With the Korea Exchange (KRX) unveiling plans to list weekly options on individual stocks using major names such as Samsung Electronics and SK hynix as underlying asset, some expect the pace of product diversification in the exchange-traded fund (ETF) market to accelerate further. In particular, analysts said the operating methods of strategy ETFs, including covered call ETFs, could become more diverse. As the domestic ETF market has been growing rapidly around theme-based and strategy products, an analysis is also gaining traction that overseas players are actively seeking to leverage the Korean stock market and KRX indexes.
On the 2nd, according to the Korea Exchange (KRX), the exchange plans to list weekly options on individual stocks using Samsung Electronics, SK hynix, Hyundai Motor, and LG Energy Solution as underlying asset on the 29th. Currently, only monthly options on 64 stocks are listed in the domestic stock options market. The exchange said it will introduce weekly-expiration products to lay the groundwork for ETF product diversification.
Growth in the covered call ETF market also lies behind this introduction. While demand for high-dividend ETFs has recently surged among investors and the covered call ETF market has been expanding quickly, the prevailing view was that related options products in the domestic market were relatively limited.
With the introduction of weekly options, asset managers will be able to use a wider range of option-selling strategies than with existing monthly options. Covered call ETFs using single-stock options are already being run, but because they center on monthly options, opportunities to use options have been limited. Weekly options expire every week, increasing opportunities to sell options and, the explanation goes, helping secure distribution resources and enhance operational flexibility.
There are also significant market concerns. Once weekly options on individual stocks are listed, launching single-stock covered call ETFs becomes theoretically possible, but critics note this runs counter to the very "basket trading" intent of ETFs, which aim to lower risk through diversification. As with the precedent of single-stock ETFs on Samsung Electronics and SK hynix, critics argue this could intensify concentration in specific individual stocks and needlessly amplify volatility across the market.
The exchange said this weekly options listing is not a measure taken with any specific ETF product launch in mind. Separate procedures, including review by the Financial Supervisory Service, are required for an actual product listing. Given the original purpose of ETFs, the exchange said single-stock covered call ETFs are unlikely to be easily allowed.
An exchange official said, "This listing of weekly options on individual stocks is intended to broaden the choices for ETF operating strategies," adding, "It can be seen as laying the groundwork for asset managers to design more diverse strategy ETFs by using weekly options."
This weekly options listing is also seen as a move reflecting asset managers' demand and the Financial Services Commission's ETF product diversification policy stance. The exchange plans to consider expanding the target stocks, taking into account future market demand.
Recently, the domestic ETF market has been growing rapidly around theme products such as AI, semiconductors, defense, and shipbuilding, and strategy products such as covered calls. In this trend, demand from overseas institutions to use KRX indexes is also rising.
An exchange official said, "Since the fourth quarter of last year, inquiries about using KRX indexes have been coming in steadily, mainly from Hong Kong, Singapore, and Taiwan," adding, "Inquiries have continued not only about representative indexes such as KOSPI 200 and KOSDAQ 150 but also about IT-related indexes."
In fact, Hong Kong asset manager CSOP is pushing to launch a product using the KOSPI 200, and the Korea Exchange (KRX) this year developed a co-branded index with Hang Seng Indexes Company in Hong Kong. In Thailand, equity-linked warrants (ELW) based on the KOSPI 200 and KOSDAQ 150 as underlying asset are already listed and trading in the local market.
Overseas institutions are also showing continued interest in FnGuide, Korea's leading index provider. A FnGuide official said, "Since late last year, inquiries have continued from overseas institutions about our in-house index calculation methodology, industry classification system, and related data," adding, "Recently, as interest in the index business and data business has grown, we have also been receiving requests for investor relations (IR) meetings with the company."
NH Investment & Securities, the only domestic securities firm operating an index business, also said inquiries from overseas institutions are ongoing and that it is reviewing some collaboration possibilities. An NH Investment & Securities official said, "It is difficult to disclose specifics, but inquiries from overseas institutions are coming in steadily, and we are reviewing related collaboration plans."