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Strategies & Market Trends : Option Spreads, Credit my Debit

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From: OX	3/7/2005 4:20:01 PM
	of 2317

"quickies"... SEC Studies New Option Type Perhaps the most significant difference between equities and options is that options have a limited lifetime. Once the expiration date passes, the option is settled (if it is in the money) or simply discarded (if it is out of the money.) Options traders focus much of their attention on "front-month" options, (those for which the expiration date falls within one month of the current date), because they anticipate a short-term market move. If they foresee movement over a longer term, they buy options that expire in the following month or beyond. But what happens if they foresee a move, say, just two days into the future? Or two hours? They have to buy the front-month option, using valuable capital to pay for time value they neither want nor need, and which might even be wasted. The Chicago Board Options Exchange has a potential solution. It has asked the Securities and Exchange Commission to consider a proposal for a new type of option with a one-week lifespan. The 'quickie' (I'm not making this up) might become available in just a few months. These positions would begin trading on a Friday and expire the following Friday afternoon. Quickies will be issued month round, except for the week when regular, monthly options approach their expiration dates. Despite capacity worries and concerns about over-zealous trading, several trading firms have already expressed interest. schaeffersresearch.com

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