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This topic explains:

Options spread instruments may be user defined and identified as either exchange recognized or exchange unrecognized.

An exchange recognized options spread is a known, historically traded options spread configuration; for example, the butterfly spread represents buy 1 sell 2 buy 1 of the given instrument at a defined strike interval and identical expiration. An exchange recognized spread type submitted for creation by CME Globex platform is acknowledged and disseminated as such in the market data Security Definition message.

All options spread types are available for all options products on CME Globex with some exceptions, for example:

Option Strip Spread (GD) - energy options only

Conditional Curve (CC) - Eurodollar options only

Reduced Tick Inter-Commodity Option Spread (EO) - natural gas options only

An unrecognized spread type does not conform to any known options spread configuration and is acknowledged and disseminated as 'Generic' (GN) in the market data Security Definition message.

For additional information, see User Defined Spread - UDS.

Exchange Recognized Options Spread Types

The following list provides the composition of each exchange recognized options spread type:

Options - Calendar Horizontal (HO)

A horizontal (HO) options spread consists of buying a call (put) at a strike in the far month, and selling a call (put) at the same strike in the near month.

Spread ratio: (Buy 1: Sell 1)

Call Horizontal Construction: Buy1callstrike1exp1 Sell1callstrike1exp2

Security Definition Example: UD:CY: HO 1215909327

Example: Call Horizontal

Buy 1 December 2018 Corn 600 Call and

Sell 1 July 2018 Corn 600 Call

Put Horizontal Construction: Buy1putstrike1exp1 Sell1putstrike1exp2

Example: Put Horizontal

Buy 1 December 2018 Corn 600 Put and

Sell 1 July 2018 Corn 600 Put

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Options - Calendar Diagonal (DG)

A Diagonal (DG) options spread consists of buying a call (put) in the deferred month expiration and selling a call (put) in the near month expiration at a different strike price.

Spread ratio: (Buy 1: Sell 1)

Security Definition Example: UD:CY: DG 0206909332

Call Diagonal Construction: Buy1callstrike1exp1 Sell1callstrike2exp2

Example: Call Diagonal (DG)

Buy 1 December 2018 Corn 600 Call and

Sell 1 July 2018 Corn 650 Call

Put Diagonal Construction: Buy1putstrike1exp1 Sell1putstrike2exp2

Example: Put Diagonal (DG)

Buy 1 December 2018 Corn 600 Put and

Sell 1 July 2018 Corn 650 Put

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Options - Straddle (ST)

A Straddle (ST) options spread consists of buying both a call and put option on the same instrument, strike price and expiration date. 

Spread ratio: (Buy 1: Buy 1)

Security Definition Example: UD:U$: ST 0206929901

Construction: Buy1callstrike1exp1  Buy1putstrike1exp1

Example: Buy the Straddle

Buy 1 December 2018 Eurodollar 9800 Call and

Buy 1 December 2018 Eurodollar 9800 Put

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Options - Strangle (SG)

A Strangle (SG) options spread consists of buying a put at a lower strike price and buying a call at a higher strike price within the same instrument and expiration.

Spread ratio: (Buy 1: Buy1)

Security Definition Example: UD:U$: SG 0206930320

Construction: Buy1putstrike1exp1   Buy1callstrike2exp1

Example: Buy the Strangle

Buy 1 December 2018 Eurodollar 9800 Put and

Buy 1 December 2018 Eurodollar 9900 Call 

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Options - Vertical (VT)

A Vertical (VT) options spread is made up of all calls or all puts and consists of buying a call at a strike price and selling a call at a higher strike price or buying a put at a strike price and selling a put at a lower strike price within the same instrument and expiration date.

Spread ratio: (Buy 1: Sell 1)

Security Definition Example: UD:U$: VT 0206930321

Call Vertical Construction: Buy1callstrike1exp1Sell1callstrike2exp1

Put Vertical Construction: Buy1putstrike2exp1Sell1putstrike1exp1

Example: Call Vertical

Buy 1 December 2018 Eurodollar 9800 Call and

Sell 1 December 2018 Eurodollar 9900 Call

Example: Put Vertical 

Buy 1 December 2018 Eurodollar 9900 Put and

Sell 1 December 2018 Eurodollar 9800 Put

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Options - Box (BX)

A Box (BX) options spread consists of buying the call and selling the put at the same lower strike price and buying the put and selling the call at the same higher strike all within the same instrument and expiry month.

Spread ratio: (Buy 1: Sell 1: Buy 1: Sell 1)

Security Definition Example: UD:M5: BX 0207913352

Construction: Buy1callstrike1exp1 Sell1putstrike1exp1 Buy1putstrike2exp1 Sell1callstrike2exp1

Example: Box

Buy 1 December mini-sized Dow Index 12000 Call,

Sell 1 December mini-sized Dow Index 12000 Put,

Buy 1 December mini-sized Dow Index 13000 Put,

Sell 1 December mini-sized Dow Index 13000 Call

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Options - Butterfly (BO)

A Butterfly (BO) options spread is constructed of all calls (Call Butterfly) or all puts (Put Butterfly). The Call Butterfly consists of buying a call, selling two calls at a higher strike price and buying a call at a still higher strike price within the same instrument and expiry month. The Put Butterfly consists of buying a put, selling two puts at a lower strike price and buying a put at a still lower strike price within the same instrument and expiry month.

The Butterfly requires a specific symmetry in the strikes in that the difference between the strike prices is the same for all legs.

Spread ratio: (Buy 1: Sell 2: Buy 1)

Security Definition Example: UD:U$: BO 0207931636

Call Butterfly Construction: Buy1callstrike1exp1 Sell2callstrike2exp1 Buy1callstrike3exp1

Example: Call Butterfly

Buy 1 December 2018 Eurodollar 9800 Call

Sell 2 December 2018 Eurodollar 9825 Call

Buy 1 December 2018 Eurodollar 9850 Call

Put Butterfly Construction: Buy1putstrike3exp1 Sell2putstrike2exp1 Buy1putstrike1exp1

Example: Put Butterfly

Buy 1 December 2018 Eurodollar 9850 Put

Sell 2 December 2018 Eurodollar 9825 Put

Sell 1 December 2018 Eurodollar 9800 Put

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Options - Conditional Curve (CC)

Conditional Curve (CC) options spreads are unique to CME Group Interest rate products and consists of buying a call(put) at a strike in one product group and selling a call(put) at a strike in another product group.

