You Can Quote Us on That, Part 2 – How to Trade CME FX Options Strategies
The previous article in this series, You Can Quote Us on That, looked at why delta-hedged options and options strategies such as call/put spreads and straddles are so popular among FX options traders, highlighting the benefits of spreads (increased liquidity, leg risk mitigation) as opposed to trading individual legs.
The next question clients often ask: How they can actually trade an options strategy?
An increasing number of front-end trading platforms support spreads of CME FX options, enabling users to request and execute pre-defined or custom-built strategies.
This article explores:
- Trading options strategies on CME Direct, including the new ATM Straddle Grid
- Trading delta-hedged options on CME Direct
- Trading options strategies on third-party trading platforms:
- Metro (Exegy)
- TT (Trading Technologies)
Trading options strategies on CME Direct
CME Direct, a futures and options trading platform from CME Group, makes trading options strategies simple and straightforward. Users can build their own options strategy, model the potential pay-outs in a strategy simulator, and anonymously request a price from the market – all on one screen.
Users can then trade on a price, work a passive order, or add the strategy to their Watch List to stay informed of price developments throughout the trading day. Strategies Grids can also be used to monitor markets in options strategies submitted by other traders.
The new ATM Straddle Grid in CME Direct provides an intuitive way for users to discover and trade exposure to implied volatility. Draft straddle strategies are shown ordered by days to expiry, with the straddle strike price being that which is closest to the underlying future. Users can then “activate” a straddle with one click, with electronic market makers immediately responding with two-sided prices.
If the underlying futures contract moves such that the shown strike is no longer that which is closest to ATM, cell(s) in the ATM column visibly change colour from orange to white and a refresh symbol appears – users can then refresh individual expiry dates or the entire run with the closest to ATM strikes.
Trading delta-hedged options on CME Direct
Volatility traders use delta-hedged (or covered) options to gain exposure to implied volatility without being exposed to directional moves in the underlying future at trade inception.
In CME Direct, options prices are displayed in premium with the equivalent implied volatility level shown alongside.
