‘Jumbo’ S&P 500 ETF Options Begin Trading

ETF Trends

Traders who are interested in moving large options contracts on the SPDR S&P 500 ETF (SPY) , the biggest exchange traded fund, can now utilize the “Jumbo SPY options” in the BOX Options Exchange.

The Securities and Exchange Commission gave the green light for the BOX Options Exchange to trade the jumbo-sized contracts, reports Doris Frankel for Reuters. Other option venues can list the contracts after filing with the SEC. [BOX Options Exchanges Prepares ‘Jumbo’ Contracts on S&P 500 ETF]

The Jumbo SPY options are based on 100 shares of SPY, whereas the standard contract is based on 100 shares. The new contract is designed for institutional investors who prefer large blocks.

The International Securities Exchange, though, did not take up the new options, citing concerns that this will cut into interest for standard SPY options and diminish overall liquidity.

“We believe Jumbo SPY would not create incremental volume and, even worse, could harm liquidity in SPY,” Boris Ilyevsky, ISE managing director, said. “Larger sized ETF contracts do not address any unmet need in the industry and in fact would serve primarily to further fragment one of the few healthy centers of liquidity,”

Options on the SPY ETF is one of the most actively traded securities in the cash market, with volume at around 216.9 million contracts year-to-date, compared to 199.3 million over the same period year-over-year.

The new jumbo contracts are part of expansion in options contracts, such as mini-options, listed Treasury options and options with smaller price increments. These new products are meant to stoke interest in the options market, which experienced volumes dip 12% in 2012, the first decline in nine years.

For more information on the S&P 500, visit our S&P 500 category.

Max Chen contributed to this article.

View Comments (1)