Cboe to launch daily expiries for Russell 2000 index options

Cboe Global Markets, Inc., has announced it is enhancing its offerings in the Russell 2000 Index options suite.

Starting January 8, 2024, Cboe plans to introduce Tuesday and Thursday-expiring options for both the Russell 2000 Index weekly (RUTW) and Mini-Russell 2000 Index weekly (MRUT) options.

This expansion allows Cboe to provide investors with options expirations every trading day of the week, a move reflecting the growing demand for versatile and short-dated index options.

Russell 2000 Index: a prime benchmark for U.S. small-cap equities

The Russell 2000 Index, renowned as a prime benchmark for U.S. small-cap equities, will gain additional layers of flexibility and precision with the introduction of these new expiries. Investors will have the opportunity to manage their small-cap U.S. equity exposures and execute targeted strategies with more control and accuracy, particularly around key market events.

Shawn Creighton, Director of Index Derivatives Solutions at FTSE Russell, highlighted the collaborative efforts of FTSE Russell and Cboe in meeting market needs. “FTSE Russell and Cboe share a deep commitment to delivering innovative solutions that meet the evolving needs of the marketplace.

“We are excited to continue building on our successful relationship and leverage FTSE Russell’s position as a leading global index provider and Cboe’s deep expertise in derivatives trading to facilitate more tradeable products and investment opportunities tied to the Russell 2000 Index – the world’s most comprehensive and precise measure of the small-cap segment of the U.S. equities market.”

“Investors are using short-dated index options for a variety of trading strategies”

Catherine Clay, Cboe’s Executive Vice President and Global Head of Derivatives, noted the growing demand for more granular expiries as trading strategies evolve to become more tactical and as the average time to expiry shortens. “Investors are becoming increasingly sophisticated and are using short-dated index options for a variety of trading strategies. As evidenced by the sustained volume growth over the past couple of years, short-dated index options have become an indispensable tool for hedging, risk management, and income generation among a diverse base of market participants. As trading strategies become more tactical and average time to expiry trend shorter, our clients are seeking even more granular expiries. We’re excited to continue collaborating with FTSE Russell to offer daily expiries for the Russell 2000 Index options suite and expand our customers’ abilities to trade short-dated strategies across additional new products.”

The addition of these new expiries is in response to a significant uptick in U.S. options trading volumes, which are projected to surpass previous records. Notably, short-dated U.S. index options have seen a surge in popularity among both retail and institutional investors.

Short-term options represent 36% of US index options flow

According to Cboe data, options contracts with expirations of one day or less represented about 36% of total U.S. index options flow in 2023, a considerable increase from 15% in 2020. Within the Russell 2000 Index options complex, these short-dated contracts accounted for 17% of overall volumes in 2023.

The RUTW and MRUT options are European-style, meaning they cannot be exercised early, and are cash-settled at expiration with a P.M. settlement. The MRUT options, mirroring the RUTW options, are smaller in size, being 1/10th of the standard RUTW options, offering a more cost-effective way for small-cap equity trading strategies.

These options are exclusively listed on Cboe’s options exchanges. In 2023, a total of 15.2 million RUT options contracts were traded, with 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 new Tuesday and Thursday expiries will complement Cboe’s existing range of Weeklys, end-of-month, and quarterly RUTW and MRUT options, further diversifying their product suite and catering to the dynamic needs of investors in the small-cap U.S. equities market.