Broad and narrow based index options
narrow-based index (NBI): An index which contains a small group of industry-specific stocks consisting mostly of future contracts. A narrow-based index will not consist of more than ten of these industry-specific stocks. For example, a narrow-based index may include stocks from the auto industry, energy industry, or construction industry. Note that it is not the number of stocks that make up an index that determines whether the index is broad-based or narrow-based, but rather, the diversity of those underlying securities and the markets they cover. Broad-base Indices. A broad-base index is designed to represent the performance of the entire stock market. Index options offer investors opportunities to implement trading decisions on a specific market sector or on the market as a whole. Each index is unique and may cover a broad array of stocks or represent a narrow sector of the market. There are indices which are capitalization-weighted or price-weighted; broad-based or narrow-based. For an index option to be considered to be "Broad Based," it must have companies in the index covering a broad spectrum of industries. Examples of narrow indexes are oil and gas; gold and silver; high technology; and airline stock indexes. Also narrow indexes could be based on stocks of companies in the same geographic location.
27 Aug 2012 commodity options and leveraged transaction products, that are that is based on (i) an index that is a narrow-based security index, Swaps on broad-based securities indexes, including credit default swaps on broad-.
Index options offer investors opportunities to implement trading decisions on a specific market sector or on the market as a whole. Each index is unique and may cover a broad array of stocks or represent a narrow sector of the market. There are indices which are capitalization-weighted or price-weighted; broad-based or narrow-based. For an index option to be considered to be "Broad Based," it must have companies in the index covering a broad spectrum of industries. Examples of narrow indexes are oil and gas; gold and silver; high technology; and airline stock indexes. Also narrow indexes could be based on stocks of companies in the same geographic location. It is a volatility index based on S&P 100 options contracts. B. It is a bearish indicator when S&P 500 option premiums are increasing. broad-based calls B. broad-based puts C. narrow-based calls D. narrow-based puts. C. narrow-based calls. The maximum life of an index LEAP contract is: A. 12 months B. 24 months C. Broad-based Security Index Although not defined in the CEA, a broad-based security index generally refers to any security index that would not be classified as a narrow-based security index under the definitions or exclusions set forth in the CEA and the Securities Exchange Act of 1934 or that meet certain criteria specified jointly by the CFTC and the SEC. On one hand, these do not settle in cash (most Section 1256 contracts do), but on the other hand they meet the definition of a "broad-based" index option. Instead, the IRS grants penalty relief if a broker determines in good faith that an index is, or is not, a narrow-based index, following published guidelines. Tax advantages
Index options offer investors opportunities to implement trading decisions on a specific market sector or on the market as a whole. Each index is unique and may cover a broad array of stocks or represent a narrow sector of the market. There are indices which are capitalization-weighted or price-weighted; broad-based or narrow-based.
17 Feb 2003 derivatives (i.e., futures and options) products based on indices point may vary depending on whether the index is broad- or narrow- based. index options, futures on stocks and stock indexes, and options It is also based on a small subset of equity- remained unregulated until the broad securities regu- underlying value (if equity or narrow index) – amount out of the moneya. companies with broad-based stock option plans (here, defined as those where agement group to defend their narrow interests in a narrow time period Remember that the Employment Cost Index of the U .S. Department of Labor does not swaps on broad-based security indices;; swaps on U.S. government securities, index credit default swaps on security indices that are not narrow-based; than futures on single securities or narrow-based security indices; and; options on
Narrow-based indexes are based on specific sectors like semiconductors or the financial industry, and tend to be composed of relatively few stocks. Broad-based
Generally referring to an index, it indicates that the index is composed of only a few stocks, generally in a specific industry group. See also broad-based. Index options can track broad- or narrow-based indexes, and be American- or European-style exercise, so it is important that each investor thoroughly understand 2 Mar 2016 narrow-based indexes (an index made up of nine or fewer securities) and broad-based indexes and options on broad-based indexes (a 11 Jan 2018 Note: Broad-based index options are considered by the IRS as section 1256 contracts. - see the topic Section 1256 Contracts. Since most
(Below is a list of the broad-based index options and options on ETFs that close at 3:15 p.m.) In general, all option classes that currently close trading at 3:02 p.m. will now close trading at 3:00 p.m.; and, all option classes that currently trade until 3:15 p.m. will continue to trade until 3:15 p.m.
Index options offer investors opportunities to implement trading decisions on a specific market sector or on the market as a whole. Each index is unique and may cover a broad array of stocks or represent a narrow sector of the market. There are indices which are capitalization-weighted or price-weighted; broad-based or narrow-based. Broad-based Index: Deposit cash or cash equivalents equal to aggregate exercise price or escrow agreement for a short put. Deposit broad based index option escrow receipt for a short call. Sale proceeds not released until deposit is made.
For an index option to be considered to be "Broad Based," it must have companies in the index covering a broad spectrum of industries. Examples of narrow indexes are oil and gas; gold and silver; high technology; and airline stock indexes. Also narrow indexes could be based on stocks of companies in the same geographic location. Assume an investor decides to purchase a call option on Index X with a strike price of 505. With index options, the contract has a multiplier that determines the overall price. Usually the multiplier is 100. If, for example, this 505 call option is priced at $11, the entire contract costs $1,100, or $11 x 100. The narrow-based formula provides a greater number of additional shares of common stock to be issued to the holders of preferred stock upon conversion than under the broad-based formula. The extent of the difference between the two formulas depends upon the size and relative pricing of the dilutive financing as well as the number of shares of Narrow-Based Generally referring to an index , it indicates that the index is composed of only a few stocks, generally in a specific industry group. See also broad-based . Not all options are treated as §1256 contracts. An option to buy or sell stock or based on the value of a group of stocks that meets the definition of a narrow based index (rather than a broad-based index) under federal securities law is not a §1256 contract. An option based on a broad-based stock index is a §1256 contract. narrow-based index (NBI): An index which contains a small group of industry-specific stocks consisting mostly of future contracts. A narrow-based index will not consist of more than ten of these industry-specific stocks. For example, a narrow-based index may include stocks from the auto industry, energy industry, or construction industry. Note that it is not the number of stocks that make up an index that determines whether the index is broad-based or narrow-based, but rather, the diversity of those underlying securities and the markets they cover. Broad-base Indices. A broad-base index is designed to represent the performance of the entire stock market.