International derivatives exchange Eurex will expand its product range in the area of equity index derivatives with futures and options on the DivDAX index. The new product will be available from 14 April 2008. In offering the additional index product, Eurex continues to expand its German index derivatives product range, currently consisting of DAX®, MDAX® and TecDAX® futures and options.
The DivDAX® index comprises 15 DAX constituents with the highest dividend yield. The index was introduced by Deutsche Börse in March 2005. The composition of DivDAX is reviewed once a year in September, based on the latest paid dividends. Components are capped at 10 percent. The index is weighted according to market capitalization. DivDAX returns have outperformed those of DAX in each of the last eight years. The contract size of the DivDAX futures is around a factor of six times smaller than the DAX futures. With this, it is particularly interesting for retail investors and hedgers of retail structures.
Peter Reitz, Eurex board member, said: "Our new futures and options on DivDAX offer issuers of structured products a perfect opportunity to hedge their exposure. It will complement our listed dividend derivatives right in time for the upcoming dividend season." The DivDAX futures and options will be cash settled, the futures expire in March, June, September and December, while the options have a maximum term of 24 months.
Eurex launched five further German equity options on stocks from the MDAX® index as of 25 March. The new options are based on the following underlyings: Bilfinger Berger, Fraport, Klöckner & Co., SGL Carbon and Wacker Chemie.
The options are included in Eurex’s market making program. This program gives market makers an incentive to quote these equity options on a permanent basis. This ensures liquid screen-based trading. The contract specifications resemble the existing equity options. By introducing further equity options, Eurex meets the growing demand among clients for derivatives on attractive mid cap stocks. The increase in demand is fuelled, in particular, by traditional investment funds and providers of warrants and certificates on German mid caps.