Wow! If you love buying options during expiration week, read this...

The financial mad scientists at the CBOE are launching a new option product on Friday, October 28th named "Weeklys." They are exactly what their name describes, options that expire on a weekly basis instead of the traditional monthly expiration. The lifespan of this innovative product will last from Friday to Friday (7 days) and they are European style. This refers to the fact that the Weeklys can only be exercised at or very near expiration, unlike the standard American style option that can be exercised or assigned at any point during its existence.

The initial Weeklys will be tied to the SP 500 and contain only 5 strike prices per contract, the strikes will be two in the money, one at the money, and two out of the money. If this initial launch is greeted with success, expect weeklys on numerous indexes and stocks in the no so distant future. The CBOE timed this release brilliantly since option volume is skyrocketing. Volume is 21% higher year today than last year and August was the 3rd highest volume month ever.

Options are quickly becoming very mainstream and the CBOE sees this new product as another way to capitalize on the exploding interest, and option traders view the Weeklys as another tool in their arsenal.

I can hear some of you now, "Why on earth would we need or want another option product, aren't there enough already?" I see several advantages to the concept of Weeklys, the first being a high delta with the in the money strikes. This is due to the fact that there is little time value inherent in the option from creation. This high delta enables the Weekly to closely track the underlying without time being a squelching factor. Secondly, the short term nature of this product will most likely result in lower entry costs providing smaller speculators access and larger traders the ability to take on more size when warranted by their analysis. Thirdly, option traders will be able to create a multitude of new simple or complex hedging and spreading strategies with this product.

The various betting exchanges such as www.tradesports.com have been offering somewhat similar products even down to options (bets) that only last a few hours on the indexes. Is this what the future holds for the major exchanges? Only time will tell. I am looking forward to the launch on October 28th!

Best wishes in the market!

Dave G

David S. Goodboy (marketsurfer) has been trading professionally for over 14 years. Mr. Goodboy trades ETF's, stocks, index futures, energy futures and options. His primary focus is a unique multi-time frame index trading system based on a combination of time/price cyclical studies and statistical models. David was a trader/partner with Biltmore Capital, traded with an option arbitrage firm, and is currently in the launch stages of IntrendX, a global multi-strategy fund.