Additionally, it is possible to have a Conditional Curve spread with a single strike (i.e. same for each leg) or two different strikes, where both strikes are listed.

Spread ratio: (Buy 1: Sell 1)

Security Definition Example: UD:U$: CC 0207931717

Call Conditional Curve Construction: Buy1callstrikeexp1 instrument1   Sell1callstrikeexp1 instrument2

Example: Call Conditional Curve

Buy 1 December Eurodollar 9800 Call,

Sell 1 December 1-year Mid-Curve 9800 Call

Example: Put Conditional Curve

Buy 1 December Eurodollar 9800 Put,

Sell 1 December 1-year Mid-Curve 9800 Put

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Options - Condor (CO)

A Condor (CO) options spread is constructed of all calls (Call Condor) or all puts (Put Condor).

The Call Condor consists of buying a call, selling one call at a higher strike price and selling a call at a still higher strike price, and buying a fourth call at a still higher strike price within the same instrument and expiry month.

The Put Condor consists of buying a put at the highest strike price, selling one put at a lower strike price, selling a put at a still lower strike price, and buying a fourth put at an even lower strike price within the same instrument and expiry month.

The Condor requires a specific symmetry in the strikes in that the difference between the strike prices is the same for all legs.

Spread ratio: (Buy 1: Sell 1: Sell 1: Buy 1)

Security Definition Example: UD:U$: CO 0206930236

Call Condor Construction: Buy1callstrike1exp1 Sell1callstrike2exp1 Sell1callstrike3exp1Buy1callstrike4exp1

Example: Call Condor

Buy 1 December 2018 Eurodollar 98000 Call

Sell 1 December 2018 Eurodollar 98500 Call

Sell 1 December 2018 Eurodollar 99000 Call

Buy 1 December 2018 Eurodollar 99500 Call

Put Condor Construction: Buy1putstrike4exp1 Sell1putstrike3exp1 Sell1putstrike2exp1Buy1putstrike1exp1

Example: Put Condor

Buy 1 December 2018 Eurodollar 99500 Put

Sell 1 December 2018 Eurodollar 99000 Put

Sell 1 December 2018 Eurodollar 98500 Put

Buy 1 December 2018 Eurodollar 98000 Put

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Options - Double (DB)

A Double (DB) options spread is constructed of all calls (Call Double) or all puts (Put Double).

The Call Double consists of buying a call at a strike price and buying another call at a higher strike price within the same instrument and expiry month.

The Put Double consists of buying a put at a strike price and buying another put at a lower strike price within the same instrument and expiry month.

Spread ratio: (Buy 1: Buy 1)

Security Definition Example: UD:U$: DB 0203678458

Call Double Construction: Buy1callstrike1exp1 Buy1callstrike2exp1

Example: Call Double

Buy 1 December 2018 Eurodollar 98000 Call

Buy 1 December 2018 Eurodollar 98500 Call

Put Double Construction: Buy1putstrike2exp1 Buy1putstrike1exp1

Example: Put Double

Buy 1 December 2018 Eurodollar 98500 Put

Buy 1 December 2018 Eurodollar 98000 Put

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Options - Horizontal Straddle (HS)

A Horizontal Straddle (HS) options spread consists of buying a straddle at one strike price in the deferred month and selling a straddle at the same or different strike in the near month.

More specifically, a Horizontal Straddle (HS) consists of buying a call and buying a put at the same strike price in the deferred month and selling a call and selling a put at the same lower strike price in the near month, all within the same instrument and expiry month.

Spread ratio: (Buy 1: Buy 1: Sell 1: Sell 1)

Security Definition Example: UD:U$: HS 0207743256

Construction: Buy1callstrike1exp2 Buy1putstrike1exp2 Sell1callstrike1exp1 Sell1putstrike1exp1

Example: Horizontal Straddle

Buying 1 Sept 2018 Eurodollar 98000 Call,

Buying 1 Sept 2018 Eurodollar 98000 Put

Selling 1 June 2018 Eurodollar 98500 Call

Selling 1 June 2018 Eurodollar 98500 Put

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Options - Iron Condor (IC)

A Iron Condor (IC) options spread consists of buying a put spread and buying a call spread at higher strike prices.
More specifically this consists of selling a put at one strike price, buying a put at a higher strike price, buying a call at a higher strike price, and selling a call at an even higher strike price, all within the same instrument and expiration.

Spread ratio: (Sell 1: Buy 1:Buy 1: Sell 1)

Security Definition Example: UD:T$: IC 0208383462

Construction: Sell1putstrike1exp1 Buy1putstrike2exp1 Buy1callstrike3exp1 Sell1callstrike4exp1

Example: Put Iron Condor

Sell 1 June 2018 30 Year Treasury Bond 116 Put

Buy 1 June 2018 30 Year Treasury Bond 117 Put

Buy 1 June 2018 30 Year Treasury Bond 118 Call

Sell 1 June 2018 30 Year Treasury Bond 119 Call

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Options - Ratio 1x2 (12)

A Ratio 1x2 (12) options spread is constructed of all calls (Call Ratio 1x2) or all puts (Put Ratio 1x2).
The Call Ratio 1x2 consists of buying a call and selling two calls at a higher strike price within the same instrument and expiry month.

The Put Ratio 1x2 consists of buying a put at a strike price and selling two puts at a lower strike price within the same instrument and expiry month.

Spread ratio (Buy 1: Sell 2)

Security Definition Example: UD:U$: 12 0206772350

Call 1x2 Construction: Buy1callstrike1exp1 Sell2callstrike2exp1

Example: Call 1x2

Buy 1 March 2018 Eurodollar 9800 Call

Sell 2 March 2018 Eurodollar 9950 Call

Put 1x2 Construction: Buy1putstrike2exp1 Buy1putstrike1exp1

Example: Put 1x2

Buy 1 March 2018 Eurodollar 9950 Put

Sell 2 March 2018 Eurodollar 9800 Put

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Options - Ratio 1x3 (13)

A Ratio 1x3 (13) options spread is constructed of all calls (Call Ratio 1x3) or all puts (Put Ratio 1x3).

The Call Ratio 1x3 consists of buying a call at one strike price and selling three calls at a higher strike price within the same instrument and expiry month.

