Volatility-Quoted Options Client Impact Assessment

  • 15 Sep 2016
  • By CME Group
  • Topics: FX

As with a covered option, volatility-quoted options allow CME Globex clients to trade an option volatility with an 'auto-hedge' into the corresponding quarterly month of the underlying futures contract. In addition, volatility-quoted options eliminate the volatility-to-premium conversion and ongoing price modifications previously required to trade options volatility in premium markets. Clients can choose to participate in the volatility-quoted options and/or the premium-quoted options. It is important to note that the option instrument - whether traded in volatility or in premium forms - is one and the same contract allowing for optimal margin efficiency. A contract traded in volatility can subsequently be traded in premium and vice versa.

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