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This topic describes the spread and combination instrument types available on the CME Globex platform.

A spread or combination instrument represents the simultaneous purchase and/or sale of two or more different but related instruments (legs), depending upon spread definition.

  • CME Group defines a Futures Spread as any multi-legged instrument made up of outright futures and/or futures spreads.
  • CME Group defines an Options Combination as any multi-legged instrument made up of calls, puts and/or future(s).
  • CME Group defines an Options Spread as any multi-legged instrument made up of only calls or puts.

This table shows available exchange-recognized spread and combination types available on CME Globex.

FB Bundle

SecuritySubType=FB

The Bundle is a futures spread involving the simultaneous purchase (sale) of a series of eight to forty consecutive quarterly instruments (in year duration groups) within the same product. The Bundle is an average net differential between the current market price of the legs and the prior day settlement price of the legs.

A Bundle has:

  • One Product
  • Minimum of eight legs
  • Maximum of 40 legs
  • Total legs in the Bundle must be evenly divisible by 4
  • Expiration of all the legs must be consecutive quarterly outright futures
  • Quantity/side ratio of the legs is +1:+1:+1+1:+1:+1+1:+1…+1
  • Buying a Bundle buys all components
  • Selling a Bundle sells all components

Example

  • Instrument Symbol = GE:FB 02Y M9
    • Leg1 = +1 GEM9
    • Leg2 = +1 GEU9
    • Leg3 = +1 GEZ9
    • Leg4 = +1 GEH0
    • Leg5 = +1 GEM0
    • Leg6 = +1 GEU0
    • Leg7 = +1 GEZ0
    • Leg8 = +1 GEH1

Note: this spread can trade at zero and at a negative price.

Pricing

  • The Bundle Trade Price is = Averaged net differential of all contracts compared to their respective prior day settlement prices

Leg Price Assignment

  • Obtain trade price of Bundle
  • Price obtained is the differential for all legs, averaged
  • Integer portion of the Bundle trade price is applied to all legs initially
    • If the Bundle trades +1.25, all legs are initially assigned a price of +1 from their respective settles
    • If the Bundle trades at -2.75, all legs are initially assigned a price of -2 from their respective settles
  • Adjust most deferred legs up or down a full point until the average differential of the legs is equal to the traded price of the Bundle.
  • The following method calculates the number of legs of the Bundle that will not have any further adjustment to their prices.
    • If the traded Bundle price has a decimal of .25, the number of legs not given an additional point adjustment equals the number of years of the bundle is multiplied by 3.
    • If the traded Bundle price has a decimal of .50, the number of legs not given an additional point adjustment equals the number of years of the bundle is multiplied by 2.
    • If the traded Bundle price has a decimal of .75, the number of legs not given an additional point adjustment equals the number of years of the bundle is multiplied by 1.
  • As a corollary, the number of legs that need to be adjusted up or down a point can be calculated by taking the result of the above calculation and subtracting it from the total number of legs in the product.

Examples

  • All pricing examples use the GE:FB 02Y M9 contract.
  • Components and settlement prices are as follows:
    • Leg1 = GEM9, prior day’s settle 9773
    • Leg2 = GEU9, prior day’s settle 9743
    • Leg3 = GEZ9, prior day’s settle 9708
    • Leg4 = GEH0, prior day’s settle 9678
    • Leg5 = GEM0, prior day’s settle 9643
    • Leg6 = GEU0, prior day’s settle 9603
    • Leg7 = GEZ0, prior day’s settle 9573
    • Leg8 = GEH1, prior day’s settle 9553
  • Bundle trades at 3.00
    • All legs are adjusted up 3 points
    • The decimal portion is zero, so no additional adjustments are needed
    • Results
      • GEM9, 9773 + 3 = 9776
      • GEU9, 9743 + 3 = 9746
      • GEZ9, 9708 + 3 = 9711
      • GEH0, 9678 + 3 = 9681
      • GEM0, 9643 + 3 = 9646
      • GEU0, 9603 + 3 = 9606
      • GEZ0, 9573 + 3 = 9576
      • GEH1, 9553 + 3 = 9556
  • Bundle trades at -2.5
    • All legs are adjusted down 2 points
    • The decimal portion is .5, so (2 years * 2 = 4) legs will not receive an additional adjustment, and 4 (8 total legs – 4 legs that are not changing) will need an additional adjustment
    • Apply additional adjustments to the most deferred legs
    • Results
      • GEM9, 9773 - 2 = 9771
      • GEU9, 9743 - 2 = 9741
      • GEZ9, 9708 - 2 = 9706
      • GEH0, 9678 - 2 = 9676
      • GEM0, 9643 - 3 = 9640
      • GEU0, 9603 - 3 = 9600
      • GEZ0, 9573 - 3 = 9570
      • GEH1, 9553 - 3 = 9550
  • Bundle trades at +1.25
    • All legs are adjusted up 1 point
    • The decimal portion is .25, so (2 years * 3 = 6) legs will not receive an additional adjustment, and 2 (8 total legs – 6 legs that are not changing) will need an additional adjustment
    • Apply additional adjustments to the most deferred legs
    • Results
      • GEM9, 9773 + 1 = 9774
      • GEU9, 9743 + 1 = 9744
      • GEZ9, 9708 + 1 = 9709
      • GEH0, 9678 + 1 = 9679
      • GEM0, 9643 + 1 = 9644
      • GEU0, 9603 + 1 = 9604
      • GEZ0, 9573 + 2 = 9575
      • GEH1, 9553 + 2 = 9555
  • Bundle trades at +1.25
    • All legs are adjusted up 1 point
    • The decimal portion is .25, so (2 years * 3 = 6) legs will not receive an additional adjustment, and 2 (8 total legs – 6 legs that are not changing) will need an additional adjustment
    • Apply additional adjustments to the most deferred legs
    • Results
      • GEM9, 9773 + 1 = 9774
      • GEU9, 9743 + 1 = 9744
      • GEZ9, 9708 + 1 = 9709
      • GEH0, 9678 + 1 = 9679
      • GEM0, 9643 + 1 = 9644
      • GEU0, 9603 + 1 = 9604
      • GEZ0, 9573 + 2 = 9575
      • GEH1, 9553 + 2 = 9555

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BS Bundle Spread

Spread type = BS

Bundle Spread (BS)

June 2008 2 - Year Bundle

March 2010 2 - Year Bundle

Buy 1 June 2008 Eurodollar

Buy 1 September 2008 Eurodollar

Buy 1 December 2008 Eurodollar

Buy 1 March 2009 Eurodollar

Buy 1 June 2009 Eurodollar

Buy 1 September 2009 Eurodollar

Buy 1 December 2009 Eurodollar

Buy 1 March 2010 Eurodollar

Buy 1 March 2010 Eurodollar

Buy 1 June 2010 Eurodollar

Buy 1 September 2010 Eurodollar

Buy 1 December 2010 Eurodollar

Buy 1 March 2011 Eurodollar

Buy 1 June 2011 Eurodollar

Buy 1 September 2011 Eurodollar

Buy 1 December 2011 Eurodollar


A Bundle Spread is a futures spread that simultaneously purchases (sells) a nearby Bundle (FB) with a corresponding sale (purchase) of a deferred Bundle (FB).  The price for each individual bundle is quoted in terms of the average net change of each contract’s current price compared to its prior day’s settlement price.  The Bundle Spread price is then the difference in prices between the individual Bundles.  Formula:

Current Price = CP

Prior Day Settlement Price = PDS

Number of legs in each Bundle = Year code (see Symbol below) * 4


Bundle Price = [(Leg1 CP – Leg1 PDS)+(Leg2 CP – Leg2 PDS)+…(LegN CP – LegN PDS)]/number of legs in the Bundle

Bundle Spread Price = Price of nearby Bundle – Price of deferred Bundle


A Bundle Spread has:

  • One Product
  • Two legs
    • Minimum of 8 quarterly expirations
    • Maximum of 16 quarterly expirations
    • Leg1 (buy leg) must be the nearby Bundle
    • Leg2 (sell leg) must be the deferred Bundle
    • Each leg must be a Bundle of quarterly expirations
    • Both Bundles must contain the same number of quarterly contracts
    • The Bundles must contain different quarterly contracts (the same contract cannot be in both Bundles)
    • Each Bundle Leg:
  • Maximum order quantity of a Bundle Spread is 8000
  • Quantity/side ratio of the Bundle legs is +1:-1
  • Buying a Bundle Spread buys all components of Bundle Leg1 and sells all components of Bundle Leg2
  • Selling a Bundle Spread sells all components of Bundle Leg1 and buys all components of Bundle Leg2


Example (with added explanation of the symbol)

  • Instrument Symbol = GE:BS 2YU9 2YU1
    • +1 GEU9
    • +1 GEZ9
    • +1 GEH0
    • +1 GEM0
    • +1 GEU0
    • +1 GEZ0
    • +1 GEH1
    • +1 GEM1
    • -1 GEU1
    • -1 GEZ1
    • -1 GEH2
    • -1 GEM2
    • -1 GEU2
    • -1 GEZ2
    • -1 GEH3
    • -1 GEM3
    • GE indicates this instrument is in product group GE
    • :BS indicates this instrument is a Bundle Spread
    • 2YU9 indicates the nearby Bundle
    • 2YU1 indicates the deferred Bundle
    • Bundle Leg1 = all of the following
    • Bundle Leg2 = all of the following
  • Note how all of the rules mentioned above regarding construction apply to this instrument and the instrument legs.


Note:  This spread can trade at zero and at a negative price. 


Pricing

  • A Bundle Spread Trade Price is = Leg1 – Leg2


Leg Price Assignment

  • Obtain trade price of the Bundle Spread
  • Leg1 of the Bundle Spread is the anchor leg
    • If no current trade price for the Bundle, use average net change between the most recent updated price and prior day’s settlement price of all components in the Bundle
  • Leg2 of the Bundle Spread is calculated:
    • Leg2 = Leg1 – Bundle Spread Trade Price
  • At this point, pricing for the Bundle legs of the Bundle Spread is complete.  These prices will be used in the next steps for the respective Bundles.
  • For each Bundle, leg prices must be assigned to the individual components making up the respective Bundle. Process:
    • If the Bundle was assigned a price of +1.25, all component legs of the Bundle are initially assigned a price of +1 from their respective settles
    • If the Bundle was assigned a price of -1.25, all component legs of the Bundle are initially assigned a price of -1 from their respective settles
    • Integer portion of the Bundle leg price is applied to all components of the Bundle initially
    • Adjust most deferred legs of the respective Bundle up or down a full point until the average differential of the legs is equal to the traded price of the Bundle
  • The following method calculates the number of legs of the Bundles that will not have any further adjustment to their prices.
    • If the traded Bundle price has a decimal of .25, the number of legs not given an additional point adjustment equals the number of years of the pack is multiplied by 3.
    • If the traded Bundle price has a decimal of .50, the number of legs not given an additional point adjustment equals the number of years of the pack is multiplied by 2.
    • If the traded Bundle price has a decimal of .75, the number of legs not given an additional point adjustment equals the number of years of the pack is multiplied by 1.
  • As a corollary, the number of legs that need to be adjusted up or down a point can be calculated by taking the result of the above calculation and subtracting it from the total number of legs in the product.