The Put Ratio 1x3 consists of buying a put at one strike price and selling three puts at a lower strike price within the same instrument and expiry month.

Spread ratio: (Buy 1: Sell 3)

Security Definition Example: UD:M5: 13 0209923456

Call 1x3 Construction: Buy1callstrike1exp1 Sell3callstrike2exp1

Example: Call 1x3

Buying 1 March 2018 December mini-sized Dow Index 12000 Call

Selling 3 March 2018 December mini-sized Dow Index 13000 Call

Put 1x3 Construction: Buy1putstrike2exp1 Sell3putstrike1exp1

Example: Put 1x3

Buying 1 March 2018 December mini-sized Dow Index 13000 Put

Selling 3 March 2018 December mini-sized Dow Index 12000 Put

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Options - Ratio 2x3 (23)

A Ratio 2x3 (23) options spread is constructed of all calls (Call Ratio 2x3) or all puts (Put Ratio 2x3).

The Call Ratio 2x3 consists of buying two calls at one strike and selling three calls at a higher strike price within the same instrument and expiry month.

The Put Ratio 2x3 consists of buying two puts at one strike price and selling three puts at a lower strike price within the same instrument and expiry month.

Spread ratio: (Buy 2: Sell 3)

Security Definition Example: UD:U$: 23 0206843756

Call 2x3 Construction: Buy2callstrike1exp1 Sell3callstrike2exp1

Example: Call 2x3

Buy 2 March 2018 Eurodollar 9800 Call

Sell 3 March 2018 Eurodollar 9950 Call

Put 2x3 Construction: Buy2putstrike2exp1 Sell3putstrike1exp1

Example: Put 2x3

Buy 2 March 2018 Eurodollar 9950 Put

Sell 3 March 2018 Eurodollar 9800 Put

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Options - Strip (SR)

A Strip (SR) options spread is constructed of all calls (Call Strip) or all puts (Put Strip).

The Call Strip consists of buying calls within the same instrument and strike price for four equidistant expiry months, resulting in a total of four (4) calls purchased.

The Put Strip consists of buying puts within the same instrument and strike price for each of four equidistant expiry months, resulting in a total of four (4) puts purchased.

The Strip requires a specific symmetry in the expiry months in that the time difference between the expiry months is the same for all legs.

Spread ratio: (Buy 1: Buy 1: Buy 1: Buy 1)

Security Definition Example: UD:U$: SR 0206921343

Call Strip Construction: Buy1callstrike1exp1 Buy1callstrike1exp2 Buy1callstrike1exp3Buy1callstrike1exp4

Example: Call Strip

Buy 1 June 2018 Eurodollar 9800 Call

Buy 1 Sept 2018 Eurodollar 9800 Call

Buy 1 Dec 2018 Eurodollar 9800 Call

Buy 1 March 2019 Eurodollar 9800 Call

Put Strip Construction: Buy1putstrike1exp1 Buy1putstrike1exp2 Buy1putstrike1exp3Buy1putstrike1exp4

Example: Put Strip

Buy 1 June 2018 Eurodollar 9800 Put

Buy 1 Sept 2018 Eurodollar 9800 Put

Buy 1 Dec 2018 Eurodollar 9800 Put

Buy 1 March 2019 Eurodollar 9800 Put

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Options - Risk Reversal (RR)

A Risk Reversal (RR) options spread consists of buying a call and selling a put option within the same instrument and expiration month.

The put component can be the same strike or a lower strike as the call option.

Spread ratio: (Buy 1: Sell 1)

Security Definition Example: UD:U$: RR 0206003457

Construction: Buy1callstrike2exp1 Sell1putstrike1or2exp1

Example: Risk Reversal

Buy 1 June 2018 Eurodollar 9900 Call

Sell 1 June 2018 Eurodollar 9800 Put

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GD Strip Spread

The GD Strip Spread is the simultaneous purchase or sale of SA Strips at the sum of the SA Strip legs. The SA Strip legs are priced according to the SA Strip rules. The GD Strip Spread is identified by tag 762-SecuritySubType=GD. GD is available in options markets only in  User-Defined spreads.

Security Definition Example: UD:1T: GD 1031912656

A GD Strip Spread has

  • One product
  • Legs must be able to be understood as SA StripsQuantity ratio of 1:1...1
    • Minimum of two legs
    • Maximum of 26 legs
  • Any side ratio is acceptable. All legs must have the same tick size
    • May contain both buy SA Strips and sell SA Strips

CME Globex recognizes a new UDS as a GD Strip Spread if the legs are submitted as outrights or if they are submitted as a recursive spread, even if the spread legs are not defined as SA Strips. For example, a recursive UDS with two VT Vertical legs will be recognized as a GD Strip Spread if the legs of the VT Verticals follow the SA Strip rules above.

iLink execution messages for trades are only sent on the individual SA Strip legs.

Pricing

  • The Spread Trade Price is the differential of the SA Strip legs
    • SA Strip legs are priced following the SA Strip rules
  • Leg price assignment
    1. Calculate Fair Price of the GD Strip Spread
    2. Calculate the difference between the Fair Market Price and the Spread Trade Price
    3. Assign the difference to each SA Strip leg equally to reach the Spread Trade Price

Pricing Example

GD Strip Spread trades at 100

  1. SA Strip Leg 1 has Fair Market Average Price of 23.
  2. SA Strip Leg 2 has Fair Market Average Price of 123.
  3. Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
    1. SA Strip Leg1 = 23
    2. SA Strip Leg2 = 123

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Options - Xmas Tree (XT)

The Xmas Tree (XT) options spread is constructed of all calls (Call Xmas Tree) or all puts (Put Xmas Tree).

The Call Xmas Tree consists of buying a call at one strike, selling a call at a higher strike and selling yet another call at a higher strike, all within the same instrument and expiration month.

The Put Xmas Tree consists of buying a put at a higher strike and selling a put at a lower strike and selling yet another put at a still lower strike, all within the same instrument and expiration month.

The Xmas Tree requires a specific symmetry in the strikes in that the difference between the strike prices is the same for all legs.

