The CME introduces E-mini Micro Options on the S&P 500 and Nasdaq 100 indices
Chicago-based CME Group, one of the world’s largest exchange operators for options trading has announced the launch of a series of micro options on US equity indices. The two contracts are over the Micro Emini-S&P 500 and Micro Emini Nasdaq 100 futures which are themselves one-tenth the size of their Emini counterparts.
What are CME E-mini Micro Options?
The Micro Emini futures contracts are a relatively new product themselves but have proved to be very popular among traders. For example, the $&P 500 Dec 2020 Micro Emini futures contract, traded more than 1.2 million contracts on the 12th November and had an open interest of 156, 330 lots.
Each micro option will be over 1 contract of the respective Micro Emini futures contracts and will run on both a quarterly and weekly expiry cycle.
The Quarterly contracts will be offered as American style options, that is they will be exercisable throughout the options lifetime. Whilst the weekly contracts are European style. and therefore only exercisable on the day of expiry.
Strikes will be offered at 100 point intervals though for front-month and front week contracts there can be additional strikes at intervals from as low as 5 index points.
Minimum tick sizes will vary based on the size of the option premium, for example, an option on the micro Emini S&P futures with a premium equal to or greater than 5 index points will have a minimum tick size of 0.25 index points or at 5 points a $1.25.
Whereas a contract with a premium below 5 points will have reduced tick size of just 0.05 index points – equating to a tick value of just 25 cents or one-fifth of the size of the minimum tick for the higher-priced options.
Where can you trade the new CME E-mini Micro Options?
Futures traders can trade these new on-exchange futures and options through most futures and options brokers. For more information on providers that offer access to the CME:
Retail traders and private clients were overlooked for years by the major exchanges however that trend has definitely been changing of late, with initiatives such as retail order priority at the CBOE, the fractional US share trading offered by online brokers and now the introduction of smaller index option contract sizes at the CME.
The new micro options will offer traders greater flexibility when it comes to sizing trades that act as portfolio hedges, and will no doubt open up index options trading to a new audience of millennial investors who have embraced single stock equity options, trading through the likes of Robinhood during 2020.
Are the CME E-mini Micro Options any good?
As ever we are pleased to see increased customer choice, competition and trading opportunities, but of course, reduced size or no, the risk profiles of options trading don’t change, and as with all complex products, clients should ensure they fully understand the risks involved in trading the products, before doing so. Particularly where the short-dated weekly options are concerned.
Darren is a veteran of the financial markets with almost 36 years of experience under his belt. He has worked in trading, sales, analytical, and research roles, he has been a regular guest & commentator on financial television channels and publications. During his career, Darren has been fortunate to act for and advise major hedge funds and investment banks as well as HNWI. Darren analyses the markets using a blend of technical and fundamental analysis