 

Individual Leg Price Assignment


Pricing Example Using Contracts Above

Bundle – Leg1

Bundle – Leg2

Instrument

Prior Day Settlement

Instrument

Prior Day Settlement

GEU9

9887

GEU1

9887

GEZ9

9886

GEZ1

9886

GEH0

9885

GEH2

9885

GEM0

9884

GEM2

9884

GEU0

9883

GEU2

9883

GEZ0

9882

GEZ2

9882

GEH1

9881

GEH3

9881

GEM1

9880

GEM3

9880

 

Bundle Spread trades at 1.00

  • Leg1 is anchored at a price of 2.00. This can be by either method described above.
  • Leg2’s price is calculated:
    • Leg2 = Leg1 – Bundle Spread price
    • Leg2 = 2.00 – 1.00 =1.00
  • These Bundle Leg prices will be used in the next steps.
  • Bundle Leg1 = The decimal portion is zero, so no additional adjustment is needed. Only the integer portion is applied
    • +1 GEU9 = 9887 + 2 = 9889
    • +1 GEZ9 = 9886 + 2 = 9888
    • +1 GEH0 = 9885 + 2 = 9887
    • +1 GEM0 = 9884 + 2 = 9886
    • +1 GEU0 = 9883 + 2 = 9885
    • +1 GEZ0 = 9882 + 2 = 9884
    • +1 GEH1 = 9881 + 2 = 9883
    • +1 GEM1 = 9880 + 2 = 9882
  • Bundle Leg2 = The decimal portion is zero, so no additional adjustment is needed. Only the integer portion is applied
    • -1 GEU1 = 9887 +1 = 9888
    • -1 GEZ1 = 9886 +1  = 9887
    • -1 GEH2 = 9885 +1 = 9886
    • -1 GEM2 = 9884 +1  = 9885
    • -1 GEU2 = 9883 +1 = 9884
    • -1 GEZ2 = 9882 +1 = 9883
    • -1 GEH3 = 9881 +1 = 9882
    • -1 GEM3 = 9880 +1 = 9881

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BF Butterfly

SecuritySubType=BF

A Butterfly is a differential spread composed of three legs having equidistant expirations—the near and deferred expirations of a product on one side of the spread, and twice the quantity of the middle expirations of a product on the other side (1:2:1).

A Butterfly has:

  • One Product
  • Three legs
    • Leg1 (buy leg) must be the nearest expiration
    • Leg2 (sell leg) must be the middle expiration compared to legs 1 and 3 for two lots
    • Leg3 (buy leg) must be the most deferred expiration
  • Quantity/side ratio of the legs is +1:-2:+1
  • Expiration sequencing for Butterfly:
    • Leg 1 month < Leg 2 month < Leg 3 month
    • In addition, expirations differentials must be sequential and equal, Leg 2 month – Leg 1 month = Leg 3 month – Leg 2 month
    • Example: GE:BF M9–U9–Z9, the June – Sept. – Dec. butterfly, 9 – 6 = 12 – 9
    • There are some exceptions to this (grains, meats)
  • Expiration sequencing for a Broken Butterfly (aka Broken Fly) is:
    • Leg 1 month < Leg 2 month < Leg 3 month
    • Example: GE:BF H9–M9–Z9
    • Note: expiration order is the same as the Butterfly, however the equal expiration differential rule is waived
  • Buying a Butterfly buys leg1, sells 2 * leg2, buys leg3
  • Selling a Butterfly sells leg1, buys 2 * leg2, sells leg3

Example

  • Instrument Symbol = GE:BF M9–U9–Z9
    • Leg1 = +1 GEM9
    • Leg2 = -2 GEU9
    • Leg3 = +1 GEZ9

Pricing

  • The Butterfly Trade Price is = Leg1 – (2 * Leg2) + Leg3

Leg Price Assignment

  • Leg1 and leg2 are the anchor legs and assigned fair market price
  • Leg3 is calculated:
    • Trade Price + Leg 2* Leg2 – Leg1
  • If leg3 price is outside the daily limits, Leg3 will be adjusted to daily limit and Leg2 is recalculated
    • Leg1 = Trade Price + (2 * Leg2) – Leg3
    • Leg2 = (Leg1 + Leg3 – Trade Price)/2
    • If leg2 is now outside the daily limits, leg2 will be adjusted to the daily limit and leg1 recalculated

Pricing Example

 Butterfly trades at 13.5

  • Leg1 has Fair Market Price of = 9812.5
  • Leg2 has Fair Market Price of = 9857.5
  • Leg3 = ((Trade Price) – leg1 + (2 * leg2))
  • Leg3 = 9916

Pricing Example Legs Calculated Outside of Daily Limits

Leg3 outside daily limit; leg3 reset to daily limit and leg 2 is recalculated

Butterfly trades at 13.5

  • Leg1 has Fair Market Price of = 9812.5
  • Leg2 = (Leg2 Settlement Price + Leg3 – Trade Price)/2 (calculated price of leg 2 is off tick since there are two legs. Round one leg up to the nearest on tick price and round one leg down to the nearest on tick price. Those two new prices should sum to the collective calculated price of leg 2)
  • Leg2 = 9859.50
  • Leg2 = 9860
  • Leg3 has a Fair Market Price of = 9901

Leg2 outside daily limit; leg2 reset to daily limit and leg1 recalculated

Butterfly trades at 13.5

  • Leg1 = Trade Price + (2 * Leg 2) - Leg 3
  • Leg1 = 13.5 + 19740 – 9875.5 = 9878
  • Leg2 has a Fair Market Price of = 9870
  • Leg3 has a Fair Market Price of = 9875.5

Leg1 outside daily limit; leg1 is reset to daily limit and all legs are recalculated starting at leg3.

Note: this process will continue for two rounds. If an on-tick price cannot be determined for the final leg (leg 1) after two attempts, the price stands. Customers can receive a non-settled price for the recalculated leg.

Leg1 outside daily limit; leg1 reset to daily limit and leg3 recalculated

Butterfly trades at 13.5

  • Leg1 = 9814
  • Leg2 has a Fair Market Price of = 9870
  • Leg3 = ((Trade Price) – leg1 + (2 * leg2))
  • Leg3 = 9939.5

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BO Butterfly

SecuritySubType=BO

The Butterfly is an options spread involving the simultaneous purchase (sale) of a call (put), the sale (purchase) of two calls (puts), and purchase (sale) of a call (put) at different equidistant strike prices with the same expirations.

Butterfly has:

  • One Product
  • Three legs
    • Leg1 (buy leg) must be a call at the lowest strike price (herein known as strike1) for a quantity of one lot
    • Leg2 (sell leg) must be a call at the middle strike price (herein known as strike2) for a quantity of two lots
    • Leg3 (buy leg) must be a call at the highest strike price (herein known as strike3) for a quantity of one lot
    • The strikes must satisfy this equation (see below, strikes must be equidistant):
      • strike2 – strike1 = strike3 – strike2
    • All three legs must be the same expiration
    • For a call Butterfly
    • For a put Butterfly
      • strike1 – strike2 = strike2 – strike3
      • Leg1 (buy leg) must be a put at the highest strike price (herein known as strike1) for a quantity of one lot
      • Leg2 (sell leg) must be a put at the middle strike price (herein known as strike2) for a quantity of two lots 
      • Leg3 (buy leg) must be a put at the lowest strike price (herein known as strike3) for a quantity of one lot
      • The strikes must satisfy this equation (see below, strikes must be equidistant):
  • Quantity/side ratio of the legs is +1:-2:+1
  • Buying a Butterfly buys leg1, sells leg2, and buys leg3
  • Selling a Butterfly sells leg 1, buys leg2, and sells leg3

Example

  • Instrument Symbol = UD:1N: BO 0808912345
    • Leg1 = +1 LOU8 C6600
    • Leg2 = -2 LOU8 C6800
    • Leg3 = +1 LOU8 C7000
The differential of the legs cannot be priced less than zero. Orders placed for at a price less than zero will be rejected. This spread cannot trade at a negative price.

Pricing

The BO Butterfly Trade Price is = leg1 – (2*leg2) + leg3

Leg Price Assignment

  • Calculate Fair Price of the Butterfly based on fair prices of the legs.
  • Calculate the difference between the Butterfly trade price and the calculated fair price of the spread.
  • Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
  • Any adjustment of the outright leg prices due to remainder will be assigned according to options combination leg pricing assignment rules.

Pricing Example – Equal Distribution

Butterfly trades at 57

  • Leg1 has Fair Market Price of = 141
  • Leg2 has Fair Market Price of = 46
  • Leg3 has Fair Market Price of = 12
  • Spread Fair Market Price = 141 + 12 – (2*46) = 61
  • Spread Trade Price - Fair Market Price = 57 – 61 = -4
  • There are 4 ticks to distribute
  • The adjustment is applied evenly as follows:
    • Leg1 = 141 +1 = 2
    • Leg2 = 46 + 1 = 45 (Note: this leg is a two lot, so the price adjustment counts double)
    • Leg3 = 12 - 1 = 13

Pricing Example – Unequal Distribution

Butterfly trades at 59

  • Leg1 has Fair Market Price of = 141
  • Leg2 has Fair Market Price of = 46
  • Leg3 has Fair Market Price of = 12
  • Spread Fair Market Price = 141 + 12 – (2*46) = 61
  • Spread Trade Price - Fair Market Price = 59 – 61 = -2
  • There are 2 ticks to distribute
  • The adjustment is applied as follows:
    • Leg1 = 141 -2 = 139
    • Leg2 = 46
    • Leg3 = 12

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DF Double Butterfly

SecuritySubType=DF

The Double Butterfly (DF) spread is a "calendar" spread between two future butterfly strategies where one butterfly is bought and a deferred month butterfly is sold. The second and third leg of the first butterfly are identical to the first and second leg of the second butterfly.

The resulting spread consists of positions in 4 equally distributed expiration months within the same product group consistent with the following pattern:

Buy 1 double butterfly = buy 1 of the closer expiration leg, sell 3 of the next expiration leg, buy 3 of the next expiration leg, sell 1 of the furthest expiration leg (e.g., Z7-H8-M8-U8).

Double Butterfly is equal to the price of Leg 1, minus the price of three Leg 2's, plus the price of three Leg 3s, minus the price of Leg 4.

Construction: Buy1exp1  Sell3exp2 Buy3exp3 Sell1exp4

Security Definition Example: ES:DF Z8H9M9U9

Example: Buy the Spread

Buy 1 December 2018 Eurodollar

Sell 3 March 2019 Eurodollar

Buy 3 June 2019 Eurodollar

Sell 1 Sept 2019 Eurodollar

Example: Sell the Spread

Sell 1 December 2018 Eurodollar

Buy 3 March 2019 Eurodollar

Sell 3 June 2019 Eurodollar

Buy 1 Sept 2019 Eurodollar

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Calendar Spreads

SecuritySubType=SP, EQ, FX, SD, EC

A Calendar spread consists of 2 instruments with the same product with different expiration months. There are variations in Calendar spreads base on the product. Each Calendar spread variation is designated through the use of a different spread type code.

Not all CME Group futures spread markets follow the convention where Buying the Spread indicates Buying the front expiry and selling the back expiry. The following markets use the logic for calendar spreads where Buying the Spread sells the front expiry month and buys the back expiry month:

  • CME FX
  • Equity

SP Standard Calendar Spread

The Standard Calendar Spread is a futures spread involving the simultaneous purchase (sale) of one product with a nearby expiration and a sale (purchase) of the same product at a deferred expiration. The listing convention of this spread and its corresponding symbol is to have the nearby expiration first and the deferred expiration second, creating a differential spread of nearby expiration minus the deferred expiration.

A Standard Calendar Spread has:

  • One Product
  • Two legs
    • Leg1 (buy leg) must be the nearest expiration
    • Leg2 (sell leg) must be the deferred expiration
  • Quantity/side ratio of the legs is +1:-1
  • Buying a Standard Calendar Spread buys leg1, sells leg2
  • Selling a Standard Calendar Spread sells leg1, buys leg2

Example

  • Instrument Symbol = NGZ9-NGF0
    • Leg1 = +1 NGZ9
    • Leg2 = -1 NGF0

Note: this spread can trade at zero and at a negative price. In addition, the pricing mechanics explained below correspond to CME Globex match engine price assignment. Member firms can designate a default way to handle price assignment to these legs in Clearing. As a result, it is possible to have different leg prices assigned by Clearing that will not match the prices obtained from CME Globex. This process that allows leg price adjustment on traded calendar spreads is commonly referred to as SLEDS (Single Line Entry of Differential Spreads).