Spread ratio: (Buy 1: Sell 1: Sell 1)

Security Definition Example: UD:U$: XT 020909112

Call Xmas Tree Construction: Buy1callstrike1exp1 Sell1callstrike2exp1 Sell1callstrike3exp1

Example: Call Xmas Tree

Buy 1 June 2018 Eurodollar 9800 Call

Sell 1 June 2018 Eurodollar 9850 Call

Sell 1 June 2018 Eurodollar 9900 Call

Put Xmas Tree Construction: Buy1putstrike3exp1 Sell1putstrike2exp1 Sell1putstrike1exp1

Example: Put Xmas Tree

Buy 1 June 2018 Eurodollar 9900 Put

Sell 1 June 2018 Eurodollar 9850 Put

Sell 1 June 2018 Eurodollar 9800 Put

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Options - 3-Way (3W)

A 3-Way (3W) options spread is constructed of calls and puts on the same instrument and expiry month with different strike prices.

A Call 3-way consists of buying the call for the middle strike price, selling the call for high strike price, and selling the put for the low strike price.

A Put 3-way consists of buying the put for middle strike price, selling the put for low strike price, and selling the call for the high strike price.

Spread ratio: (Buy 1: Sell 1: Sell 1)

Security Definition Example: UD:1H: 3W 0508834528

Call 3-Way Construction: Buy1callstrike2exp1 Sell1callstrike3exp1 Sell1putstrike1exp1

Example: Call 3-Way Spread

Buy 1 July 2018 Lean Hog 78000 Call

Sell 1 July 2018 Lean Hog 80000 Call

Sell 1 July 2018 Lean Hog 77000 Put

Put 3-Way Construction: Buy1putstrike2exp1 Sell1putstrike1exp1 Sell1callstrike3exp1

Example: Put 3-Way Spread

Buy 1 July 2018 Lean Hog 78000 Put

Sell 1 July 2018 Lean Hog 76000 Put

Sell 1 July 2018 Lean Hog 80000 Call

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Options - 3-Way Straddle versus Call (3C)

A 3-way: Straddle versus Call (3C) options spread consists of buying a Straddle and (versus) selling a Call in the same expiry month. The Straddle component consists of buying a Call and buying a Put in the same instrument, expiration, and strike price. The opposing (versus) component is to sell a Call for the same instrument and expiration but at a different strike price.

Spread ratio: (Buy 1: Buy 1: Sell 1)

Security Definition Example: UD:T$: 3C 0122667543

Construction: Buy1callstrike1exp1 Buy1putstrike1exp1 Sell1callstrike(2)exp1

Example: Buy the 3-way: Straddle versus Call

Buy 1 December 2019 Ten-Year Treasury Note option 120 Call

Buy 1 December 2019 Ten-Year Treasury Note option 120 Put

Sell 1 December 2019 Ten-Year Treasury Note option 123 Call

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Options - 3-Way Straddle versus Put (3P)

A 3-way: Straddle versus Call (3C) options spread consists of buying a Straddle and selling a Put in the same expiry month.

The Straddle component consists of buying a Call and buying a Put in the same instrument, expiration, and strike price. The opposing component is to sell a Put for the same instrument and expiration but at a different strike price.

Spread ratio: (Buy 1: Buy 1: Sell 1)

Security Definition Example: UD:T$: 3P 0129234563

Construction: Buy1callstrike1exp1 Buy1putstrike1exp1 Sell1putstrike2exp1

Example: Buy the 3-way: Straddle versus Put

Buy 1 December 2019 Ten-Year Treasury Note option 120 Call

Buy 1 December 2019 Ten-Year Treasury Note option 120 Put

Sell 1 December 2019 Ten-Year Treasury Note option 117 Put

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Options - Iron Butterfly (IB)

An Iron Butterfly (IB) options spread consists of buying a Straddle and selling a Strangle in the same expiry month. The IB components are to sell a Put at a strike price, buy Put and Call at higher strike price, and sell a Call at an even higher strike price. The strike prices do not have to be consecutive and the gaps between strike prices do not have to be equal.

Spread ratio: (Sell 1: Buy 1: Buy 1: Sell 1)

Security Definition Example: UD:T$: IB 01277435267

Construction: Sell1putstrike1exp1 Buy1putstrike2exp1 Buy1callstrike2exp1 Sell1callstrike3exp1

Example: Iron Butterfly

Sell 1 March 2019 Ten-Year Treasury Note option 118 Put

Buy1 March 2019 Ten-Year Treasury Note option 120 Put

Buy 1 March 2019 Ten-Year Treasury Note option 120 Call

Sell 1 March 2019 Ten-Year Treasury Note option 122 Call

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Options - Jelly Roll (JR)

A Jelly Roll (JR) is created by entering into two separate positions simultaneously. The first position involves buying a put and selling a call with the same strike price and expiration. The second position involves selling a put and buying a call. The strike prices of the put and call in the second position are identical but differ from the first position, and the duration of the second position is longer than the first position. This overall position creates a synthetic near-term short position and long-term long position that work to capitalize upon the time differential between underlying futures prices.

  • Leg sequence
    • Sell 1 call
    • Buy 1 put
    • Buy 1 call
    • Sell 1 put
  • Strike configuration
    • Leg 1 strike = Leg 2 strike
    • Leg 3 strike = leg 4 strike
    • Leg 3 strike ≠ leg 1 strike
  • Leg Expiration
    • Leg 1 expiration = leg 2 expiration
    • Leg 3 expiration = leg 4 expiration
    • Leg 1 expiration < leg 3 expiration

Spread ratio: (Sell 1: Buy 1: Buy 1: Sell 1)

Security Definition Example: UD:U$: JR 0227775643

Buy Jelly Roll Construction: Sell1callstrike1exp1 Buy1putstrike1exp1 Buy1callstrike2exp2 Sell1putstrike2exp2

Example: Buy Jelly Roll

Sell 1 Dec 2019 Eurodollar options 9750 Call

Buy 1 Dec 2019 Eurodollar options 9750 Put

Buy 1 March 2020 Eurodollar options 9825 Call

Sell 1 March 2020 Eurodollar options 9825 Put

Sell Jelly Roll Construction: Buy1callstrike1exp1 Sell1putstrike1exp1 Sell1callstrike2exp2 Buy1putstrike2exp2

Example: Sell Jelly Roll

Buy 1 Dec 2019 Eurodollar options 9750 Call

Sell 1 Dec 2019 Eurodollar options 9750 Put

Sell 1 March 2020 Eurodollar options 9825 Call

Buy 1 March 2020 Eurodollar options 9825 Put

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Options - Guts (GT)

A Guts (GT) options spread consists of buying a Call at a strike price and buying a Put at a higher strike price in the same expiry.

