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Could someone please help me with the following:
The only differences between the OEX and the SPX of which I am aware are:
a). The OEX is based on the S&P 100 and that the SPX is based on the S&P 500.
b). The OEX is an American style option and the SPX is European in style.
It this second difference that puzzles me. I thought the only difference
between the two is that American style options can be exercised before their
expiration date, whereas European style options can't.
Is there some other important difference of which I am unaware?
If not, then I am further puzzled.
Most options are never exercised but are repeatedly bought and sold during
their life span. Therefore, I thought that the ability to exercise an option
is only of any use to the 'Commercials' who would eventually want to take
delivery of the underlying.
If the underlying is a tangible asset such as a Stock or Commodity, then this
is an important distinction.
But as Index options are intangibles and there isn't anything underlying of
which to take delivery, of what use is the ability to exercise before
expiration?
……..And another question: I have been monitoring the Put/Call ratios between
the two. Would there be any validity in an observation that the 'strong hands'
use the SPX instead of the OEX to hedge against their S&P 500 Futures
positions or is this just wishful thinking on my part?
Has anyone who also looks at the relationship between these two indices
extracted any useful conclusions that they would be willing to share?
Many thanks in advance.
Rgds,
Kim.
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