Pricing

  • The Standard Calendar Spread Trade Price is = Leg1 – Leg2

Leg Price Assignment

  • Determine the anchor leg of the Standard Calendar Spread
    • The leg with the most recent price update (last price update or settlement price) is the anchor leg.
    • In the event of no price updates, the leg with the nearest expiration will be determined to be the anchor leg
  • Calculate the non-anchor leg:
    • If Leg 1 is used as the anchor leg, then Leg 2 = Leg 1 price – Spread Price
    • If Leg 2 is used as the anchor leg, then Leg 1 = Leg 2 price + Spread Price
  • If the calculated price is outside the daily limits, set the leg's price to its limit and recalculate the price of the anchor leg

Note: If the recalculated price is outside the daily limit the price will stand. Customers can receive a non-settled price for the recalculated leg.

In this example leg1 has the most recent price

  • Leg1 is the anchor leg
  • Leg2 is calculated:
    • Leg2 = Leg1 – Trade Price of spread

Pricing Example

Standard Calendar Spread trades at -105

  • Leg1 = anchor price of 2558, therefore this is automatically assigned
  • Leg2 = 2558 – (-105) or Leg2 = 2558 + 105 = 2663

In this example leg2 has the most recent price

  • Leg2 is the anchor leg
  • Leg1 is calculated:
    • Leg1 = Leg2 + Trade Price of spread

Pricing Example

 Standard Calendar Spread trades at -105

  • Leg2 = anchor price of 2558, therefore this is automatically assigned

Leg1 = 2558 + (-105) or Leg1 – 105 = 245

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EQ Calendar Spread

This Calendar Spread is a futures spread involving the simultaneous purchase (sale) of a deferred expiration with a sale (purchase) of a nearby expiration within one product. The price of this Calendar Spread is a differential between the two expirations (deferred minus nearby).

Note: while the contract symbol convention for this spread lists the deferred leg second, buying this spread represents purchase of the second leg and sale of the first leg. This is different from other Calendar Spreads listed on CME Globex.

This Calendar Spread has:

  • One Product
  • Two legs
    • Leg1 (sell leg) must be the nearest expiration
    • Leg2 (buy leg) must be the furthest expiration
  • Quantity/side ratio of the legs is -1:+1
  • Buying this Calendar Spread sells leg1, buys leg2
  • Selling this Calendar Spread buys leg1, sells leg2

Example

  • Instrument Symbol = ESU9-ESZ9
    • Leg1 = - 1 ESU9
    • Leg2 = +1 ESZ9

Note: this Calendar Spread may have a smaller minimum tick than the outright futures legs or the same tick for both as the legs. This spread can trade at zero and at a negative price. In addition, the pricing mechanics explained below correspond to CME Globex match engine price assignment. Member firms can designate a default way to handle price assignment to these legs in Clearing. As a result, it is possible to have different leg prices assigned by Clearing that will not match the prices obtained from CME Globex. This process that allows leg price adjustment on traded calendar spreads is commonly referred to as SLEDS (Single Line Entry of Differential Spreads).

 Pricing

  • This Calendar Spread Trade Price is = Leg2 – Leg1

Leg Price Assignment

  • Determine the anchor leg of this Calendar Spread
    • The anchor leg is the prior day settlement price of Leg1
  • Calculate the non-anchor leg:
    • Leg 2 = Spread Price + Leg1 price
  • If the calculated price is outside the daily limits, set the Leg2 price to its limit and recalculate the price of Leg1
    • Leg1 = Leg2 – Spread Price

Note: If the recalculated price is outside the daily limit the price will stand. Customers can receive a non-settled price for the recalculated leg.

Pricing Examples

This Calendar Spread trades at 80.65

  • Leg1 has a prior day’s settlement of 2880.30
  • Leg2 = Trade Price + Leg1
    • 80.65 + 2880.25
  • Leg2 = 2960.95

This Calendar Spread trades at 80.65

  • Leg2 has a lower limit price of 2967.95
  • Leg1 = Leg2 – spread trade price
    • 2967.95 – 80.65
  • Leg2 = 2887.30

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FX Calendar Spread

Foreign Exchange (FX) consists of 2 instruments within the Foreign Exchange product group and with different expiration months. Due to tick differences between the spread and the outright markets, FX Leg prices from Spread trades may be allowed at non-standard tick increments.

Construction: Buy1exp2  Sell1exp1

Security Definition Example: 6EH9-6EZ8

Example: Buy the Spread

Buy 1 March 2019 CME EuroFX and

Sell 1 December  2018 CME EuroFX

Example: Sell the Spread

Sell 1 March 2019 EuroFX and

Buy 1 December 2018 EuroFX

The Goldman Sachs Commodity Index (GSCI) product, which is classified as an agricultural product, supports the Calendar spread FX spread.

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SD Calendar

This Calendar Spread is a futures spread involving the simultaneous purchase (sale) of one product with a deferred expiration and a sale (purchase) of the same product at a nearby expiration.  SecuritySubType  = SD is specific to FX Calendar spreads. The listing convention of this spread and its corresponding symbol is to have the further expiration listed first and the nearby expiration listed second, creating a differential spread price of deferred expiration price minus the nearby expiration price.

This Calendar has:

  • One Product
  • Two legs
    • Leg1 (buy leg) must be the deferred expiration
    • Leg2 (sell leg) must be the nearby expiration
  • Quantity/side ratio of the legs is +1:-1
  • Buying this Calendar buys leg1, sells leg2
  • Selling this Calendar sells leg1, buys leg2

Example

  • Instrument Symbol = 6BM7-6BJ7
    • Leg1 = +1 6BM7
    • Leg2 = - 1 6BJ7

Note: this Calendar may have a smaller minimum tick than the outright futures legs or the same tick for both as the legs. This spread can trade at zero and at a negative price. In addition, the pricing mechanics explained below correspond to CME Globex match engine price assignment. Member firms can designate a default way to handle price assignment to these legs in Clearing. As a result, it is possible to have different leg prices assigned by Clearing that will not match the prices obtained from CME Globex. This process that allows leg price adjustment on traded calendar spreads is commonly referred to as SLEDS (Single Line Entry of Differential Spreads).

Pricing

  • This Calendar Trade Price is = Leg1 – Leg2

Leg Price Assignment

  • Determine the anchor leg of the Calendar
  • The leg with the most recent price update is the anchor leg.
    • In the event of no price updates, the leg with the nearest expiration will be determined to be the anchor leg
  • Calculate the non-anchor leg:
    • If Leg 1 is used as the anchor leg, then Leg 2 = Leg 1 price – Spread Price
    • If Leg 2 is used as the anchor leg, then Leg 1 = Leg 2 price + Spread Price
  • If the calculated price is outside the daily limits, set the leg's price to its limit and recalculate the price of the anchor leg

Note: If the recalculated price is outside the daily limit the price will stand. Customers can receive a non-settled price for the recalculated leg. 

In this example leg1 has the most recent price

This Calendar trades at 10

  • Leg1 = 14965
  • Leg2 is calculated
    • Leg1 – Trade Price of the spread
    • 14965 - 10
  • Leg2 = 14955

In this example leg2 has the most recent price

This Calendar trades at 10

  • Leg2 = 14960
  • Leg1 is calculated
    • 14960 + 10
    • Leg1 = 14970
    • Leg1 = Leg2 + Trade Price

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EC TAS Calendar Spread

SecuritySubType = EC


The TAS Calendar Spread is a Trade at Settlement (TAS) calendar futures spread involving the simultaneous purchase (sale) of one TAS product with a nearby expiration and a sale (purchase) of the same TAS product at a deferred expiration. The listing convention of this spread and its corresponding symbol is to have the nearby expiration first and the deferred expiration second, creating a differential spread of the nearby expiration minus the deferred expiration.


A TAS Calendar Spread has:

  • One Product
  • Two legs
    • Leg1 (buy leg) must be the nearby expiration
    • Leg2 (sell leg) must be the deferred expiration
  • Quantity/side ratio of the legs is -1:+1
  • Buying an TAS Calendar Spread buys Leg1, sells Leg2
  • Selling an TAS Calendar Spread sells Leg1, buys Leg


Example

  • Instrument Symbol = CLTH0-CLTJ0
    • Leg1 = +1 CLTH0
    • Leg2 = -1 CLTJ0


This spread can trade at zero and at a negative price. Furthermore, the allowable price range tradeable in this product should be considered to be X number of ticks above and below the underlying product’s settlement price. The leg assignments below pertain to the price of the TAS outright. Clearing then completes the process at a designated time after settlement of the underlying contract with this formula: Underlying contract Settle price + TAS Leg assigned price = Assigned price to underlying contract

 

Pricing

  • The TAS Calendar Spread trade price is = Leg1 - Leg2


Leg Price Assignment

  • If the TAS Calendar Spread traded price is zero:
    • Leg1 is priced at zero
    • Leg2 is priced at zero
  • If the TAS Calendar Spread traded price is a negative differential:
    • Leg1 is priced at zero
    • Leg2 is priced at the absolute value of the TAS Calendar Spread traded price
  • If the TAS Calendar Spread traded price is a positive differential
    • Leg2 is priced at zero
    • Leg1 is priced at the TAS Calendar Spread traded price

 

Given for all of the following examples:

  • CLH0 settle price = 4961
  • CLJ0 settle price = 4980


And using this formula in Clearing:

  • Underlying contract settle price + TAS leg assigned price = Assigned price to underlying contract

 

TAS Calendar Spread traded price is 0

  • CLTH0 is priced at 0
  • CLTJ0 is priced at 0
  • Clearing assigns the following:
    • CLH0 assigned price = 4961
    • CLJ0 assigned price = 4980

 

TAS Calendar Spread traded price is -2

  • CLTH0 is priced at 0
  • CLTJ0 is priced at 2
  • Clearing assigns the following:
    • CLH0 assigned price = 4961
    • CLJ0 assigned price = 4980 + 2 = 4982

 

TAS Calendar Spread traded price is 3

  • CLTH0 is priced at 3
  • CLTJ0 is priced at 0
  • Clearing assigns the following:
    • CLH0 assigned price = 4961 + 3 = 4964
    • CLJ0 assigned price = 4980

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CF Condor

Spread type=CF

A Condor is a differential futures spread composed of one product with four different expirations. Buying (selling) a Condor buys (sells) the nearest and most deferred expirations while simultaneously selling (buying) the middle two expirations.

In its purest form, a Condor’s component expirations are equidistant and consecutive. On CME Globex, this is not the case with every listed Condor. As a result, the above definition represents what a customer may find as a listed Condor instrument on CME Globex.

A Condor has:

  • One Product
  • Four legs
    • Leg1 (buy leg) must be the nearest expiration
    • Leg2 (sell leg) must be the second nearest expiration
    • Leg3 (sell leg) must be the third nearest expiration
    • Leg4 (buy leg) must be the most deferred expiration
  • Quantity/side ratio of the legs is +1:-1:-1:+1
  • Expiration sequencing for Condor:
    • Leg1 month < Leg2 month < Leg3 month < Leg4 month
    • Example: GE:CF M9U9Z9H0
  • Buying a Condor buys leg1, sells leg2, sells leg3, buys leg4
  • Selling a Condor sells leg1, buys leg2, buys leg3, sells leg4


Example

  • Instrument Symbol = GE:CF M9U9Z9H0
    • Leg1 = +1 GEM9
    • Leg2 = -1 GEU9
    • Leg3 = -1 GEZ9
    • Leg4 = +1 GEH0


This spread can trade at zero and at a negative price.


