ISE Clean Water Index

From MarketsWiki
Jump to: navigation, search
TradeAlertLogo.jpg

The International Securities Exchange offers cash-settled options on its proprietary ISE Clean Water Index (HHO).[1] Index components include companies engaged in water distribution, water filtration, flow technology, and other water solutions.[2]

Related water instruments

ETFs on HHO

In February 2007, ISE announced that it had entered into an agreement with First Trust Advisors L.P., an investment management firm, to create and list exchange-traded funds (ETFs) on the ISE Water Index.

USFE futures on ISE Homebuilders Index

Additionally, the U.S. Futures Exchange (USFE) listed a futures contract on the ISE Water Index (FHHO) in 2007.[3]

Background on water industry

Companies with exposure to the global water industry have recently emerged as a compelling investment themes. Increasing privatization of water system assets, an aging infrastructure, costly new regulatory guidelines, population increases in water-stressed regions, and industry consolidation have focused attention on companies with significant exposure to water. As a natural resource with no substitute, water is considered by many to have similar characteristics to oil -- available supply is limited, and demand will increase exponentially from expanding global population and industrial demand.

Components and weighting

With more than 30 underlying stocks in the index[4] , it uses a modified market capitalization-weighted methodology to create a more uniform weight distribution. This prevents a few large component stocks from dominating the index but still promotes portfolio diversification by retaining the economic attributes of capitalization ranking. Semi-annual reviews and rebalancing events are used to “re-set” the weighting of each component such that each component has a proportionate influence on the index performance.

ISE Water Index Option Contract Overview

Full specifications can be found on the ISE web site.

Trading hours 9:30 A.M. - 4:00 P.M. Eastern Time (New York time).
Expiration months Four near-term months followed by one additional month from the March quarterly cycle (March, June, September and December).
Strike price intervals At least $2.50.
Minimum trading increments The minimum trading increment for an options contract trading at less than $3.00 is $0.05. The minimum trading increment for an options contract trading at $3.00 or higher is $0.10.

As of Nov. 1, 2007, there are 31 ISE index options listed.


USFE ISE Water Index Futures Contract Overview

Underlying: ISE Water™ Index

Quotation Index Points
Contract Size $100 per Index Point
Minimum Tick Size 0.05
Minimum Calender Spread Tick Size 0.01
Outright Tick Value $5
Minimum Size for Block Trade 50 contracts
Mistrade Parameters 30 ticks
Reportable Positions 200 contracts
Position Limits / Accountability Limits at 25,000 contracts
Screen Price 9999.95
Settlement Cash Settled


References

  1. "Product Details: Contract Specs”. International Securities Exchange.
  2. ISE Clean Edge Water Index (HHO). Cleanedge.com.
  3. "ISE Indexes”. US Futures Exchange.
  4. "ISE Water Index Components”. International Securities Exchange.