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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CME Group is the world's leading and most diverse derivatives marketplace. The company is comprised of four Designated Contract Markets (DCMs). Further information on each exchange's rules and product listings can be found by clicking on the links to CME, CBOT, NYMEX and COMEX.