Spread ratio: (Buy 1: Buy 1)

Security Definition Example: UD:T$: GT 0127856432

Construction: Buy1callstrike1exp1 Buy1putstrike2exp1

Example: Buy the Guts

Buy 1 December 2019 Ten-Year Treasury Note option 120 Call

Buy 1 December 2019 Ten-Year Treasury Note option 122 Put

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SA Strip

The SA Strip is the simultaneous purchase or sale of futures or options positions at the averaged price of the legs; the spread price is identical to the price assigned to each leg. The SA Strip is identified by tag 762-SecuritySubType=SA. SA is available in futures and options markets in both Exchange- and User-Defined spreads. For more information, refer to the Average Price Method for Option Strips and Option Strip Spreads topic.

An SA Strip has:

  • One product
  • Minimum of two legs
  • Maximum of 26 legs
  • Quantity/side ratio of +1:+1...+1
  • All legs must have the same tick size
  • Expiration of all legs must be different and symmetric

An options SA Strip has an additional requirement

  • All legs must be either Calls or Puts
For any single market, only FS or SA User-Defined Spreads will be recognized.

Spread ratio: (Buy 1: Buy 1: Buy 1: Buy 1)

Security Definition Example: UD:1T: SA 0206912727

Call Strip Construction: Buy1callstrike1exp1 Buy1callstrike1exp2 Buy1callstrike1exp3Buy1callstrike1exp4

Example: Call Strip

Buy 1 June 2016 Natural Gas 2550.0 Call

Buy 1 Sept 2016 Natural Gas 2550.0 Call

Buy 1 Dec 2016 Natural Gas 2550.0 Call

Buy 1 March 2017 Natural Gas 2550.0 Call

Put Strip Construction: Buy1putstrike1exp1 Buy1putstrike1exp2 Buy1putstrike1exp3Buy1putstrike1exp4

Example: Put Strip

Buy 1 June 2016 Natural Gas 2550.0 Call

Buy 1 Sept 2016 Natural Gas 2550.0 Call

Buy 1 Dec 2016 Natural Gas 2550.0 Call

Buy 1 March 2017 Natural Gas 2550.0 Call

CV Covered

The CV Covered is the simultaneous purchase or sale of outright options or options spreads with one or more outright futures; for example, buying call options and selling futures or selling put options and selling futures. The creator of the UDS is responsible for defining the direction, delta, price, and expiration of the futures leg(s).  Covereds pricing and leg assignments follow the rules of the options leg; i.e., an outright options covered with a future is priced following the rules of the option leg and a VT Vertical covered with a future is priced following the rules of the VT Vertical. The CV Covered is identified with tag 762-SecuritySubType=CV:XX, where XX is either "FO" for an outright option or the options spread type (e.g., "GN", "VT"). CV Covered is available as an options-futures User-Defined Spread only.

A CV Covered has:

  • Many products
  • At least one and up to 25 outright futures legs, with defined directions, deltas, prices and terms
  • At least one options outright or options spread
  • Any quantity ratio, so long as the ratio has the least common denominator possible
  • Any side ratio, as long as the first option outright or option spread leg is a buy

Pricing

  • The Spread Trade Price is the price or differential of the outright options or options spread legs
    • A CV Covered SA Strip follows the SA pricing rules
    • A CV Covered GD Strip Spread follows the GD pricing rules
  • Leg price assignment
    1. If options leg(s) are a spread, the Spread Trade Price is calculated following the defined spread rules
      1. If options leg is an outright, the Spread Trade Price is assigned to the options leg 
    2. Multiply the Delta times the total number of traded options
    3. Assign the futures quantity at the Futures Leg Price

Pricing Example

CV Covered trades 100 lots at 25

  • Leg1 is a 1 lot buy options outright
  • Leg2 is a 1 lot sell futures outright, Delta 47 and price 200,000
  1. Outright options Leg1 is assigned Spread Trade Price of 25
    1. Futures outright Leg2 sells 47 lots (Delta * traded options quantity) at defined price of 200,000.

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Options - Reduced Tick Inter-Commodity Option Spread (EO)

For UDS creation, a Reduced Tick Inter-Commodity Option Spread (EO) spread consists of buying one American Natural Gas Option (ON) and selling one European Natural Gas Option (LNE) with a reduced tick. Strike prices and months do not have to be consecutive, and either leg can be a call or a put.

Buy Spread Ratio: (Buy 1 ON: Sell 1 LNE)

Security Definition Example: UD:1T: EO 020691261548

Example 1

 Buy 1 April 2017 ON Natural Gas Option (American) 2750 Call

 Sell 1 April 2017 LNE Natural Gas Option (European) 2750 Call

Example 2

Buy1 March 2017 ON Natural Gas Option (American) 3100 Call

Sell 1 April 2017 LNE Natural Gas Option (European) 2950 Put

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Options - Option Strip Spread (GD)

Option Strip Spreads (GD) consist of multiple Option Strip (SA) (referred to as "sub-strips") legs. The legs can have a mixture of sides and strip lengths.  Option Strip Spreads (GD) are priced as the sum of each average priced 'sub-strip.' Each 'sub-strip' is priced according to the average price Option Strip (SA) rules. Then each buy strip is added and each sell strip is subtracted to calculate the fair value price. For more information, refer to the Average Price Method for Option Strips and Option Strip Spreads topic.

Security Definition Example: UD:1T: GD 0206913162

Example: Buy a Winter SA  and Sell a Summer SA

Buy Winter (Sub-Strip 1) (SA)

Sell Summer (Sub-Strip 2) (SA)

Exchange Unrecognized Spread Types

If the options spread requested by the user is not identified as one of the CME Globex exchange recognized spread types, but has a valid construction, the instrument will be created exactly as the user requested and designated in market data as 'GN' (generic).

Under the generic designation, the user can create options spread instruments composed of multiple spread types. For example, a unique options spread instrument can be created by combining the configurations of a Vertical options spread and Xmas tree options spread into a unique Generic instrument.

