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Expirationless Options will start trading later this year on the PHLX electronic platform. This forum has been established to discuss what XPOs are, how will they change the investment landscape and why they will be "the next big thing" for equity and options traders.
online.barrons.com
THE PHILADELPHIA STOCK EXCHANGE has signed an agreement with the electronic-trading platform NexTrade to develop "expirationless options," essentially puts and calls with no expiration dates. Terms aren't disclosed. With the pact, the PHLX says it gains the right to license expirationless options (dubbed XPOs) to other exchanges or firms. "We are exploring the development potential of XPOs and, interestingly, we have received significant interest in Europe," says Dan Carrigan, PHLX's vice president for product development.
NexTrade has been pushing XPOs for some time now (see "Perpetual Motion," Feb. 16, 2004). These options raise interesting questions about potential demand and use, and have spawned discussion among traders and academics about how they ought to be priced (for instance, how traders might factor in future dividend payouts or cuts).
The PHLX plans to begin listing expirationless options on an index-related product, specifically the Standard & Poor's Depositary Receipts (SPY), or Spiders. It is seeking regulatory approval, Carrigan says, and is discussing with the Options Clearing Corp. how to arrange for the clearing of this new class of derivatives. The exchange is gunning for a fall debut on its electronic platform.
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