Pricing

  • The Condor Trade Price is = Leg1 – Leg2 – Leg3 + Leg4


Leg Price Assignment

  • Leg1, Leg2 and Leg3 are anchor legs and assigned prices based on one of the following rules (priority given to the lowest number rule that applies)
  1. Last traded price
  2. Significant bid or offer that did not trade
  3. Settlement price
  • Leg4 is calculated:
      • Leg1 = Trade Price + leg2 + leg3 – leg4
    • If leg1 has a calculated price outside of the daily limit, leg1 is adjusted to daily limit and leg2 price is recalculated
      • Leg2 = leg1 – leg3 + leg4 – Trade Price
    • If leg2 has a calculated price outside the daily limits, leg2 will be adjusted to the daily limit and leg3 recalculated
      • Leg3 = leg1 - leg2 + leg4 – Trade Price
    • Trade Price – Leg1 + Leg2 + Leg3
    • If leg4 price is outside the daily limits, Leg4 will be adjusted to daily limit and Leg1 is recalculated
  • If leg3 has a recalculated price is outside the daily limit the price will stand. Customers can receive a non-settled price for the recalculated leg.


Pricing Example

Condor trades at 13.5

  • Leg1 most recent price update = 9812.5
  • Leg2 most recent price update = 9857.5
  • Leg3 most recent price update = 9875.5
  • Leg4 is calculated:
    • Trade Price – leg1 + leg2 + leg3
    • 13.5 – 9812.5 = -9799 + 9857.5 + 9875.5
    • Leg4 = 9934

Pricing Example  - Legs Calculated Outside of Daily Limits

Leg4 outside daily limit; leg4 reset to daily limit and leg1 is recalculated

Condor trades at 13.5

  • Leg1 is recalculated:
    • Leg1 = Trade Price + leg2 + leg3 – leg4
    • 13.5 + 9857.5 + 9875.5 – 9900
    • Leg1 = 9846.5
  • Leg2 has Fair Market Price = 9857.5
  • Leg3 has Fair Market Price = 9875.5
  • Leg4 = daily limit
    • Leg4 = 9900

 

Leg1 outside daily limit; leg1 reset to daily limit and leg2 recalculated

Condor trades at 13.5

  • Leg1 = daily limit
    • Leg1 = 9814
  • Leg2 is recalculated:
    • Leg2 = leg1 – leg3 + leg4 – Trade Price
    • 9814 – 9875.5 + 9900 – 13.5
    • Leg2 = 9825
  • Leg3 has a Fair Market Price of = 9875.5
  • Leg4 = daily limit
    • Leg4 = 9900

 

Leg2 outside daily limit; leg2 reset to daily limit and leg3 recalculated

Condor trades at 13.5

  • Leg1 = 9814
  • Leg2 = daily limit
    • Leg2 = 9870
  • Leg3 is recalculated:
    • Leg3 = leg1 – leg2 + leg4 – Trade Price
    • 9814 – 9870 + 9900 – 13.5
    • Leg3 = 9830
  • Leg4 = 9900

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CO Condor

SecuritySubType=CO

The Condor is an options spread involving the simultaneous purchase (sale) of a call (put), sale (purchase) of a second call (put), sale (purchase) of a third call (put), and purchase (sale) of a fourth call (put). All strike prices must be equidistant (i.e. the interval between the first and second strike must match the interval between the second and third strike, as well as between the third and fourth strike), and of the same expiration.

Condor has:

  • One Product
  • Four legs
    • Leg1 (buy leg) must be a call at a certain strike price
    • Leg2 (sell leg) must be a call at a higher strike price than leg1
    • Leg3 (sell leg) must be a call at a higher strike price than leg2
    • Leg4 (buy leg) must be a call at a higher strike price than leg3
    • Leg1 (buy leg) must be a call at a certain strike price
    • Leg2 (sell leg) must be a call at a lower strike price than leg1
    • Leg3 (sell leg) must be a call at a lower strike price than leg2
    • Leg4 (buy leg) must be a call at a lower strike price than leg3
    • All legs must be the same expiration
    • Strike prices must be equidistant of each strike price in leg1
    • For a call Condor
    • For a put Condor
  • Quantity/side ratio of the legs is +1:-1:-1:+1
  • Buying a Condor buys leg1, sells leg2, sells leg3, and buys leg4
  • Selling a Condor sells leg1, buys leg2, buys leg3, and sells leg4

Example

  • Instrument Symbol =
    • Leg1 = +1
    • Leg2 = -1
    • Leg3 = -1
    • Leg4 = +1

Example

  • Instrument Symbol = UD:1V: CO 0911959621
    • Leg1 = +1 ESU8 C2870
    • Leg2 = -1 ESU8 C2875
    • Leg3 = -1 ESU8 C2880
    • Leg4 = +1 ESU8 C2885
This spread can trade to a minimum price of zero.

Pricing

The Condor Trade Price is = [Leg1+Leg4] – [Leg2+Leg3]

Leg Price Assignment

  • Calculate Fair Price of the Condor based on fair prices of the legs.
  • Calculate the difference between the Condor trade price and the calculated fair price of the spread.
  • Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
  • Any adjustment of the outright leg prices due to remainder will be assigned according to options combination leg pricing assignment rules.

Pricing Example – Equal Distribution

Condor trades at 150

  • Leg1 has Fair Market Price of = 2900
  • Leg2 has Fair Market Price of = 2550
  • Leg3 has Fair Market Price of = 2150
  • Leg4 has Fair Market Price of = 1850
  • Spread Fair Market Price = [2900+1850] – [2550+2150] = 50
  • Spread Trade Price - Fair Market Price = 150 – 50 = 100
  • There are 4 ticks to distribute.
  • The adjustment is applied evenly as follows:
    • Leg1 = 2900 + 25 = 2925
    • Leg2 = 2550 – 25 = 2525
    • Leg3 = 2150 – 25 = 2125
    • Leg4 = 1850 + 25 = 1875

Pricing Example – Unequal Distribution

Condor trades at 175

  • Leg1 has Fair Market Price of = 2900
  • Leg2 has Fair Market Price of = 2550
  • Leg3 has Fair Market Price of = 2150
  • Leg3 has Fair Market Price of = 1850
  • Spread Fair Market Price = [2900+1850] – [2550+2150] = 50
  • Spread Trade Price - Fair Market Price = 175 – 50 = 125
  • There are 5 ticks to distribute.
  • The adjustment is applied as follows:
    • Leg1 = 2900 + 50 = 2950
    • Leg2 = 2550 – 25 = 2525
    • Leg3 = 2150 – 25 = 2125
    • Leg4 = 1850 + 25 = 1875

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C1 Crack One:One

SecuritySubType=C1

The Crack One:One is a futures differential spread involving the simultaneous purchase (sale) of a distilled product (i.e. Gasoline or Ultra Low Sulfur Diesel) with a corresponding sale (purchase) of the raw product from which it was produced (i.e. WTI Crude Oil).  The Crack One:One is priced in terms of the raw product which necessitates a mathematical conversion of the distilled product’s price.

A Crack One:One has:

  • Two different products belonging to the same product group (e.g. energy)
  • Two legs
    • Leg1 (buy leg) must be the distilled product
    • Leg2 (sell leg) must be the raw product
  • Quantity/side ratio of the legs is +1:-1
  • Buying a Crack One:One buys leg1, sells 2
  • Selling a Crack One:One sells leg1, buys 2

Examples

  • Instrument Symbol = BZ:C1 HO F0-BZ G0
    • Leg1 = +1 HOF0
    • Leg2 = -1 BZG0

Note: This spread can trade at zero and at a negative price.

Pricing

  • The Crack One:One Trade Price is = [(42 * Leg 1)/100] – Leg 2

Leg Price Assignment

  • Determine the anchor leg of the Crack One:One
    • The leg with the most recent price update is determined to be the anchor leg
  • If neither leg as a price update then the most recent settlement price of the legs will determine the anchor leg
    • The anchor leg price must be within the daily limits. If the anchor leg is outside the daily limits, reset the anchor leg to the daily limit.
    • Leg1 = [(Spread Price + Leg 2) *100]/42
    • Leg2 = [ (Leg1 * 42) / 100] – Spread Price 
  • The final anchor leg price must be rounded up to the nearest 50 point increment if the Low Limit was violated and rounded down to the nearest 50 point increment if the High Limit was violated

Pricing Examples

Example: Leg1 as anchor leg

Crack One:One  trades at 105

  • Leg1 has Fair Market Price of = 14890
    • Leg1 = 14900
  • Leg2 is calculated
    • Leg2 = (42*14900)/100 – 105
    • Leg2 = 6258 -105
    • Leg2 = 6153

Example: Leg2 anchor Leg

Crack One:One  trades at 105

  • Leg2 has most recent price
    • Leg2 = 6147
  • Leg1 is calculated:
    • Leg1 = [(105 + 6147) * 100]/42
    • Leg1 = 625200/42
    • Leg1 = 14885.72

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MP Month Pack

SecuritySubType=MP

Month-Pack consists of selling 1 pack with a later expiration and buying 4 outright instruments of the same instrument month with a expiration earlier than the front month of the pack.

The spread is listed with the month code followed by a space, then the pack code. For example, GE:MP Z8 1YZ9 would represent 4 of the GEZ8 futures vs. the Z9 1-year Pack (GEH9, GEM9, GEU9, GEZ9)

Construction: Buy4exp1  Sell (Pack)1exp2

Security Definition Example: GE:MP Z8 1YH9

Example: Buy the Spread

Buy 4 December 2018 Eurodollar Futures and

Sell 1 March 2019 Eurodollar Pack

Pack = March 2019, June 2019, Sept 2019, Dec 2019

Example: Sell the Spread

Sell 4 December 2018 Eurodollar Futures and

Buy 1 March 2019 Eurodollar Pack

Pack = March 2019, June 2019, Sept 2019, Dec 2019

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PK Pack

SecuritySubType=PK

The Pack is a futures spread involving the simultaneous purchase (sale) of a series four consecutive quarterly instruments (in year duration groups) within the same product.  The Pack is an average net differential between the current market price of the legs and the prior day settlement price of the legs.

A Pack has:

  • One Product
  • Four legs
  • Total legs in the pack must be evenly divisible by 4
  • Expiration of all the legs must be consecutive quarterly outright futures
  • Quantity/side ratio of the legs is +1:+1:+1:+1
  • Buying a Pack buys all components
  • Selling a Pack sells all components

Example

  • Instrument Symbol = GE:PK 01Y Z9
    • Leg1 = +1 GEZ9
    • Leg2 = +1 GEH0
    • Leg3 = +1 GEM0
    • Leg4 = +1 GEU0

Note:  This spread can trade at zero and at a negative price. 

Pricing

  • The Pack trade price is the average price of the differentials of each leg from its prior day’s settlement price

Leg Price Assignment

  • Obtain trade price of Pack
  • Price obtained is the differential for all legs, averaged
  • Integer portion of the Pack trade price is applied to all legs initially
    • If the Pack trades +1.25, all legs are initially assigned a price of +1 from their respective settles
    • If the Pack trades at -5.75, all legs are initially assigned a price of -2 from their respective settles
  • Adjust most deferred legs up or down a full point until the average differential of the legs is equal to the traded price of the Pack.
  • The following method calculates the number of legs of the Pack that will not have any further adjustment to their prices.
    • If the traded Pack price has a decimal of .25, the number of legs not given an additional point adjustment equals the number of years of the pack is multiplied by 3.
    • If the traded Pack price has a decimal of .50, the number of legs not given an additional point adjustment equals the number of years of the pack is multiplied by 2.
    • If the traded Pack price has a decimal of .75, the number of legs not given an additional point adjustment equals the number of years of the pack is multiplied by 1.
  • As a corollary, the number of legs that need to be adjusted up or down a point can be calculated by taking the result of the above calculation and subtracting it from the total number of legs in the product.