Generic spreads can contain up to 26 outrights. This count is irrespective of leg ratio. For example, when the user submits a proposed user defined spread to CME Globex containing an options butterfly (buy1, sell2, buy1) as a leg, CME Globex will count that instrument as 3 (buy/sell/buy) instruments against the 26 instrument limit.

For additional information, see User-Defined Spread (UDS).

For advanced information on UDS construction rules, see UDS - Validation and Messaging Rules.

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UDS Covered Options

The term Covered denotes a unique delta-neutral instrument created by combining an outright option or options spread with one or more underlying outright futures instruments.

A Covered options instrument can have up to 25 futures outright legs and must contain a minimum of one options outright.

Delta

When customers request the creation of a covered, CME Globex validates the proposed delta by performing a 'delta reasonability' check. During the match process for orders on Covered instruments, CME Globex determines the Covering future quantity by multiplying the outright option or option spread quantity by the absolute value of delta and then rounding according to the rules specific to incoming and resting orders.

Delta Neutrality

To ensure delta neutrality on covered options, CME Globex rejects New Order, Cancel/Replace, and Mass Quote messages violating the minimum quantity value sent in tag 526-MinTradeVol of the market data Security Definition (tag 35-MsgType=d) message.

In response to:

  • New Order (tag 35-MsgType=D)
  • Cancel Replace (tag 35-MsgType=G)

Execution Report (tag 35-MsgType=8), tag 103-OrdRejReason =

Tag 58-Text

2115

Order quantity is outside of the allowable range'Quantity: <Requested Quantity> Max: <Maximum configured for contract> Min: <Minimum configured for contract>’

7613

Disclosed quantity cannot be smaller than the minimum quantity 'Disclosed: <Requested Quantity> Min: <Minimum configured for contract>’

In response to:

  • Mass Quote (tag 35-MsgType=i)
  • Ruote Request (tag 35-MsgType=R)

Quote Acknowledgment (tag 35-MsgType=b), tag 368-QuoteEntryRejectReason =

Tag 58-Text

7112

Quote exceeds limit.

Delta Neutrality Feature Files
Basic Covered.feature
This feature file demonstrates how Covered delta neutrality ies ensured by enforcing a minimum quantity on the Covered. The minimum quantity of the covered order is determined by the future leg delta of covered. 

#####################################################################################################################
  Background:
    Given the following:
    * Instrument Group Configurations:
      | groupName | 
      | E0        | 
      | GE        | 
      | U$        | 
    * Contracts:
      | symbol      |
      | TE0H2 C9875 |
      | GEZ0        |
      | GEH2        |
    * initial covered minimum quantity configuration for instrument group "U$":
      | delta | minQty |
      | 0.2   | 20     |
      | 0.6   | 5      |
      | 1     | 1      |

  #####################################################################################################################
  Scenario: Basic Covered, positive delta, Allocation of Min Qty
    When the following events occur:
    * the group(s) "GE" is put in "closed" with reset statistics "on"
    * the following attributes are updated for contract(s) in real time:
      | securityDescription | settlementPrice |
      | GEZ0                | 9500            |
    * the group(s) "GE" is put in "open" with reset statistics "on"

    * these "UDS" message(s) are sent to Globex:
      | rgIdentifier | securitySubType |
      | UDSCovered   | COVERED         |
    * with legs for "uds": "UDSCovered"
      | legSymbol | legSecurityDesc | legSide | legPrice | legOptionDelta |
      | E0        | TE0H2 C9875     | bid     | omit     | omit           |
      | GE        | GEZ0            | bid     | settle   | 0.31           |

    Then the following should happen:

    * expect a "NEW" UDS update for the following contracts:
      | symbol     | minQuantity |
      | UDSCovered | 5           |


  #####################################################################################################################
  Scenario: Basic Covered, negative delta, Allocation of Min Qty
    When the following events occur:
    # Set the settlements for runnable mode
    * the group(s) "GE" is put in "closed" with reset statistics "on"
    * the following attributes are updated for contract(s) in real time:
      | securityDescription | settlementPrice |
      | GEZ0                | 9500            |
    * the group(s) "GE" is put in "open" with reset statistics "on"

    * these "UDS" message(s) are sent to the Globex:
      | rgIdentifier | securitySubType |
      | UDSCovered   | COVERED         |
    * with legs for "uds": "UDSCovered"
      | legSymbol | legSecurityDesc | legSide | legPrice | legOptionDelta |
      | E0        | TE0H2 C9875     | bid     | omit     | omit           |
      | GE        | GEZ0            | ask     | settle   | 0.50           |

    Then the following should happen:

    * expect a "NEW" UDS update for the following contracts:
      | symbol     | minQuantity |
      | UDSCovered | 5           |

  #####################################################################################################################
  Scenario: Basic Covered, Two Futures, positive delta, Allocation of Min Qty
    When the following events occur:
    * the group(s) "GE" is put in "closed" with reset statistics "on"
    * the following attributes are updated for contract(s) in real time:
      | securityDescription | settlementPrice |
      | GEZ0                | 9500            |
      | GEH2                | 8000            |
    * the group(s) "GE" is put in "open" with reset statistics "on"

    * these "UDS" message(s) are sent to the Globex:
      | rgIdentifier | securitySubType |
      | UDSCovered   | COVERED         |
    * with legs for "uds": "UDSCovered"
      | legSymbol | legSecurityDesc | legSide | legPrice | legOptionDelta |
      | E0        | TE0H2 C9875     | bid     | omit     | omit           |
      | GE        | GEZ0            | bid     | settle   | 0.50           |
      | GE        | GEH2            | ask     | settle   | 0.30           |

    Then the following should happen:

    * expect a "NEW" UDS update for the following contracts:
      | symbol     | minQuantity |
      | UDSCovered | 5           |

  #####################################################################################################################
  Scenario: Basic Covered, Two Futures, negative delta, Allocation of Min Qty
    When the following events occur:
  
    * the group(s) "GE" is put in "closed" with reset statistics "on"
    * the following attributes are updated for contract(s) in real time:
      | securityDescription | settlementPrice |
      | GEZ0                | 9500            |
      | GEH2                | 8000            |
    * the group(s) "GE" is put in "open" with reset statistics "on"

