A Contract For Every Trader: Exploring Cboe's Standard, Mini And Nano Options

In 1983, Cboe Global Markets Inc. CBOE revolutionized the financial markets by introducing options contracts on broad-based stock indexes. Over the next 40 years, options contracts on the S&P500 Index (denoted “SPX”) would become the most actively traded index option in the U.S. 

According to the World Federation of Exchanges, the dominance of the SPX option truly began during the 1987 crash, when the S&P 500 Index gained dominance over its S&P 100 counterpart as the leading market proxy. Today, the SPX commands an average daily volume (ADV) of 2.3 million contracts, allowing thousands of investors from all over the world to benefit from the options market.  

The SPX Index options, along with SPX Weekly and End of Month options, continue to provide both institutions and retail investors access to alpha-generating and portfolio-hedging tools upon which many strategies are based.

A Retail Revolution

In the last two years, the number of retail investors participating in stock markets has grown exponentially. 

According to one study, retail investors accounted for 19.5% of all stock market shares traded in the first six months of 2020, a truly unprecedented occurrence in stock market history. The figure represented a 4.5% increase over 2019 and was almost double the amount in 2010. 

While retail growth has slowly subsided since late 2021, the generally agreed-upon vision is that retail investors will continue to participate more in the stock market. Better dissemination of information, affordable and accessible entries into markets, and quality trading tools have been cited as the reasons for sustained retail investors' growth. Cboe has played its part in all of these developments, but it has particularly stood out from the crowd in its creation of Mini and Nano options. 

At 1/10th the size of standard options contracts, the Mini-S&P 500 Index (XSPSM) and Mini-Russell 2000 (MRUTSM) Index options are set at a price that is meant to be more friendly for retail traders to easily participate in, as smaller versions of the SPX and RUT indices. Cboe’s Nanos takes this affordability one step further, offering contracts 1/100th the size of standard options contracts. 

Source: Cboe Global Markets

Aside from their high affordability, Cboe’s Mini and Nano options have a host of benefits compared to standard options contracts including: 

• Potentially favorable tax treatment 
• Access to global trading hours
• Cash-settled options 
• European exercise style

Since it was founded in 1973, Cboe Global Markets has created a steady stream of innovative products for participants in the financial markets. Today, the division between institutional and retail investors is far smaller with retail traders exerting significant influence on the market and comprising a large number of its constituents. 

To find out which products work best for you, check out Cboe’s options contracts here. 

Featured Photo by Aditya Vyas on Unsplash

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