Examples

  • In all pricing examples, we will be using the GE:PK 01Y Z9 contract.
  • Components and settlement prices are as follows:
    • Leg1 = GEM9, prior day’s settle 9873
    • Leg2 = GEU9, prior day’s settle 9858.5
    • Leg3 = GEZ9, prior day’s settle 9834.5
    • Leg4 = GEH0, prior day’s settle 9821
  • Pack trades at 5
    • All legs are adjusted up 5 points
  • The decimal portion is zero, so no additional adjustments are needed
  • Results
      • Leg1 = 9873 + 5 = 9878
      • Leg2 = 9858.5 + 5 = 9863.5
      • Leg3 = 9834.5 + 5 = 9839.5
      • Leg4 = 9821 + 5 = 9826
  • Pack trades at -5.50
    • All legs are adjusted by down 5 points
    • The decimal portion is .25, so (1 year * 2 = 2) legs will not receive an additional adjustment, and 2 (4 total legs – 2 leg that are not changing) will need an additional adjustment
    • Results
      • Leg1 = 9873 - 5 = 9868
      • Leg2 = 9858.5 - 5 = 9853.5
      • Leg3 = 9834.5 - 5 = 9829.5
      • Leg4 = 9821- 6 = 9815
  • Pack trades at +5.25
    • All legs are adjusted by up 5 points
    • The decimal portion is .25, so (1 year * 3 = 3) legs will not receive an additional adjustment, and 1 (4 total legs – 3 leg that are not changing) will need an additional adjustment
    • Results
      • Leg1 = 9873 + 5 = 9878
      • Leg2 = 9858.5 + 5 = 9863.5
      • Leg3 = 9834.5 + 5 = 9839.5
      • Leg4 = 9821+ 6 = 9827

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PB Pack Butterfly

Spread type = PB

A Pack Butterfly is a Butterfly (BF) spread with each of the legs consisting of a Pack (PK) buying (selling) the Pack Butterfly consists of buying (selling) the nearby Pack, selling (buying) 2 Packs of the middle expiration, and buying (selling) the Pack at the most deferred expiration.  The Pack expirations must have the same differential between them sequentially, i.e. if the expiration difference between Leg1 and Leg2 is one year, then an additional requirement exists regarding the components of the Packs contained in the Pack Butterfly: no individual outright instrument can exist in more than one Pack contained in the Pack Butterfly


A Pack Butterfly has:

  • One Product
  • Three legs
    • Leg1 (buy leg) must be the Pack with the nearest quarterly expiration
    • Leg2 (sell leg) must be the Pack with the middle expiration compared to legs 1 and 3 and with a multiple of two lots
    • Leg3 (buy leg) must be the Pack with the most deferred expiration
  • Quantity/side ratio of the legs is +1:-2:+1
  • Buying a Pack Butterfly buys leg1, sells 2 * leg2, buys leg3
  • Selling a Pack Butterfly sells leg1, buys 2 * leg2, sells leg3


Example

  • Instrument Symbol = GE:PB Z0-Z1-Z2
    • Leg1 = +1 GE:PK 01Y Z0
    • Leg2 = -2 GE:PK 01Y Z1
    • Leg3 = +1 GE:PK 01Y Z2


This spread can trade at zero and at negative prices.  For more information regarding the component legs, see the section on this page regarding Packs.


Pricing

  • The Pack Butterfly Trade Price is = Leg1 – (2 * Leg2) + Leg3


Leg Price Assignment

  • Leg1 and leg2 are the anchor legs and assigned the most recent updated price.
    • If no recent price update in either of the two legs; use the calculated value from the most recent price of the 4 individual legs of each pack.
  • Leg2 may be calculated; leg3 is calculated:
    • Leg2 = Leg3 Calculated Price – Trade Price
    • Leg3 = Leg1 Anchor Price + Trade Price
    • Leg2 = Leg1 Anchor Price + (Trade Price * ¼)
    • Leg3 = Trade Price – (Leg1 + 2 * leg2)
    • Use the next most recent calculated pack to assign a value to the first leg of the spread and calculate Leg 2 and Leg 3 the same way as step 2
    • If there is no next most recent calculated Pack (PK), use settlement price for calculation 
    • If price of the pack butterfly is greater than -1.0 and less than 1.0 use the same calculated price generated for the first leg and apply the entire price to the third leg of the butterfly.
    • If price of the pack butterfly is less than or equal to -1.0 or greater than or equal to 1.0, apply 1/4 of the price to the second leg and calculate the price of the third leg.
    • If no recent price update in the pack or underlying legs


Pricing Example Leg1 and Leg2; price greater than -1.0 and less than 1.0

Pack Butterfly trades at .5

  • Leg1 most recent price = 3.5
  • Leg2 most recent price = 3.5
  • Leg3 = 4.0


Pricing Example Leg1 and Leg2; price less than or equal to -1.0 or greater than or equal to 1.0

Pack Butterfly trades at 2.0

  • Leg1 = 3.5
  • Leg2 = Calculated
  • Leg2 = 5 + (2.0 * 1/4)
  • Leg2 = 0
  • Leg3 = Calculated
    • Leg3 = 2.0 – (leg1 + (2 *leg2)
    • Leg3 = 11.5

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PS Pack Spread

SecuritySubType=PS

The PS Pack Spread is the simultaneous purchase (sale) of a nearby PK Pack and sale (purchase) of a deferred PK Pack, priced as the differential of the PK Pack prices. PS Pack Spread is available as a futures Exchange-Defined Spread only.

A PS Pack Spread has

  • One product
  • Two PK Pack legs
  • expirations of legs must be different
  • Quantity/side ratio of +1:-1

Pricing

  • The PS Pack Spread Trade Price is the differential of the PK Pack leg prices
    • The PK Pack prices are calculated following the PK rules
  • Leg price assignment
    1. Determine anchor PK Pack leg
      1. Leg with most recent trade, best bid/best offer, or Indicative Opening Price; else the PK Pack leg with an outright futures leg with most recent trade, best bid/best offer, or Indicative Opening Price; else nearby PK Pack
    2. Subtract the PS Pack Spread Trade Price from the anchor PK Pack leg and assign to non-anchor PK Pack leg

Pricing Example

PS Pack Spread GE:PS M7-M8 trades at -2.25

  1. GE:PK 01Y M7 Leg1 has the most recent trade at -1 and is designated the anchor
    1. GE:PK 07Y M8 Leg 2 = +1.25 (Leg1 Price - PS Pack Spread Trade Price)

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RT Reduced Tick

SecuritySubType=RT

The Reduced Tick Calendar Spread is the simultaneous purchase (sale) of one product with a nearby expiration and a sale (purchase) of the same product at a deferred expiration.  The listing convention of this spread and its corresponding symbol is to have the nearby expiration first and the deferred expiration second, creating a differential spread of nearby expiration minus the deferred expiration.  Spreads with SecuritySubType RT will have a smaller tick than their corresponding outright legs.

A Reduced Tick Calendar Spread has:

  • One Product
  • Two legs
    • Leg1 (buy leg) must be the nearest expiration
    • Leg2 (sell leg) must be the deferred expiration
  • Quantity/side ratio of the legs is +1:-1
  • Buying a Reduced Tick Calendar Spread buys leg1, sells leg2
  • Selling a Reduced Tick Calendar Spread sells leg1, buys leg2

Example

  • Instrument Symbol = ZNZ9-ZNH0
    • Leg1 = +1 ZNZ9
    • Leg2 = -1 ZNH0

Note: this spread can trade at zero and at a negative price. In addition, the pricing mechanics explained below correspond to how the CME Globex match engine assigns prices. Member firms can designate a default method to handle price assignment to these legs in Clearing. As a result, it is possible to have different leg prices assigned by Clearing that will not match the prices obtained from CME Globex. This process that allows leg price adjustment on traded calendar spreads is commonly referred to as SLEDS (Single Line Entry of Differential Spreads).

Pricing

  • The Reduced Tick Calendar Spread Trade Price is = Leg1 – Leg2

Note: All prices below are in a fractional pricing format.

Leg Price Assignment

  • Determine the anchor leg of the Reduced Tick Calendar Spread
    • The leg with the most recent price update is the anchor leg.
    • In the event of no recent price updates, the prior day settle of the nearby leg will be the anchor leg.
  • Calculate the non-anchor leg:
    • If Leg 1 is used as the anchor leg, then Leg 2 = Leg 1 price – Spread Price
    • If Leg 2 is used as the anchor leg, then Leg 1 = Leg 2 price + Spread Price
  • If the calculated price is outside the daily limits, set the leg's price to its limit and recalculate the price of the anchor leg

Note: If the recalculated price is outside the daily limit the price will stand. Customers can receive a non-settled price for the recalculated leg.

Pricing Examples

Leg1 is the anchor leg

Reduced Tick Calendar Spread trades at 1040

  • Leg1 = anchor price of 129300
  • Leg2 = 129300 – 1040 = 128260

Leg2 is the anchor leg

Reduced Tick Calendar Spread trades at 1040

  • Leg2 = anchor price of 129310
  • Leg1 = 129310 + 1040 = 130350

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FS Strip

SecuritySubType=FS

The Strip is the simultaneous purchase or sale of futures positions at the averaged price of the legs. FS is available in futures markets only in both Exchange- and User-Defined spreads.

An FS 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

For any single market, only FS or SA User-Defined Spreads will be recognized.

Pricing

  • Spread Trade Price = (Leg1+Leg2+...LegN)/Total number of legs
  • Leg price assignment
    1. Calculate strip settlement price by averaging all of the legs' most recent settlement prices and round to closest on-tick
    2. Subtract the result from step 1 from the Trade Price
    3. Add the differential from step 2 to each leg's settlement price
      1. Note: Leg prices may not be identical.
Currently, the FS Strip for 30-Day Federal Funds Futures (ZQ) and Ethanol Futures (EH) is settled to zero. As a result, the trade entry price is a net change from settlement.


Pricing Example

CU:FS 03M V6 trades at 13490

Given that

  • Average leg settlement price is 13550
    • Leg1 last settle price is 13750
    • Leg2 last settle price is 13550
    • Leg3 last settle price is 13350
  • 13490 (Trade price) - 13550 (Average leg settlement price) = -60
    1. Leg1 = 13750 (last settle price) - 60 = 13690
    2. Leg2 = 13550 (last settle price) - 60 = 13490
    3. Leg3 = 13350 (last settle price) - 60 = 13290

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SA Average Price Strip

SecuritySubType=SA

The Average Price Strip is a CME recognized future or options spread type involving the simultaneous purchase (sale) of multiple related legs priced as the average of all included legs. Customers trading this product will receive legs priced at the Average Price Strip spread traded price.

This pricing model is unique to this spread type. 

  • Products created with related legs and consecutive expirations will receive spread type SA in their security definition message (both in the tags 55-Symbol and in tag 762-SecuritySubType). Products designated spread type SA are priced as an average
  • Products created with related legs and non-consecutive expirations will receive spread type GN in their security definition message (both in the tags 55-Symbol and in tag 762-SecuritySubType). Products designated spread type GN are priced as additive.
Spread types Average Price Strip (SA) and Futures Strip (FS) are not supported in the same market. 