    * these "UDS" message(s) are sent to Globex:
      | rgIdentifier | securitySubType |
      | UDSCovered   | COVERED         |
    * with legs for "uds": "UDSCovered"
      | legSymbol | legSecurityDesc | legSide | legPrice | legOptionDelta |
      | E0        | TE0H2 C9875     | bid     | omit     | omit           |
      | GE        | GEZ0            | ask     | settle   | 0.15           |
      | GE        | GEH2            | ask     | settle   | 0.65           |

    Then the following should happen:

    * expect a "NEW" UDS update for the following contracts:
      | symbol     | minQuantity |
      | UDSCovered | 20          |

  #####################################################################################################################
  Scenario: Basic Covered, Two Futures bid and ask, Allocation of Min Qty
    When the following events occur:
    
    * the group(s) "GE" is put in "closed" with reset statistics "on"
    * the following attributes are updated for contract(s) in real time:
      | securityDescription | settlementPrice |
      | GEZ0                | 9500            |
      | GEH2                | 8000            |
    * the group(s) "GE" is put in "open" with reset statistics "on"

    * these "UDS" message(s) are sent to Globex:
      | rgIdentifier | securitySubType |
      | UDSCovered   | COVERED         |
    * with legs for "uds": "UDSCovered"
      | legSymbol | legSecurityDesc | legSide | legPrice | legOptionDelta |
      | E0        | TE0H2 C9875     | bid     | omit     | omit           |
      | GE        | GEZ0            | bid     | settle   | 0.5            |
      | GE        | GEH2            | ask     | settle   | 0.5            |

    Then the following should happen:

    * expect a "NEW" UDS update for the following contracts:
      | symbol     | minQuantity |
      | UDSCovered | 5           |
  #####################################################################################################################
  Scenario: Basic Covered, more than 2 Futures, Allocation of Min Qty
    When the following events occur:
    
    * the group(s) "GE" is put in "closed" with reset statistics "on"
    * the following attributes are updated for contract(s) in real time:
      | securityDescription | settlementPrice |
      | GEZ0                | 9500            |
      | GEH2                | 8000            |
      | GEZ1                | 6500            |
    * the group(s) "GE" is put in "open" with reset statistics "on"

    * these "UDS" message(s) are sent to Globex:
      | rgIdentifier | securitySubType |
      | UDSCovered   | COVERED         |
    * with legs for "uds": "UDSCovered"
      | legSymbol | legSecurityDesc | legSide | legPrice | legOptionDelta |
      | E0        | TE0H2 C9875     | bid     | omit     | omit           |
      | GE        | GEZ0            | bid     | settle   | 0.75           |
      | GE        | GEH2            | ask     | settle   | 0.55           |
      | GE        | GEZ1            | bid     | settle   | 0.15           |

    Then the following should happen:

    * expect a "NEW" UDS update for the following contracts:
      | symbol     | minQuantity |
      | UDSCovered | 20          |


  #####################################################################################################################
  Scenario: Basic Covered created, Update in Min Qty configuration, duplicate Covered created and rejected
    When the following events occur:
    
    * the group(s) "GE" is put in "closed" with reset statistics "on"
    * the following attributes are updated for contract(s) in real time:
      | securityDescription | settlementPrice |
      | GEZ0                | 9500            |
      | GEH2                | 8000            |
    * the group(s) "GE" is put in "open" with reset statistics "on"

    * these "UDS" message(s) are sent to Globex:
      | rgIdentifier | securitySubType |
      | UDSCovered   | COVERED         |
    * with legs for "uds": "UDSCovered"
      | legSymbol | legSecurityDesc | legSide | legPrice | legOptionDelta |
      | E0        | TE0H2 C9875     | bid     | omit     | omit           |
      | GE        | GEZ0            | bid     | settle   | 0.30           |
    * update instrument group "U$" with covered minimum quantity configuration:
      | delta | minQty |
      | 0.2   | 25     |
      | 0.6   | 10     |
      | 1     | 2      |
    * these "UDS" message(s) are sent to Globex:
      | rgIdentifier | securitySubType |
      | UDSCovered2  | COVERED         |
      | UDSCovered3  | COVERED         |

    * with legs for "uds": "UDSCovered2"
      | legSymbol | legSecurityDesc | legSide | legPrice | legOptionDelta |
      | E0        | TE0H2 C9875     | bid     | omit     | omit           |
      | GE        | GEZ0            | bid     | settle   | 0.30           |

    * with legs for "uds": "UDSCovered3"
      | legSymbol | legSecurityDesc | legSide | legPrice | legOptionDelta |
      | E0        | TE0H2 C9875     | bid     | omit     | omit           |
      | GE        | GEH2            | bid     | settle   | 0.75           |

    Then the following should happen:

    * expect a "NEW" UDS update for the following contracts:
      | symbol      | minQuantity |
      | UDSCovered  | 5           |
      | UDSCovered3 | 2           |

    * expect execution message(s) with values:
      | identifier | messageType  | securitySubType | noLegs | securityDescription | symbol | securityResponseType | expirationCycle | autoQuoteRequest | securityIDSource |
      | UDSCovered | sde response | COVERED         | 2      | UDSCovered          | U$     | 2                    | 0               | Y                | 4                |

#    duplicate UDS rejected with securityResponseType=5
    * expect execution message(s) with values:
      | identifier  | messageType  | securitySubType | noLegs | securityDescription | securityResponseType |
      | UDSCovered2 | sde response | COVERED         | 2      | UDSCovered          | 5                    |

#    new UDS created with updated bucket config
    * expect execution message(s) with values:
      | identifier  | messageType  | securitySubType | noLegs | securityDescription | symbol | securityResponseType | expirationCycle | autoQuoteRequest | securityIDSource |
      | UDSCovered3 | sde response | COVERED         | 2      | UDSCovered3         | U$     | 2                    | 0               | Y                | 4                |


  #####################################################################################################################
  Scenario: Update in Min Qty configuration, new Basic Covered UDS created
    When the following events occur:
    
    * the group(s) "GE" is put in "closed" with reset statistics "on"
    * the following attributes are updated for contract(s) in real time:
      | securityDescription | settlementPrice |
      | GEZ0                | 9500            |
    * the group(s) "GE" is put in "open" with reset statistics "on"

