, and they offer those through API’s. So we see that continuing, we’re having conversations with various firms here, specifically about them creating this second string to their data licensing arm.
“The other interesting trend is that we’ve seen firms wanting to talk to us about offering options for trading to retail clients […] I feel that maybe the FX brokerage space is now very, very saturated and it’s difficult to see how they can create some form of an advantage there. They obviously do see options trading as a currency that’s increasingly of interest to retail traders here in Europe because they look at what’s happening in the US. They think ‘How can I get some of that action here?’ The other thing is maybe one or two of the more farsighted firms are thinking that this might be a good regulatory hedge should ESMA review leverage restrictions again at some point in the not-too-distant future. If that were to happen, it might make trading equity CFDs, or other products, slightly more problematic and promote exchange-traded derivatives, such as those offered by CEDX. Maybe then, they might look to options as a listed product that makes it easier for them. So I expect to see a continued interest in European options trading in 2024.”
