- What are USD/CNH FX options?
- When will USD/CNH FX options be available to trade?
- Why is CME Group launching USD/CNH options?
- How do USD/CNH options differ to the already listed CNY/USD options?
- What are the underlying futures that these options reference?
- What expiry dates are available?
- What strikes are available?
- What is the notional size of each contract?
- What are the CME Globex /ClearPort codes for these options?
- What is the expiry style of these options?
- What is the delivery style of these options?
- At what time do these options expire?
- Are contrary expiry instructions allowed?
- How is the automated expiry fixing price determined?
- What happens if the fixing price is exactly at the strike price of an option?
- How can I trade these options?
- Where can I see the market?
- Can I trade these options with a delta hedge?
- Can I trade options strategies (eg ,call/put spreads, straddles, strangles)?
- Can I trade USD/CNH FX options OTC-style in a large size at a risk transfer price?
- How is the cash settlement price of the future determined?
- Do I have to take a position in the future to cash settlement?
1. What are USD/CNH FX options?
USD/CNH FX options are physically deliverable options on the existing USD/Offshore Chinese Renminbi (USD/CNH) cash-settled futures available at CME Group.
2. When will USD/CNH FX options be available to trade?
USD/CNH FX options are available to trade from April 3, 2023.
3. Why is CME Group launching USD/CNH options?
In the last decade, CNH has grown to be among the most actively traded currencies in the world and is now considered a core currency by many institutional FX traders. CME Group is excited to expand its options product offering to include this increasingly important currency pair.
4. How do USD/CNH options differ to the already listed CNY/USD options?
CME Group already lists options on CNY/USD non-deliverable futures (NDFs). CNY refers to the onshore (mainland) Chinese renminbi rate. In contrast, CNH (offshore Chinese renminbi) is the currency traded internationally by many global institutions and traders outside of mainland China looking to position or hedge exposure to Chinese renminbi.
5. What are the underlying futures that these options reference?
6. What expiry dates are available?
USD/CNH FX options are listed with a wide range of expiry dates available to trade, from short-dated weekly expiries to monthly expiries out to one year. Both monthly and Friday weekly expiries will be available from launch. See full calendar of available expiry dates: Monthly options and Friday weekly options.
7. What strikes are available?
USD/CNH FX options are listed with a wide range of strike prices, available to trade as calls or puts. Weekly and front monthly options are listed with strike prices every 0.025 CNH per USD. Non-front monthly options are listed with strike prices every 0.050 CNH per USD, with the ability to open new strikes at 0.025 CNH per USD increments on demand.
8. What is the notional size of each contract?
Each USD/CNH FX option is an option on one futures contract, with a notional amount of 100,000 USD.
9. What are the CME Globex/ClearPort codes for these options?
Monthly options: CNH
Weekly options: 1CN, 2CN, 3CN, 4CN, 5CN
10. What is the expiry style of these options?
USD/CNH FX options are European style, exercising or expiring only at maturity. Early exercise is prohibited.
11. What is the delivery style of these options?
All in-the-money USD/CNH options physically deliver an underlying quarterly futures contract. The futures contract, once delivered, will have time remaining until final cash settlement.
12. At what time do these options expire?
To align with international OTC FX markets, USD/CNH FX options expire at 3:00 p.m. Tokyo time/2:00 p.m. Shanghai time.
13. Are contrary expiry instructions allowed?
Contrary expiry instructions are not allowed for any FX options offered by CME Group.
14. How is the automated expiry fixing price determined?
The expiry fixing is derived from market data in the underlying futures in the 60 seconds prior to the option expiry time. Full methodology can be found here.
15. What happens if the fixing price is exactly at the strike price of an option?
If the fixing price is exactly at the strike price, call options are exercised and put options are abandoned.
16. How can I trade these options?
To trade FX options at CME Group, you must first open an account with a registered futures broker (futures commission merchant (FCM) or introducing broker (IB)) who will maintain your account and guarantee your trades. Trading is then available through CME Direct, through third-party broker platforms, or via API.
17. Where can I see the market?
18. Can I trade these options with a delta hedge?
Yes. Delta-hedged options can be anonymously RFQ’d (Request for Quote) through CME Direct or major quote vendors, with electronic market makers then responding instantly with prices for the “package” of the option and its future delta hedge.
19. Can I trade options strategies (e.g. call/put spreads, straddles, strangles)?
Yes. Options strategies can be anonymously RFQ’d (Request for Quote) through CME Direct or major quote vendors, with electronic market makers then responding instantly with prices for the option strategy as a whole. Choose from popular options strategies such as call/put spreads, straddles and strangles, or build custom strategies.
20. Can I trade USD/CNH FX options OTC-style in a large size at a risk transfer price?
Yes. USD/CNH FX options are block-eligible, meaning institutional traders can negotiate prices and trade options, delta-hedged options, or option strategies directly with market makers, just as they would in the OTC market. The trade is subsequently submitted to CME Group for central clearing.
Block trades are subject to Rule 526.
Block trades must be above the minimum block threshold, which for USD/CNH FX options is 100 contracts (equivalent to $10M notional). If traded as a spread of options, the combined notional of the options legs counts towards this threshold. If traded with a delta hedge, the delta hedge amount must be consistent with the delta of the options component of the block trade.
21. How is the cash settlement price of the future determined?
These options physically deliver into the underlying futures, but that futures contract itself is cash-settled. If taken to final settlement, the future is cash-settled in CNH with reference to the Treasury Markets Association (TMA) USD/CNY (HK) Spot FX rate. Full details here.
22. Do I have to take a position in the future to cash settlement?
No. If your option is in the money at expiry, it will physically deliver into a position in the underlying quarterly futures contract, but you then have until the final trading day of that futures contract to close out or roll your position if you do not wish to take it to final settlement. Futures positions can be rolled from one quarterly future to the next in the liquid central limit order book, or as blocks with chosen liquidity providers subject to Rule 526.
All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.