    * update instrument group "U$" with covered minimum quantity configuration:
      | delta | minQty |
      | 0.2   | 25     |
      | 0.6   | 10     |
      | 1     | 2      |
    * these "UDS" message(s) are sent to Globex:
      | rgIdentifier | securitySubType |
      | UDSCovered   | COVERED         |
    * with legs for "uds": "UDSCovered"
      | legSymbol | legSecurityDesc | legSide | legPrice | legOptionDelta |
      | E0        | TE0H2 C9875     | bid     | omit     | omit           |
      | GE        | GEZ0            | bid     | settle   | 0.32           |

    Then the following should happen:

    * expect a "NEW" UDS update for the following contracts:
      | symbol     | minQuantity |
      | UDSCovered | 10          |


 

Modified Limit Order feature
When a Delta Min Quantity is configured in STAR for a UDS destination group and a UDS is created in that group, 
the correct minimum quantity shall be allocated to that UDS and only modified Limit orders that have a Min Qty equal to or more than
the Min Qty allocated shall be accepted. Otherwise a business reject should be sent back to the client system.

#####################################################################################################################
  Background:
    Given the following:
    * Instrument Group Configurations:
      | groupName | 
      | E0        |
      | GE        | 
      | U$        | 
    * Contracts:
      | symbol      |
      | TE0H2 C9875 |
      | GEZ0        |
      | GEH2        |
    * initial covered minimum quantity configuration for instrument group "U$":
      | delta | minQty |
      | 0.2   | 20     |
      | 0.6   | 5      |
      | 1     | 1      |

    * the group(s) "GE" is put in "closed" with reset statistics "on"
    * the following attributes are updated for contract(s) in real time:
      | securityDescription | settlementPrice | bandSwitch |
      | GEZ0                | 9500            | false      |
    * the group(s) "GE" is put in "open" with reset statistics "on"

  #####################################################################################################################

  Scenario: New Limit Order accepted using allocated Min Qty
    When the following events occur:
    * these "UDS" message(s) are sent to Globex:
      | rgIdentifier | securitySubType |
      | UDSCovered   | COVERED         |
    * with legs for "uds": "UDSCovered"
      | legSymbol | legSecurityDesc | legSide | legPrice | legOptionDelta |
      | E0        | TE0H2 C9875     | bid     | OMIT     | OMIT           |
      | GE        | GEZ0            | bid     | settle   | 0.34           |

    * these "new order" message(s) are sent to Globex:
      | identifier | CTICode | CustomerOrFirm | TimeInForce | Price | OrdType | Side | OrderQty | SecurityDescription |
      | Order1     | 1       | 1              | session     | 100   | limit   | bid  | 8        | UDSCovered          |
      | Order2     | 1       | 1              | session     | 100   | limit   | bid  | 6        | UDSCovered          |
    # Change delta min qty configuration. This should have no effect on existing Covereds
    * update instrument group "NR" with covered minimum quantity configuration:
      | delta | minQty |
      | 0.2   | 20     |
      | 0.6   | 6      |
      | 1     | 1      |

    * these "cancel replace" message(s) are sent to the Globex:
      | OrderId | ordType | price | identifier | OrderQty |
      # modify is rejected because Modified Order Qty id below Delta MinQty
      | Order1  | limit   | 100.0 | Order3     | 4        |
      # Modify is accepted as orderQty is equal to Delta MinQty
      | Order2  | limit   | 100.0 | Order4     | 5        |

    * these "new order" message(s) are sent to the Globex:
      | identifier | CTICode | CustomerOrFirm | TimeInForce | Price | OrdType | Side | OrderQty | SecurityDescription |
      | Order5     | 1       | 1              | session     | 100   | limit   | ask  | 6        | UDSCovered          |
     # Order is Rejected as OrderQty < MinQty
      | Order6     | 1       | 1              | session     | 100   | limit   | bid  | 1        | UDSCovered          |

    Then the following should happen:
    * expect a "NEW" UDS update for the following contracts:
      | symbol     | minQuantity |
      | UDSCovered | 5           |

    * expect execution message(s) with values:
      | rgIdentifier | messageType  | securitySubType | noLegs | securityDescription | symbol | securityResponseType | expirationCycle | autoQuoteRequest | securityIDSource |
      | UDSAck1      | sde response | COVERED         | 2      | UDSCovered          | U$     | 2                    | 0               | Y                | 4                |
    * with legs for UDS Ack: "UDSAck1"
      | legSecurityDesc | legSymbol | legRatioQty | legSide |
      | TE0H2 C9875     | E0        | 1           | bid     |
      | GEZ0            | GE        | 1           | bid     |

    * expect execution message(s) with values:
      | messageType | OrderQty | OrdType | Side | Symbol | SecurityDescription | CumQty | OrdStatus | Price | TimeInForce | LeavesQty |
      | order ack   | 8        | limit   | bid  | U$     | UDSCovered          | 0      | 0         | 100   | session     | 8         |
      | order ack   | 6        | limit   | bid  | U$     | UDSCovered          | 0      | 0         | 100   | session     | 6         |

      # Cancel reject for Order 3
    * expect execution message(s) with values:
      | messageType   | CxlRejReason | text                                                                            |
      | cancel reject | 2115         | Order quantity is outside of the allowable range 'Quantity: 4 Max: 8000 Min: 5' |

    * expect execution message(s) with values:
      | messageType    | TimeInForce | SecurityDescription | OrderQty | Side |
      | order replaced | session     | UDSCovered          | 5        | bid  |

    * expect execution message(s) with values:
      | messageType | OrderQty | OrdType | Side | Symbol | SecurityDescription | CumQty | OrdStatus | Price | TimeInForce | LeavesQty |
      | order ack   | 6        | limit   | ask  | U$     | UDSCovered          | 0      | 0         | 100   | session     | 6         |


      # business reject for Order 6
    * expect execution message(s) with values:
      | messageType  | OrderQty | OrdRejReason | text                                                                            |
      | order reject | 1        | 2115         | Order quantity is outside of the allowable range 'Quantity: 1 Max: 8000 Min: 5' |


Expiration

A Covered instrument either expires with the earliest expiration of its component leg instruments or at the end of the trading session.

Valid Instruments

All listed CME Group outright options and options spreads are available for creating Covered spreads, and all listed outright futures contracts are available as a Covering future.

Both CME Globex exchange recognized and unrecognized spread types may be Covered.

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