- What are options on S&P 500 Annual Dividend Index futures?
- Why is CME Group choosing to launch these products?
- What is the underlying index to each of the contracts, and where can I find the methodology?
- What are dividend index points?
- Over what period are the dividend points in the index accumulated?
- How are “special” or “extraordinary” dividends treated?
- What are the contract specifications for these options?
- What are the codes?
- What are the fees?
- What are the margin requirements?
- Are margin offsets available between these dividend options and related dividend futures?
1. What are options on S&P 500 Annual Dividend Index futures?
The S&P 500 Annual Dividend Index futures calculate the accumulation of all ordinary gross dividends paid on the S&P 500 index constituent stocks that have gone ex-dividend over a 12-month period. The amounts are expressed as dividend index points.
Market participants can hedge risks and express a view with a wide variety of options strategies, or trade dividend volatility directly through delta hedged options structures.
2. Why is CME Group choosing to launch these products?
The demand to trade and risk manage dividend exposure via listed dividend futures and options has accelerated over the last few years. Based on the success of S&P 500 Annual Dividend Index futures, market participants have looked for access to a product that allows for trading dividend index volatility through complex option strategies.
3. What is the underlying index to each of the contracts, and where can I find the methodology?
The underlying index for S&P 500 Annual Dividend Index futures is the S&P 500 dividend point index. The methodology for the index can be found here.
4. What are dividend index points?
Dividend index points specifically refer to the level of index points that are directly attributable to the dividends of index constituents for a set period and are reset on a periodic basis. They represent dividends as a fraction of the index level itself. Typically, they only capture regular dividends and calculate this on the ex-date of the respective constituents within each index, as defined in the index methodology.
5. Over what period are the dividend points in the index accumulated?
Specifically, the cumulation period for an annual contract starts on the day after the expiration of the mostly recently expired contract, continuing up to and including the expiration day of the nearest subsequent contract: typically, the third Friday of December. All regular dividends for each constituent stock going “ex” within the cumulation period will be included in the annual dividend index after conversion into dividend index points.
6. How are “special” or “extraordinary” dividends treated?
In general, “special” or “extraordinary” dividends are not included as dividend points in the respective annual dividend indices. Instead, the underlying parent cash index adjusts for this event with a divisor change – i.e., if the S&P 500 index adjusts for a special dividend by making a divisor change than the annual dividend index won’t capture that particular dividend event. For more details, please refer to the respective index methodology rules (linked in Q3 above).
7. What are the contract specifications for these options?
|Options on S&P 500 Annual Dividend Index futures
|CME Rulebook 365
|CME GLOBEX AND CME CLEARPORT CODE
CME Globex Pre-Open:
CME Globex: Sunday 6:00 p.m. – Friday 5:00 p.m. ET with a daily maintenance period from 5:00 p.m. - 6:00 p.m. ET
CME ClearPort: Sunday 6:00 p.m. - Friday 6:45 p.m. ET with no reporting Monday - Thursday 6:45 p.m. - 7:00 p.m.
|$250 x S&P 500 Annual Dividend Index
|U.S. dollars and cents per index point
|MINIMUM PRICE INCREMENT AND FINANCIAL EQUIVALENT
|Premium > 5.00 Index points: .05 ($12.50) Premium <= 5.00 Index points: .025 ($6.25)
|MINIMUM PRICE FLUCTUATION
|FINAL SETTLEMENT PRICE FLUCTUATION
|Deliverable into Financially Settled futures Contract
|Five (5) annual December contract months
|INITIAL LISTING SCHEDULE
|Dec 24, Dec 25, Dec 26, Dec 27, Dec 28
|TERMINATION OF TRADING
|Trading terminates at 9:30 a.m. ET on the third Friday of the contract month
|BLOCK TRADE MINIMUM THRESHOLD
|100 contracts subject to a 15-minute reporting window
|CME GLOBEX MATCHING ALGORITHM
8. What are the codes?
|BLOOMBERG FRONT MONTH
|REUTERS RIC Code
|S&P 500 ANNUAL DIVIDEND INDEX FUTURES
|Dec. 24: 0#SDAZ24+
9. What are the fees?
Options on S&P 500 Annual Dividend Index futures are listed on the CME DCM and follow the CME Fee Schedule.
10. What are the margin requirements?
Margin requirements will be set be the clearing house based on market conditions and subject to change.
11. Are margin offsets available between these dividend options and related dividend futures?
Equity Index Dividend futures
Harness the potential to hedge or express a view on the U.S. dividend market, regardless of the price movement of the benchmark indices.
All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.