HI I am new to options. I would like to know how it works. Is cboe S&P 500 options the most active and popular index option in the market?what is the last trding day of each month's contract?and how they calculate the price of settlement?Thanks for ur help!!
For SPX options the last trading day is the Thursday before the third Friday of the month. The settlement value is calculated on the opening print on Friday. For more details see the contract specs on CBOE.
MTE is right. The opening print may also differ slightly from the opening price for the index since it is calculated using a different protocol. The expiration price is displayed on the CBOE website as the "SET". If you have a OTM position written in SPX options and they are reasonably close to the current market price, you will need to watch them carefully this week! As a general rule, I'm personally uncomfortable with a credit position at the close of Thursday if it is within 30 points of the actual index price at that point. Others may wish to comment on this, as well There is a huge journal in elitetrader that discusses all of these issues and more. Search for 'SPX credit trader'.
SPX is the most actively traded index contract. However, some etfs, (QQQQ, IWM, and SPY) see more volume. Since they settle like stock options, you might take a look at those too.
look under the volume tab http://www.interactivebrokers.com/optionsCommentary/index.php?ib_entity=llc
The last trading day for most of these index contracts (SPX, IWM, RUT, NDX, and others) is the third Thursday of each trading month, one day before stock options expire. The August contract's last trading opportunity is on the 14th (tomorrow) at 4:30 PM EST, although I don't recommend that you try to trade contracts at the very last second, since you may not get a favourable price. The settlement price is calculated at the open on Friday morning. This means that everyone who holds a contract and does not trade it on the Thursday has some uncertainty about whether they will earn money on the contract or not, and for DITM contracts the question will be how much they will earn. Why this is that way is a bit mysterious! Practically speaking, it means that even contracts that are a little OTM will trade with a few cents of value right at the last trading instant. This makes for some tricky judgement calls on Thursday afternoon. Generally, I will try to close out positions before the end of the day unless they are way out of the money. As I mentioned in an earlier post above, with the SPX and the NDX, I usually find positions within 20-30 dollars have some risk in them and should be closed. Paying 0.15 to avoid getting smoked is insurance and means a peaceful snooze on Thursday night.