"Long term options"

On July 21 "long term options", with expiries of up to 60 months on the S&P/MIB index, start trading on IDEM, the Italian derivatives market.

These new contracts come after the introduction in 2005 of contracts with six month expiries for the first and second year. These new contracts will have yearly expiries (December) for the two subsequent years (third and fourth year) following the current year.  

To date, there are 150,000 open contracts on S&P/MIB options with expiries beyond 12 months, which equal 19% of open interest.  This figure confirms the growing interest of the market to assume long standing positions.

For all expiries of up to 12 months, 15 strike prices with call and put series at a 500 index point break will be available for trading; for expiries exceeding 12 months,  21 strike prices with call and put series at a 1000 index point break will be offered.

The liquidity of the contracts will be guaranteed by the presence of market maker operators  (Banca Aletti & C., BNP Paribas Arbitrage, Deutsche Bank), that will answer listing requests on all the expiring dates available to cover volumes of ten contracts at the money, the first five series in the money and the first five out of the money call and put. Market makers will answer to specific listings in two minutes and listing will be present on the book for at least 30 seconds.

In the first half 2008 trading on IDEM reached 19.5 million trades, with 660 billion euro turnover. The daily average is approximately 152.000 trades with 3,3 million of open positions.

“These new expiries – commented Raffaele Jerusalmi, Director of Derivatives and Fixed Income - represent a further innovation of our derivatives market, with an increase in the range of derivatives products linked to the S&P/MIB index. The introduction of these index option contracts will guarantee a better transparency of the price discovery, offering  further opportunities for trading for all the Institutional Investors, and will provide the retail market with a new tool to cover its investment portfolio.”

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