17 lines
1.1 KiB
Plaintext
17 lines
1.1 KiB
Plaintext
ETF Options
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Exchange-traded funds are vehicles that represent ownership in a fund or
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investment trust. This fund is made up of a basket of an underlying index’s
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securities—usually equities. The contract specifications of ETF options are
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similar to those of equity options. Let’s look at an example.
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One actively traded optionable ETF is the Standard & Poor’s Depositary
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Receipts (SPDRs or Spiders). Spider shares and options trade under the
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symbol SPY. Exercising one SPY call gives the exerciser a long position of
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100 shares of Spiders at the strike price of the option. Expiration for ETF
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options typically falls on the same day as for equity options—the Saturday
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following the third Friday of the month. The last trading day is the Friday
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before. ETF options are American exercise. Traders of ETFs should be
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aware of the relationship between the price of the ETF shares and the value
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of the underlying index. For example, the stated value of the Spiders is
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about one tenth the stated value of the S&P 500. The PowerShares QQQ
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ETF, representing the Nasdaq 100, is about one fortieth the stated value of
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the Nasdaq 100. |