An Average Price Strip has three different variations according to whether it is Exchange listed, a User Defined Instrument for futures, or a User Defined Spread for options:

  • One Product
  • Minimum of 2 legs
  • Maximum of 26 legs
  • For a future Average Price Strip
    • All legs must be buy side futures
    • All expirations will be consecutive
    • Expirations can be measured in days or months depending on the futures contained in the Average Price Strip
    • Instruments can be exchange listed or user defined. See examples below for symbology.
  • For an Option Average Price Strip
    • All legs must be buy side options
    • All legs must be calls or puts
    • All legs must have the same strike price
    • All expirations must be consecutive
    • Expirations can be measured in days, weeks, or months depending on the Options contained in the Average Price Strip
  • Quantity/side ratio of the legs is +1 for each individual leg
  • Buying an Average Price Strip buys each individual leg of the spread
  • Selling an Average Price Strip sells each individual leg of the spread

Examples

  • Exchange listed Futures Average Price Strip
    • Leg1 = +1 NGU9
    • Leg2 = +1 NGV9
    • Leg3 = +1 NGX9
    • First characters are the Futures Group (NG)
    • Colon separator immediately follows the Group
    • Spread Type follows the separator
    • A space character follows the Spread Type
    • Two digits after the space indicate the number of legs
    • Following the digits is the period between the legs.  M = Month, Y = Year, D = Day
    • Last, a space followed by the expiration
    • Instrument Symbol = NG:SA 03M U9
    • Symbology points
  • Exchange listed Futures Average Price Strip composed of Daily Futures
    • Leg1 = +1 JDLV817
    • Leg2 = +1 JDLV818
    • Leg3 = +1 JDLV819
    • First characters are the Futures Group (JDL)
    • Colon separator immediately follows the Group
    • Spread Type follows the separator
    • A space character follows the Spread Type
    • Two digits after the space indicate the number of legs
    • Following the digits is the period between the legs.  M = Month, Y = Year, D = Day
    • Last, a space followed by the expiration (in this case, October 17, 2018)
    • Instrument Symbol = JDL:SA 03D 17V8
    • Symbology
  • User defined Futures Average Price Strip
    • Leg1 = +1 NGJ9
    • Leg2 = +1 NGK9
    • Leg3 = +1 NGM9
    • Leg4 = +1 NGN9
    • Leg5 = +1 NGQ9
    • Leg6 = +1 NGV9
    • Leg7 = +1 NGX9
    • Leg8 = +1 NGZ9
    • First characters indicate the instrument is User Defined (UD), followed by a separating colon
    • Next two characters indicate the instrument Group. For User Defined Instruments containing Futures only, this will be the group code of the contained Futures
    • Another colon separator follows the group
    • Next, a space followed by the Spread Type, followed by another space
    • The following four digits indicate when the date the User Defined Spread was created
    • The next six digits are the CME Security ID
    • The symbol does not convey the number of legs or the expiration. This information must be obtained from the Security Definition message.
    • Instrument Symbol = UD:NG: SA 1015986004
    • Symbology
  • User Defined Options Average Price Strip
    • Leg1 = +1 LOF9 C8000
    • Leg1 = +1 LOG9 C8000
    • Leg1 = +1 LOH9 C8000
    • First characters indicate the instrument is User Defined (UD), followed by a separating colon
    • Next two characters indicate the instrument Group. For User Defined Instruments containing Options, this will be the group code for the options spread
    • Another colon separator follows the group
    • Next, there will either be a space or the letter C. The letter C indicates this User Defined Spread includes one or more covering futures in the package.
    • The space or the C is followed by the Spread Type, followed by another space
    • The following four digits indicate when the User Defined Spread was created
    • The next six digits are the CME Security ID
    • The symbol does not convey the number of legs or the expiration. This information must be obtained from the Security Definition message.
    • Instrument Symbol = UD:1N: SA 1015921428
    • Symbology
The Average Price Strip cannot be priced below the lowest tick of an individual instrument. Orders submitted at a price less than this lowest tick will be rejected. For any single market, only FS or SA User-Defined Spreads will be recognized.

Pricing

The Average Price Strip Trade Price is = the average price of all included legs

Leg Price Assignment

The Spread Trade Price is assigned to each leg

Pricing Example – Futures Spread Equal Distribution

Average Price Strip (SA) trades at 1657

  • For illustration purposes, the spread in this example contains three legs
  • The trade price is the average of the individual legs
  • The trade price is applied equally to each of the legs as follows:
    • Leg1 = 1657
    • Leg2 = 1657
    • Leg3 = 1657

Pricing Example – Futures Spread Equal Distribution

Average Price Strip (GN) trades at 1657

  • For illustration purposes, the spread in this example contains three legs
  • The trade price is the addition of the individual legs
  • The trade price is applied equally to each of the legs as follows:
    • Leg1 = 1657
    • Leg2 = 1657
    • Leg3 = 1657

For these spreads, there is no possibility of Unequal Distribution of Prices.

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SB Balanced Strip Spread

SecuritySubType=SB

The SB Balanced Strip Spread is the simultaneous purchase or sale of futures strips at the differential price of the legs. SB is available in futures markets only in both Exchange- and User-Defined spreads.

An SB Strip has

  • One product
  • Two legs
  • Quantity/side ratio of +1:-1
  • Expiration of all legs must be different and symmetric
  • Legs will both be FS Strips or SA Strips; no FS vs SA Strip legs
    • FS or SA Strips must have the same number of legs
    • FS or SA Strips must not share any outright legs
    • FS or SA Strips must have the same duration (3 months, 6 months, etc.)

Pricing

  • The Spread Trade Price is the differential of the strip legs
  • Leg price assignment
    1. Determine anchor strip leg
      1. Leg with most recent trade, best bid/best offer, or Indicative Opening Price; else Leg1
    2. Subtract the Spread Trade Price from the non-anchor strip leg

Pricing Example

SB Balanced Strip Spread NG:SB 05M X6-X7 trades at 4

  1. Strip Leg1 has the most recent trade at price 3229 and is designated the anchor
    1. Strip Leg1 = 3229
    2. Strip Leg2 = 3225 (Leg1 Price - Spread Trade Price)

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SR Strip

SecuritySubType=SR

The Strip is an options spread involving the simultaneous purchase (sale) of a series of calls or puts at the same strike price comprised of four equidistant expirations.

Strip has:

  • One Product
  • Four legs
    • Leg1 must be a call in Exp1
    • Leg2 must be a call in Exp2
    • Leg3 must be a call in Exp3
    • Leg4 must be a call in Exp4
    • Leg1 must be a put in Exp1
    • Leg2 must be a put in Exp2
    • Leg3 must be a put in Exp3
    • Leg4 must be a put in Exp4
    • All legs must have the same strike price
    • Each leg must be in consecutive equidistant expirations (Exp1, Exp2, Exp3, Exp4)
    • All legs must be buys
    • For a call Strip
    • For a put Strip
  • Quantity/side ratio of the legs is +1:+1:+1:+1
  • Buying a Strip buys all legs
  • Selling a Strip sells all legs

Example

  • Instrument Symbol = UD:U$: SR 1203930561
    • Leg1 = +1 GEZ9 C9675
    • Leg2 = +1 GEH0 C9675
    • Leg3 = +1 GEM0 C9675
    • Leg4 = +1 GEU0 C9675
The minimum tradeable price of a Strip is the sum of the minimum prices of the legs provided it results in a tradeable tick for the combination. Orders entered below this minimum price or at an untradeable tick will be rejected. This spread cannot trade zero or negative.

Pricing

The Strip Trade Price is = Leg1 + Leg2 + Leg3 + Leg4

Leg Price Assignment

  • Calculate Fair Price of the Strip based on fair prices of the legs.
  • Calculate the difference between the Strip trade price and the calculated fair price of the spread.
  • Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
  • Any adjustment of the outright leg prices due to remainder will be assigned according to options combination leg pricing assignment rules.

Pricing Example – Equal Distribution

Strip trades at 206.5

  • Leg1 has Fair Market Price of = 41
  • Leg2 has Fair Market Price of = 48.5
  • Leg3 has Fair Market Price of = 54
  • Leg4 has Fair Market Price of = 59
  • Spread Fair Market Price = 202.5
  • Spread Trade Price - Fair Market Price = 206.5 – 202.5 = 4.0
  • There are 8 ticks to distribute.
  • The adjustment is applied evenly as follows:
    • Leg1 = 41 + 1 = 42
    • Leg2 = 48.5 + 1 = 49.5
    • Leg3 = 54 + 1 = 55
    • Leg4 = 59 + 1 = 60

Pricing Example – Unequal Distribution

Strip trades at 207.0

  • Leg1 has Fair Market Price of = 41
  • Leg2 has Fair Market Price of = 48.5
  • Leg3 has Fair Market Price of = 54
  • Leg4 has Fair Market Price of = 59
  • Spread Fair Market Price = 202.5
  • Spread Trade Price - Fair Market Price = 207.0 – 202.5 = 4.5
  • There are 9 ticks to distribute.
  • The adjustment is applied as follows:
    • Leg1 = 41 + 1.5 = 42.5
    • Leg2 = 48.5 + 1 = 49.5
    • Leg3 = 54 + 1 = 55
    • Leg4 = 59 + 1 = 60

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WS Unbalanced Strip

SecuritySubType=WS

Unbalanced Strip is a spread between two strips in the same product (Intra-commodity), but with differing durations (to allow for spreads between Winter and Summer, etc.). An Unbalanced Strip is constructed by buying the first expiring strip and selling the later expiring strip (Buy 1 stripExp1, Sell 1 stripExp2). The durations of each strip cannot be equal. The balance of the strip will continue to expire until only one expiration month remains.

Construction: Buy StripLeg1exp1  Sell StripLeg2exp2

Security Definition Example: GL:WS X2-J3

Example: Buy the Spread

Buy 1 November 2012 5Month Strip (GL:SA 05M X2) and

Sell 1 April 2013 7Month Strip (GL:SA 07M J3)

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Inter-Commodity Futures spread

SecuritySubType=IS

The Inter-Commodity is a futures spread involving the simultaneous purchase and sale of two instruments in different products with similar ticks. There can be variations in the leg pricing assignments in the Inter-Commodity futures spreads based on the components of the spread.

There are different methods for leg assignment depending on the products composing the Inter-commodity spread.

 A Inter-Commodity futures spread has:

  • Two different products
  • Two legs
    • Leg1 is the buy leg
    • Leg2 is the sell leg
  • Quantity/side ratio of the legs is +1:-1
  • Buying an Inter-Commodity spread buys leg1 and sells leg2
  • Selling an Inter-Commodity spread sells leg1 and buys leg2

Example

  • Instrument Symbol= NKDU9-NIYU9
    • Leg1 = +1 NKDU9
    • Leg2 = -1 NIYU9

Pricing

The Inter-Commodity futures spread Trade Price is equal to Leg1-Leg2.

When a match occurs in an Inter-Commodity spread, the traded differential is applied to either Leg1 or Leg2 to arrive at the price of the other leg.

