HKEX Insight

On 4 November 2024, HKEX launched weekly stock options for ten single stock options listed on the Stock Exchange of Hong Kong.

This is the first weekly stock options product in Asia and adds to HKEX’s increasingly vibrant options ecosystem.

Since 2005, exchanges across the globe have steadily introduced weekly index options and weekly stock options to meet evolving market demands.

The launch of weekly index and stock options, 2005-2024

Options trading – and particularly that of short-dated options – has grown in popularity due to several factors, including expanded access to trading tools and high-quality data for retail investors, the rapid delivery of information via social media, as well as risk management and trading needs from macroeconomic events.

Trading volume for weekly options, a significant part of the short-dated options space, has grown markedly in recent years.

In the US, for example, average daily volume of SPX Options has grown from around 750,000 in 2013 to close to 2.5 million contracts between 2013 and 2023. Trading of weekly options has grown from 25% to almost 70% of CBOE SPX options ADV over the same period.

#1 Efficiency: If an investor wants to take a directional position in the market and get the best return, he or she will want to have the smallest possible initial outlay on option premium. Short-dated options have lower premiums than long-dated options because there is less time for the underlying asset to move significantly, reducing the probability of large price changes. The lower premiums associated with short-dated options also make them more accessible to retail traders, who can use them to implement trading strategies without significant capital outlay.

#2 Precision: Short-dated options allow investors to more precisely manage their positions. For example, an investor with a long position on a stock or an index may have risk management needs ahead of the release of economic data or an earnings report. With a weekly option, the investor can be precise and target the exact week of that earnings announcement or that economic figure.

#3 Flexibility: If an investor is long on an index or stock and wants to earn yield by selling options against it, a monthly option allows the investor to sell the option with monthly expiries. Weekly options offer more flexibility. By having options that expire weekly or even daily, investors can fine-tune their strategies to align with their market outlook and risk tolerance, enhancing their flexibility to manage and mitigate risks effectively.

Hong Kong is one market where weekly options are growing in popularity.

After launching Hong Kong’s first weekly options in 2019, trading of Weekly Hang Seng Index (WHSIO) Options has grown steadily with ADV increasing from 3,380 contracts in 2019 to 15,969 contracts in 2024^[1],  accounting for approximately 35% of options trading volume YTD in 2024.

The product ecosystem expanded in September 2024 with the introduction of Weekly Hang Seng TECH Options, a sector-specific risk management tool for investors which focuses on opportunities in the Chinese technology sector.

Since launch, Weekly Hang Seng TECH Index Options has had a fast start, showing strong post-launch momentum and significant volumes recorded in late September and early October, coinciding with a period of active trading in the Mainland China and Hong Kong markets.

[1] Until 18 October 2024

Now with the new product launch on 4 November 2024, HKEX is the first market in Asia to offer stock options that expire on a weekly basis, and these weekly stock options will reference some of the largest stocks listed in Hong Kong.

List of Stock Option Class with Weekly Expiries

HKEX is empowering investors to manage risks and opportunities with greater accuracy, thereby enhancing their overall trading experience. As the market develops, HKEX may add more weekly stock options.

HKEX’s strategy of expanding the range of products is focused on meeting the diverse needs of market participants.

On the equity derivatives side, there is a wide range of Hang Seng Indexes, single stock products, as well as a large MSCI suite that offers access to emerging markets and developed markets in the Asia Pacific and globally.

Aside from a steady stream of advances on the product side, HKEX has been making important market structure enhancements in recent years.

Since 2022, we introduced derivatives holiday trading, allowing investors to trade derivatives products during Hong Kong public holidays, starting first with all MSCI futures and options contracts on 9 May 2022 and then currency futures and options contracts from 29 March 2024.

In December 2023, we increased the maximum position limit for single stock options from 150,000 to 250,000 contracts, providing investors with more capacity and greater flexibility, allowing them to better manage their market exposure while ensuring proper risk controls. This has supported market liquidity and allowed the stock option market to reach a record of over 17 million contracts of open interest in October 2024.

Severe Weather Trading commenced in September 2024 to ensure that Hong Kong’s markets remain open and operational for local, regional and international investors, whatever the weather, and removing the interrupted-trading risk that typhoon-induced market closures bring to the market.

On top of market structure enhancements, HKEX is also investing in its derivatives trading capabilities by developing the Orion Derivatives Platform (ODP) to create a robust, flexible, and efficient market infrastructure that can differentiate us in the increasingly competitive international marketplace, with the ability to provide investors with near 24-hour derivatives trading.

By offering weekly stock options, HKEX is empowering investors to manage risks and opportunities more accurately, enhancing their trading experience, catering to the growing demand for flexible trading instruments, and growing Hong Kong’s vibrancy as Asia’s risk management centre and reinforcing its position as a leading international financial centre.