Korea Exchange (KRX) is pushing to slice the expiry cycle of options on individual domestic stocks from weekly intervals down to daily intervals. The move is seen as a strategy to expand the ultra-short-term options market — previously limited to weekly options — to cover large-cap names such as Samsung Electronics (005930.KS) and SK hynix (000660.KS) as well as indices, absorbing short-term hedging and arbitrage demand while growing the domestic asset-based derivatives product market.
According to financial industry sources on Tuesday, KRX plans to list weekly options on individual domestic stocks for the first time at the end of June, followed by the introduction of index daily options in the second half. Product development has already made partial progress, though additional time is needed for procedures including board approval and authorization from the Financial Services Commission (FSC). Weekly options are expected to launch on a pilot basis centered on the top four stocks by market capitalization with ample liquidity. For daily options, KRX plans to finalize listing targets and methods based on market response and regulatory readiness.
Options are instruments that grant the right to buy or sell an asset at a predetermined price at a future date. The shorter the expiry, the lower the time-value burden, allowing investors to respond to short-term fluctuations at relatively lower cost. KRX's push to introduce daily options following individual stock weekly options is aimed at capturing such demand more precisely.
Industry participants expect these changes could also affect the cash equity market. If ultra-short-term options based on indices such as the KOSPI 200 become available, hedging trades to protect stock holdings and arbitrage trades exploiting price discrepancies could increase. For institutional and foreign investors, the expansion is also expected to broaden risk management tools combining spot, futures and options. "From an institutional perspective, this is positive in terms of product diversification, hedging and arbitrage opportunities," the head of one asset management firm said.
There is also the dimension of broadening the foundation for designing derivatives-based products such as covered-call exchange-traded funds (ETFs) using single stocks. According to the FSC, 71% of covered-call ETFs traded in Korea track U.S. assets. Domestic asset-based products, by contrast, remain at the level of KOSPI 200 weekly covered-call strategies. Expectations are emerging that the introduction of ultra-short-term options on indices could create more room to shift some options-based strategic products, currently centered on overseas assets, toward domestic assets.
Speculation concerns and investor protection, however, remain hurdles to clear. "Short-term options on individual stocks could stimulate speculative impulses among investors and amplify closing-price volatility due to options hedging positions," said Kang Dae-kwon, CEO of Life Asset Management. The worry is that retail investors who do not fully understand options structures could see losses mount quickly if they engage in directional trading. Some argue that safeguards such as trading-limit regulations are needed, noting that establishing trading infrastructure including a liquidity provider (LP) system could reduce price distortion and help vitalize the derivatives market.
