Dow Jones Industrial Average Index options (DJX) enable the trader
to speculate on the future direction of the Dow. Since their introduction in
1997, DJX Index options have grown to become one of the most popular
index options. A DJX Index options contract is based on the Dow Jones
Industrial Average (DJIA) - the oldest continuous U.S. market index
(established 1896).
To individual investors, the DJIA is probably the world's best known
stock index. Made up of 30 large and financially strong companies, the DJIA
is the most widely followed index in the world � it is considered a key
trading indicator, representative of the U.S. market's performance.
The DJX Index options contract is calculated as
1/100 of the current value of the DJIA. For instance, when the
DJIA trades at $10,000, the DJX Index options contract will be priced at
approximately $100. The DJX option strike prices are set in intervals of 100
points.
DJX Index options are popular for several reasons; they are:
- Tied to the DJIA � the world's oldest and best known stock index.
Individual traders use the DJIA as one of the most widely used trading
indicators of the market's overall performance;
- Allow investors to trade a cumulative basket of a 30-stock
portfolio. This means investors can trade DJX Index options rather than
having to analyze and invest in 30 individual stocks that make up the
DJIA.
- Are a highly liquid trading vehicle.
