ISE Clean Water Index

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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[edit]

ETFs on HHO[edit]

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[edit]

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

Background on water industry[edit]

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[edit]

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[edit]

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[edit]

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[edit]

  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.