A New Kind Of Options Contract Is Coming To The Market

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Complexity and affordability have sometimes been barriers to entry for investors considering options contracts as investment vehicles. 

After all, it can be easy to worry about which strike price to choose and what expiration best fits your strategy, along with the affordability of Tesla Inc. TSLA and Shopify Inc. SHOP options — especially when there are cheaper securities to choose from.

Options traders and connoisseurs will argue that these derivatives offer a unique opportunity for investors to capture superior returns, an advantage sufficient enough to overcome their inherent complexity and affordability issues. But many may have struggled to trade options because options may seem too complex or sufficient capital has been needed to utilize these derivatives - until now.  

On March 14, Cboe Global Markets Inc. CBOE will introduce the Nanos S&P 500 Index Options Contract, a simple, affordable, and unique alternative to standard option contracts. Cboe defines Nanos℠ as a new, simpler way to trade options on the S&P 500 Index.

But how exactly does it work? 

The Nanos S&P 500 Index Options Contract

Cboe has designed Nanos℠ to address some of the shortcomings of traditional options contracts. 

Addressing affordability concerns, for example, the Nano S&P 500 Index Options contract will trade at one-tenth the value of the S&P 500 Index. Perhaps the most innovative aspect, Nanos℠ will be the first one-multiplier option listed on the S&P 500 Index. This is a contrast to the 100-multiplier that standard option contracts have. Altogether, this means investors will have a derivative that is a thousand times cheaper than its standard counterpart, providing that accessibility. 

Cboe has also attempted to reduce the complexity of standard options contracts with Nano contracts. Nanos℠, for example, will have fewer strike prices, shorter expiration cycles and will settle in cash instead of shares.

The latter – the settlement of cash instead of shares – reduces complexity by assigning buyers their gains in cash rather than in physical shares. In comparison, equity and exchange-traded fund (ETF) options physically deliver shares when exercised or assigned. 

Finally, Nanos℠ will uphold all the traditional benefits of index options, which range from diversification and higher liquidity to cash settlements and potential tax benefits. 

Our goal is to broaden accessibility to options, empower new market participants with education, and enable them to better express their opinions on market movements,” Cboe says.  

To learn more, visit cboe.com/nanos.

This post contains sponsored advertising content. This content is for informational purposes only and is not intended to be investing advice.

The authors prepared this article at the request of Cboe to describe Nanos Index Options. Readers should understand that the authors were compensated by Cboe for the preparation of this article, which was not intended to be used in connection with the offering for purchase or sale of any product. The information in this article is for informational purposes only and no statement within this article should be construed as investment advice or a recommendation to buy or sell Nanos Index Options. The authors and Cboe make no representation as to the appropriateness of Nanos Index Options for any investor. Neither the authors nor Cboe assume any responsibility for any losses you might suffer by reason of investing or trading in Nanos Index Options.

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