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This week's question:
DATE: August 30, 2010
QUESTION:
Do indexes options trade in open outcry pits?
ANSWER:
All index options are traded electronically with varying degrees of volume traded in open outcry. OEX, XEO, DJX, XSP and RUT are traded 90% or more electronically and the rest in open outcry. Typically, for these contracts, it is the larger orders – 500 or more contracts per trade – that are traded in open outcry when either (1) there is not the desired quantity available on the screen or (2) someone wants to negotiate a better price than is bid for or offered on the screen.
SPX is traded approximately 75% in open outcry and the rest electronically. SPX is a very large contract (over $100,000 underlying value per contract). SPX is also an “institutional product,” which means that there is a large percentage of trades that are both large – greater than 500 contracts – and negotiated (hoping to get a trade price between the quoted bid and ask prices).
It is very expensive to trade in open outcry, so it is only economic on a per-contract basis to trade the large orders in open outcry.
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