When it comes to options on futures, there may be a variety of options expiration dates you could trade for the same futures contract. Some options expirations even align with the expiration of the underlying futures contract.
In other cases, a futures product could have a variety of shorter-term options listed whose expiry does not align with their underlying futures contract. The option will always have an expiration before or concurrent to its underlying future.
These shorter-term options offer traders greater precision and flexibility to expand their trading strategies. Often referred to as “weeklies”, these options allow traders to more precisely express their market opinion at a lower cost.
Weekly Friday options on the E-mini Nasdaq-100 futures have experienced tremendous growth and success, but traders oftentimes need even more granularity and accuracy to manage their market exposure.
Now, additional weekly options expiring on Monday and Wednesday, will provide opportunities to hedge weekend exposure or express views on mid-week economic announcements or earnings events. At any given time, the four nearest weeks of Monday and Wednesday options will be listed ‒ complementing the four existing Friday Weekly options.
For example, assume it’s August 1, four Monday options will be available along with four Wednesday options.
As the week one Monday and Wednesday options expire, listings will be added to the next available week of the listing cycle resulting in always having the nearest four Monday and Wednesday expirations available.
In this example, an August option that expires in the money, would deliver the September futures contract. Whether traders end up long or short the futures position, they would have exposure to the market until they either trade out of the resultant futures position or until the futures contract expires in September.
The Monday and Wednesday options have a European-style expiration – meaning the options cannot be exercised or assigned early. They will expire at 4 p.m. Eastern Time and expire based on the special fixing price of the E-mini Nasdaq-100 future for that day.
The special fixing price is based on the weighted average trading price of the E-mini futures in the last 30 seconds of trading before the cash equity markets close. This special fixing is referred to as the NQF.
As a European-style option, Monday and Wednesday options on E-mini Nasdaq-100 futures will auto-exercise at expiration. Which means the clearinghouse will automatically exercise in-the-money options. Long holders will automatically receive the E-mini Nasdaq-100 futures contract upon expiration. Short holders of in-the-money options will automatically be assigned the opposing position by the clearinghouse.
Because the underlying futures contract expires later, both long and short positions that expire in-the-money will generate exposure to the futures market. As a reminder, European-style options on futures can always be traded prior to their expiration and there is no requirement to hold the option to expiration.
Monday and Wednesday options join the Friday Weekly, Third Friday, End of Month, and Quarterly options providing greater flexibility in choosing the option tenor best suited to hedge Nasdaq-100 exposure or capture market opportunities as they arise.