Nikkei Inter Commodity spread

Example

  • Instrument Symbol= NKDU9-NIYU9
    • Leg1 = +1 NKDU9
    • Leg2 = -1 NIYU9

Leg Price Assignment

  • The anchor leg price must be determined first. It can be one of the following, and these rules are applied in order until one of them applies:
  • A recent significant bid or offer from either outright futures leg.  To be significant, a bid must be greater than settle or the most recent traded price of the instrument, or an offer must be less than settle or the most recent traded price of the instrument.
  • An Indicative Opening Price can be a significant bid or offer in the prior rule.
  • Most recent traded outright leg in either NKD or NIY products pertaining to the spread in question, i.e. if the spread is NKDU9-NIYU9, an anchor price could be determined by the most recent trade in either NKDU9 or NIYU9.
  • The previous day’s settlement of the NKD outright futures
  • Calculate the non-anchor leg price:
    • If Leg1 is used as the anchor leg, then Leg2 = (Leg1 price – Spread Price)
    • If Leg2 is used as the anchor leg, then Leg1 = (Leg2 price + Spread Price)

Pricing Example

Example1 – Leg1 as anchor leg  

Leg1 recent significant bid in NKDU9

Nikkei Inter-Commodity Spread -  NKDU9-NIYU9 trades at 30

  • Leg1 = 21260
  • Leg2 = Leg1 price – Spread price

                       = 21260-30

                       =21230

Differential applied to Leg2:

  • Leg1 = 21260
  • Leg2 = 21230

Example2 – Leg1 as anchor leg  

Leg1 trade is the most recent

Nikkei Inter-Commodity Spread -  NKDU9-NIYU9 trades at 30

  • Leg1 = 21250
  • Leg2 = Leg1 price – Spread price

                       = 21250-30

                       =21220

Differential applied to Leg2:

  • Leg1 = 21250
  • Leg2 = 21220

Example3 – Leg2 as anchor leg:           

Leg2 trade is the most recent

Nikkei Inter-Commodity Spread -  NKDU9-NIYU9 trades at 30

  • Leg2 = 21245
  • Leg1 price = Leg2 + Spread price

                       = 30 + 21245

                       =21275

Differential applied to Leg1:

  • Leg1 = 21275
  • Leg2 = 21245

Example4 – Leg1 as anchor leg:           

Leg1 is prior day’s settle

Nikkei Inter-Commodity Spread -  NKDU9-NIYU9 trades at 30

  • Leg1 = 21200
  • Leg2 price = Leg1 price -  Spread price

                       = 21200 - 30

                       = 21170

Differential applied to Leg2:

  • Leg1 = 21200
  • Leg2 = 21170

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XS Inter-Commodity Strip

SecuritySubType=XS

The Cross-Commodity Strip Spread is a futures spread involving the simultaneous purchase (sale) of one Average Priced Strip (SA) against the sale (purchase) of a second Average Priced Strip (SA)  with the same expiration.  Each Averaged Priced Strip must contain the same number of component parts (i.e. three consecutive futures contracts), and each Average Priced Strip must be of a different but related product (i.e. the first Average Priced Strip is WTI Crude while the second Average Priced Strip is Brent Last Day Financial Crude).  After the first month of the strip from the first leg of the Cross-Commodity Strip Spread expires, the leg becomes a “balance of” spread. The balance of the Cross-Commodity Strip Spread will continue to decay until only one expiration month remains.

IMPORTANT NOTE: Average Priced Strips trade as the average price of all components, and leg assignment to those components will be the price assigned to the Average Priced Strip.

A Cross-Commodity Strip Spread has:

  • Two Products
  • Two legs
  • Each Leg is an Average Priced Strip with the same expiration and duration (number of component contracts)
    • Leg1 (buy leg) must be one product
    • Leg2 (sell leg) must be a related but different product from Leg1
  • Quantity/side ratio of the legs is +1:-1
  • Buying an Cross-Commodity Strip Spread buys leg1, sells leg2
  • Selling an Cross-Commodity Strip Spread sells leg1, buys leg2

Example

  • Instrument Symbol = PW:XS 02M EJL-B6L X9
    • EJLX9
    • EJLZ9
    • B6LX9
    • B6LZ9
    • Leg1 = +1 EJL:SA 02M X9 (2 Month Strip)
    • Leg2 = -1 B6L:SA 02M X9 (2 Month Strip)

Note: This spread can trade at zero and at a negative price. 

Pricing

  • The Cross-Commodity Strip Spread Trade Price is the differential between the two Average Priced Strips = Leg1 – Leg2

Leg Price Assignment

  • Determine the anchor leg of the Cross-Commodity Strip Spread
    • The leg with the most recent price update of the strip (last price update or settlement price) is the anchor leg.
  • Calculate the non-anchor leg:
    • If Leg 1 is used as the anchor leg, then Leg2 = Leg1 price – Cross-Commodity Strip Spread Price
    • If Leg 2 is used as the anchor leg, then Leg1 = Leg2 price + Cross-Commodity Strip Spread Price

Pricing Example

In this example Leg1 has the most recent price.

Cross-Commodity Strip Spread WS:XS 02M CL-BZ G0 trades at -325

  • Leg1 traded at 5757
    • Leg1 is the anchor, and assigned a price of 5757
    • CLG0 is assigned a price of 5757
    • CLH0 is assigned a price of 5757
  • Leg2 has its price calculated
    • Leg2 = 5757 – (–325) = 5757 + 325 = 6082
    • BZG0 is assigned a price of 6082
    • BZH0 is assigned a price of 6082

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DI Inter-Commodity Spread

SecuritySubType=DI

The DSF Inter-Commodity Calendar is a futures spread involving the simultaneous purchase (sale) of one interest rate product with a corresponding sale (purchase) of a second interest rate product. Both products will have the same monthly expiration.  Both products will also have the same underlying term (i.e., both products will be five year notional instruments).

The DSF Inter-Commodity Calendar has:

  • Two Products
  • Two legs
    • This leg will have the same monthly expiration as Leg1
    • This leg will have the same underlying term as Leg1
    • Leg1 (buy leg) will be an interest rate product
    • Leg2 (sell leg) will be a different interest rate product
  • Quantity/side ratio of the legs is +1: -1
  • Buying  the DSF  Inter-Commodity Calendar buys leg1, sells leg2
  • Selling the DSF  Inter-Commodity Calendar sells leg1, buys leg2

Example

  • Instrument Symbol = ZNZ9-N1UZ9
    • Leg1 = +1 ZNZ9
    • Leg2 = -1 N1UZ9

Note: This spread can trade at zero and at a negative price. 

Pricing

  • The Interest Rate Inter-Commodity Spread Trade Price is = Leg1 – Leg2

Note All prices below are in a fractional pricing format.

Leg Price Assignment

  • The anchor leg will have the most recent price update; otherwise the prior day’s settlement price from Leg1 is the anchor leg
  • Calculate the non-anchor leg:
    • Leg2 = Leg 1 price - Trade Price
    • Leg 1 = Leg 2 price + Trade Price
    • If Leg 1 is used as the anchor leg
    • If Leg 2 is used as the anchor leg
  • If the calculated price is outside the daily limits, set the leg's price to its limit and recalculate the price of the anchor leg

Note: If the recalculated price is outside the daily limit the price will stand. Customers can receive a non-settled price for the recalculated leg.

Pricing Examples

Example: Leg1 as anchor leg

 DSF Inter-Commodity Calendar trades at 50

  • Leg1 has the most recent trade at 130295
  • Leg2 is calculated:
    • Leg2 = Leg1 - Trade Price
    • 130295 - 50
  • Leg2 = 130245

Example: Leg2 as anchor leg

DSF Treasury Inter-Commodity Calendar trades at 50

  • Leg2 has the most recent trade at 129290
  • Leg1 is calculated:
    • Leg1 = Leg2 + Trade Price
    • 129290 + 50
  • Leg1 = 130020

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IV Intercommodity Spread

SecuritySubType=IV

Inter-commodity spreads consist of two financial futures instruments having the same expiration.

Construction: Buy1exp1com1 Sell1exp1com2

Security Definition Example: FOS 01-01 M3

Example: Buy the Spread

Buy 1 June 2013 5 year T-Note

Sell 1 June 2013 5-year Interest Rate Swap

Example: Sell the Spread

Sell 1 June 2013 5-year T-Note

Buy 1 June 2013 5-year Interest Rate Swap

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SI Intercommodity Spread

SecuritySubType=SI

This spread type, also known as the Soybean Crush, represents the price differential between the raw soybean product and the yield of its two processed products

Construction: Sell11exp1com1 Sell9exp1com2 Buy10exp1com3

Security Definition Example: SOM:SI N4-N4-N4

Example: Buy the Spread

Buy 11 July Soybean Meal

Buy 9 July Soybean Oil

Sell 10 July Soybeans

Example: Sell the Spread

Sell 11 July Soybean Meal

Sell 9 July Soybean Oil

Buy 10 July Soybeans

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BC Intercommodity

SecuritySubType=BC

This combination buys 1 Henry Hub Natural Gas futures contract and buys 1 Henry Hub Natural Gas Index futures contract with both contracts having the same expiration.

Example: Buy the Combination

Buy 1 HB:IN H7 =

Buy 1 Henry Hub Natural Gas (Platts FERC) Basis Futures (HB) March 2017 expiration

Buy 1 Henry Hub Natural Gas (Platts Gas Daily/Platts IFERC) Index futures (IN) March 2017 expiration

Example: Sell the Combination

Sell 1 HB:IN H7 =

Sell 1 Henry Hub Natural Gas (Platts FERC) Basis Futures (HB) March 2017 expiration

Sell 1 Henry Hub Natural Gas (Platts Gas Daily/Platts IFERC) Index futures (IN) March 2017 expiration

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IP Inter-Commodity Spread

SecuritySubType=IP

The Inter-commodity calendar spread for futures (commonly known as a “box spread") allows customers to trade calendar spreads on Inter-commodity spreads as a single instrument, eliminating leg execution risk.

Construction: Buy1com1exp1 Sell1com2exp1 Sell1com1exp2 Buy1com2exp2

Security Definition Example:

NG:HH Z7-F8

Example: Buy the Spread

Buy 1 December 2017 Henry Hub Natural Gas (NG)
Sell 1 December 2017 Henry Hub Natural Gas Last Day Financial Future (HH)
Sell 1 January 2018 Henry Hub Natural Gas (NG)
Buy 1 January 2018 Henry Hub Natural Gas Last Day Financial Future (HH)

Example: Sell the Spread

Sell 1 December 2017 Henry Hub Natural Gas (NG)
Buy 1 December 2017 Henry Hub Natural Gas Last Day Financial Future (HH)
Buy 1 January 2018 Henry Hub Natural Gas (NG)
Sell 1 January 2018 Henry Hub Natural Gas Last Day Financial Future (HH)

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RI Inter-Commodity Spread

SecuritySubType=RI

This spread allows a difference in tick size between the underlying instrument and the spread, where the underlying instrument trades at a larger tick size than the spread market.

Construction:  Buy1com1exp1 Sell1com2exp1

Security Definition Example: HPH8-NGH8

Example: Buy the Spread

Buy 1 March 2018 Natural Gas (Henry Hub) Penultimate Financial Futures
Sell 1 March 2018 Natural Gas (Henry Hub) Last-day Financial Futures

Example: Sell the Spread

Sell 1 December 2018 Natural Gas (Henry Hub) Penultimate Financial Futures
Buy 1 December 2018 Natural Gas (Henry Hub) Last-day Financial Futures

These spreads are currently available for customer testing in New Release.

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MS BMD Strip

SecuritySubType=MS

The BMD futures strip consists of multiples of four consecutive, quarterly expirations of a single product with the legs having a +1:+1:+1:+1 ratio. A 1-year strip, for example, consists of an equal number of futures contracts for each of the four consecutive quarters nearest to expiration.

Construction: Buy1exp1  Buy1exp2  Buy1exp3 Buy1exp4

Security Definition Example: FKB3:MS 01Y M8

Example: Buy the Spread

Buy 1 June 2018 3-Month Month Kuala Lumpur Interbank Offered Rate
Buy 1 September 2018 3-Month Month Kuala Lumpur Interbank Offered Rate
Buy 1 December 2018 3-Month Kuala Lumpur Interbank Offered Rate
Buy 1 March 2019 3-Month Kuala Lumpur Interbank Offered Rate

Example: Sell the Spread

Sell 1 June 2018 3-Month Month Kuala Lumpur Interbank Offered Rate

Sell 1 September 2018 3-Month Month Kuala Lumpur Interbank Offered Rate

Sell 1 December 2018 3-Month Kuala Lumpur Interbank Offered Rate

Sell 1 March 2019 3-Month Kuala Lumpur Interbank Offered Rate

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IN Invoice Swap Spread

SecuritySubType=IN

An Invoice Swap is an Inter-commodity spread trade consisting of a long (short) Treasury futures contract and a long (short) non-tradeable Interest Rate Swap (IRS).

