Index FLEX Contracts Hit New Records as Investors Customize Their Options

July 16, 2019

FLexible EXchange Options (FLEX® Options) offer customers customizable terms for strike prices, exercise styles and expiration dates with the transparency, administrative ease and clearing guarantees of standard listed options. Since Cboe first introduced FLEX® Options in 1993, interest has grown tremendously – most notably in the first half of 2019.

New Volume and Open Interest Records for FLEX Index Options

Cash-settled index FLEX Options set new all-time records for open interest and average daily volume in June 2019. Open interest reached 2.46 million (a 122% increase over 1.1 million in January 2019) and average daily volume reached 59,124 (a 402% increase over 11,783 contracts in January 2019).

Features of FLEX Options

FLEX Options provide investors with:

The ability to customize key contract terms, like exercise prices, exercise styles and expiration dates. Index FLEX options are cash-settled and may have expiration dates up to 15 years from the trade date, approximately 5 to 10 years more than what’s available for most popular indexes.
A recent Options Clearing Corporation (OCC) report showed S&P 500 (SPX) options with expirations through 2029, Russell 2000 (RUT) options with expirations through 2025, and Dow 30 (DJX) options with expirations though 2024.
Virtual elimination of counter-party risk – guaranteed by the OCC
Price discovery in competitive, transparent, auction markets
A secondary market, which provides an opportunity to offset or alter positions before expiration
Independent daily valuation of prices by OCC
Daily price and open interest reports
Operational efficiencies of exchange-listed options

Index FLEX Options May Be Useful for:

Insurance companies
Annuity providers
OTC options investors
Financial firms that track Cboe's Target Outcome Index and the Cboe S&P 500 Buffer Protect Series

The indexes in the Cboe S&P 500 Buffer Protect Index Series measure the performance of a portfolio of hypothetical exchange-traded FLEX options on the S&P 500 Index, and are designed to provide target outcome returns to the US domestic stock market.

Index FLEX Options with Long-Dated Expirations

Some cash-settled index FLEX options have expiration dates up to 15 years from the trade date. The chart below shows the open interest by expiration years for key index FLEX options in early July 2019.

There is open interest on cash-settled index FLEX options with expirations in every year from now through 2029. About 13% of the open interest is for contracts that expire between 2021 and 2029. Additionally, there is open interested on the Mini-SPX (XSP), S&P 500® (SPX), Dow 30® (DJX), Russell 2000® (RUT), MSCI EAFE® (MXEA) and MSCI EM (MXEF) indexes, as well as on Cboe listed Dow 30 Asian options and the SPX and Mini-SPX Cliquet options.