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The Chicago Board Options (CBOE) today announced it has received Securities and Exchange Commission (SEC) approval to offer trading in options on the S&P 500® Dividend Index (ticker symbol - DVS). The first contract of its kind in the U.S., the S&P 500 Dividend Index option will be listed exclusively at CBOE.A launch date has not been finalized.
The S&P 500 Dividend Index, calculated by Standard & Poor's, represents the accumulated ex-dividend amounts of all S&P 500 Index component securities over a specified accrual period. Options on the S&P 500 Dividend Index will allow investors to directly hedge risks based on changes in the dividend-paying policies of stocks comprising the S&P 500 Index.Investors will have the ability to trade the difference between the expected ordinary cash ex-dividend amounts during a specified accrual period and the actual ex-dividend amounts over that time period.In addition, S&P 500 Dividend Index options will appeal to market makers who use dividend estimates when pricing options.
Because the S&P 500 Dividend Index is calculated using the same set of component securities, same shares outstanding, same capitalization-weighting methodology and same index divisor as are used to calculate the S&P 500 Index, DVS options can dovetail with trading of S&P 500 Index (SPX) options.Alternatively, the contract can be used independently to take a broad position on the direction of dividend payments of U.S. stocks.
"Until now there has been no index option for cumulative dividend changes on stocks in the S&P 500 and no way to either hedge risk on lower-than-expected dividends or pursue opportunities on the potential for rising dividends. Now, anyone who collects dividends or wants to trade based on the difference between realized and implied dividends will have an options contract available to register market sentiment," said CBOE Chairman and CEO William J. Brodsky.
Specified Accrual Period
CBOE is designating a quarterly accrual period that runs from the business day after the third Friday of a quarterly options expiration month (March, June, September or December) through the third Friday of the next quarterly options expiration month.The S&P 500 Dividend Index, which is expressed in S&P 500 Index points, will be reset to zero at the end of each quarterly period as defined above.CBOE S&P 500 Dividend Index Options Contract Specification Overview
Underlying: Ten times the S&P 500 Dividend Index
Strike Price Intervals: Strike prices less than 200 may be listed in one-point ($1.00) intervals. When the strike price exceeds 200, strike price intervals will be no less than 2-1/2 points
Strike (Exercise) Prices: Initially, in-, at- and out-of-the-money strike prices are listed. New strikes added as the price of the related S&P 500 Dividend Index futures contract moves and upon request
Expiration Date: Saturday following the third Friday of the expiration month
Expiration Months: Up to 4 contract months from the March quarterly cycle (March, June, September and December).LEAPS will also be listed.
Last Trading Day: Day prior to the expiration date of each month
Exercise Style: European-style exercise - exercised only on the expiration date
Trading Hours: 8:30 a.m. - 3:15 p.m. Central time