Construction

Buy 1 Invoice IRS spread buy 1 Treasury futures contract

Security Definition Example: IN:ZTM4L026220NOV14

Example: Buy the Spread

Buy 1 June 2014 2-Year Treasury Invoice Swap Spread, Buy 1 June Treasury Future

Example: Sell the Spread

Sell 1 June 2014 2-Year Treasury Invoice Swap Spread, Sell 1 June Treasury Future

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SC Invoice Swap Calendar Spread

SecuritySubType=SC

An Invoice Swap calendar spread lists invoice swaps of the same tenor with consecutive quarters (e.g., 2 yr Dec 2015 vs. 2 yr Mar 2016) as two legs.

Security Definition Example: ZTU50317A-ZTM50317A

Example: Buy the Spread

Buy 1Mar 2016 5Y IN and sell 1 Dec 2015 5Y IN

Example: Sell the Spread

Sell 1Mar 2016 5Y IN and buy 1 Dec 2015 5Y IN

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SW Invoice Swap Switch Spread

SecuritySubType=SW

A Treasury Invoice Swaps Switch Spread lists invoice swaps of the same contract month with different tenors with consecutive quarters (e.g., 2 yr Mar 2015 vs. 10 yr Mar 2015) as two legs.

Security Definition Example: ZNM51221A-ZTM50317A

Example: Buy the Spread

Buy 1 Mar 2015 10Y IN and sell 1 Mar 2015 2Y IN

Example: Sell the Spread

Sell 1 Mar 2015 10Y IN and buy 1 Mar 2015 2Y IN

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TL Tail Spread

SecuritySubType=TL

The Treasury Tail User Defined Spread has a 1:1 calendar spread as leg 1 and a single future for leg 2. Leg 2 must be one of the 1:1 calendar spread legs (i.e., if Leg 1 is ZFZ5-ZFH6, then Leg 2 must be either ZFZ5 or ZFH6). The side of the outright leg must match the 1:1 calendar spread; Leg 2 must be on the buy side if it is the same as the front month of the calendar and on the sell side if it is the deferred month.

Example: Buy the Spread

Buy 1 ZFZ5-ZFH6, Buy 0.2 ZFZ5 at price 118.078125

Example: Sell the Spread

Sell 1 ZFZ5-ZFH6, Sell 0.2 ZFZ6 at price 118.078125

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EF Inter-Exchange Reduced Tick Ratio Spread

SecuritySubType=EF

The EF strategy type involves trading 90-day short term interest rates in a single package across commodities or exchanges.

An EF inter-exchange reduced tick ratio spread has:

  • Two products in two different DCMs
    • Expiration 2
    • Expiration 3
    • Expiration 1
    • Interest Rate future (DCM 1)
    • Interest Rate future (DCM 2)
  • Expiration 1 shall be the nearest quarterly expiry month for Interest Rate future (DCM 2)
  • Expirations 2 and 3 shall be the nearest consecutive months for Interest Rate future (DCM 1) dated after Expiration 1 
  • Sixteen legs
  • Quantity/side ratio of [+3:+3]:-10 (Quantity/side ratio constructed with a bid-side bias)

Construction: Buy3exp2com1 Buy3exp3com1 Sell10exp1com2

Security Definition Example:  ZQF8G8-GEZ7

Pricing

The Inter-Commodity Reduced Tick Ratio Spread Trade Price is the average net differential between the current market price of the two legs of one commodity and one leg of another commodity.

Spread Trade Price = AvgPx(2 sets of Com1) – Com2

 If necessary, CME Globex will adjust Com1 leg prices to equal the spread price.

Leg Price Assignments

  • Leg 3 (Com2) is the anchor and assigned the most recent available price from the outright market; trade, best bid/best offer, or Indicative Opening Price. 
  • Legs 1 and 2 (Com1) are assigned prices in line with the outright markets but adjusted if necessary to equal the Spread Trade Price. 

Example of trade with leg price adjustment

This example illustrates the leg price assignments after adjustment.

Spread ZQF8G8-GEZ7 trades at 0.1425

  • ZQF8 Early Expiry = 98.9750
  • ZQG8 Later Expiry = 98.9050
  • GEZ7 Qtry Expiry = 98.8000

(98.9750+98.9050) / 2 = 98.9425 - 98.8000 = 0.1400

Most Recent Market Prices: (98.9750 + 98.9100) / 2 = 98.9425 - (988.000/10) = 0.1425

Adjusted Leg Prices Assigned: 

  • ZQF8 Early Expiry = 98.9750
  • ZQG8 Later Expiry = 98.9100

 (98.9750 + 98.9100) / 2 = 98.9425 - 98.8000 = 0.1425

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HO Calendar Horizontal

SecuritySubType=HO

The Horizontal is an options spread involving the simultaneous purchase (sale) of buying a call (put) in a deferred expiration and selling a call (put) of the same strike in an earlier expiration

Horizontal has:

One Product

  • Two legs
    • Both legs must be of different expiration
      • First leg must be the deferred expiration to the second leg
      • First leg must be a buy
    • Both legs must have the same strike
    • Both legs must be calls or puts
  • Buying the Horizontal buys leg1 and sells leg2
  • Selling the Horizontal sells the leg1 and buys leg2
  • Quantity/side ratio of the legs is +1:-1

Example

  • Instrument Symbol = UD:1V: HO  0709947215
    • Leg 1 =+1 ESZ8 P2300
    • Leg 2 = -1 ESU8 P2300
The differential of the legs must be a tradeable tick for the new combined instrument. In the event that it is not, orders using the price will be rejected. This spread can also trade at a negative price.

Pricing

The Horizontal Trade Price is = (Leg1-Leg2) the differential of the legs

Leg Price Assignment

  • Calculate Fair Price of the Horizontal based on fair prices of the legs.
  • Calculate the difference between the Horizontal trade price and the calculated fair price of the spread.
  • Spread Trade Price = Fair Market Price; no remainder to distribute to the legs
  • Any adjustment of the outright leg prices due to remainder will be assigned according to UDS leg pricing assignment rules

Pricing Example – Equal Distribution

Horizontal trades at 20

  • Leg1 has Fair Market Price of 130
  • Leg2 has Fair Market Price of 120
  • Spread Fair Market Price = 130-120 =10
  • Spread Trade Price – Fair Market Price = 10
  • There are 10 ticks to distribute
    • Leg1 = 130 +5 = 135
    • Leg2 = 120 - 5 = 115

Pricing Example – Unequal Distribution

Horizontal trades at 15

  • Leg1 has Fair Market Price of 130
  • Leg2 has Fair Market Price of 120
  • Spread Trade Price - Fair Market Price = 15 – 10 = 5
  • There are 5 ticks to distribute
  • Leg Pricing Assignment rules applied – distribute whole tick value to each leg evenly, remainder applied to leg1
    • Leg1 = 130 + 3 = 133
    • Leg2 =  120 - 2 = 118
    • 133 - 118 = 15

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DG Calendar Diagonal

SecuritySubType=DG

The Diagonal is an option spread involving the simultaneous purchase (sale) of a call (put) in a deferred expiration and a sale (purchase) of a put (call) in an earlier expiration. There are additional requirements for the strike prices based on whether puts or calls are used.

A Diagonal has:

  • One Product
  • Two legs
    • Both legs must be of different expirations
    • Both legs must be of different strike prices
    • First leg must be the deferred expiration compared to the second leg
    • For a Call Diagonal
      • First leg must be a buy of a call in a deferred expiration
      • Second leg must be a sell of a call in a nearby expiration (compared to leg1)
    • For a Put Diagonal
      • First leg must be a buy of a put in a deferred expiration
      • Second leg must be a sell of a put in a nearby expiration (compared to leg1)
  • Buying the Diagonal buys leg1 and sells leg2
  • Selling the Diagonal sells the leg1 and buys leg2
  • Quantity/side ratio of the legs is +1:-1
  • Products created without following strike price construction rules below will receive spread type GN in their security definition message (both in the tags 55-Symbol and in tag 762-SecuritySubType).

Examples

  • Instrument Symbol = UD:1V: DG 1112959471
    • Leg 1 = +1 EWF9 C2940
    • Leg 2 = +1 EWX8 C2865
The differential of the legs must be a tradeable tick for the new combined instrument.  In the event that it is not, orders using the price will be rejected.  This spread can trade to a minimum price of zero. This spread can also trade at a negative price.

Pricing

  • The Diagonal Trade Price is = (Leg1-Leg2) the differential of the legs

Leg Price Assignment

  • Calculate Fair Price of the Diagonal based on fair prices of the legs.
  • Calculate the difference between the Diagonal trade price and the calculated fair price of the spread.
  • Spread Trade Price = Fair Market Price; no remainder to distribute to the legs
  • Any adjustment of the outright leg prices due to remainder will be assigned according to UDS leg pricing assignment rules

Pricing Example – Equal Distribution

Diagonal trades at 850

  • Leg1 has Fair Market Price of 850
  • Leg2 has Fair Market Price of 130
  • Spread Fair Market Price = 850-130 = 720
  • Spread Trade Price – Fair Market Price = 850 – 720 = 130
  • There are 26 ticks to distribute (smallest tick is in the Leg2 price)
  • Ticks are divided up equally as follows:
    • Diagonal Leg1 = 850 + 65 = 915
    • Diagonal Leg2 = 130 – 65 = 65

Pricing Example – Unequal Distribution

Diagonal trades at 825

  • Leg1 has Fair Market Price of 850
  • Leg2 has Fair Market Price of 130
  • Spread Fair Market Price = 850-130 = 720
  • Spread Trade Price – Fair Market Price = 825 – 720 = 105
  • There are 21 ticks to distribute
  • Leg Pricing Assignment rules applied – distribute whole tick value to each leg evenly, remainder applied to leg2:
    • Diagonal Leg1 = 850 + 50 = 900
    • Diagonal Leg2 = 130 – 55 = 75

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ST Straddle

SecuritySubType=ST

The Straddle is an options combination involving the simultaneous purchase (sale) of both a call and put of the same strike and expiration.

Straddle has:

  • One Product
  • Two legs
    • Both legs must be same expiration
    • Both legs must have the same strike
    • One leg must be a call
    • One leg must be a put
  • Quantity/side ratio of the legs is +1:+1
  • Buying the Straddle buys both legs
  • Selling the Straddle sells both legs

Example

  • Instrument Symbol = UD:U$: ST 0625928966
    • Leg 1 = +1 GEU9 C9712
    • Leg 2 = +1 GEU9 P9712
The sum of the legs cannot be priced at or less than zero. Orders placed for at a price at or less than zero will be rejected. This spread cannot trade at a negative price.

Pricing

The Straddle Trade Price is = (Leg1+Leg2) the sum of both option legs

Leg Price Assignment

  • Calculate Fair Price of the Straddle based on fair prices of the legs
  • Calculate the difference between the Straddle trade price and the calculated fair price of the spread
  • Spread Trade Price = Fair Market Price; no remainder to distribute to the legs
  • Any adjustment of the outright leg prices due to remainder will be assigned according to UDS leg pricing assignment rules

Pricing Example – Equal Distribution

Straddle trades at 127.5

  • Leg1 has Fair Market Price of 119
  • Leg2 has Fair Market Price of 8.5
  • Spread Fair Market Price = 119 + 8.5 = 127.5
  • There are  0 ticks to distribute.
  • Trade Price = Fair Market Price; no remainder to distribute to the legs
    • Leg1 = 119 + 0 = 119
    • Leg2 =  8.5 + 0 = 8.5

Pricing Example – Unequal Distribution

Straddle trades at 128

  • Leg1 has Fair Market Price of 119
  • Leg2 has Fair Market Price of 8.5
  • Spread Fair Market Price 119 + 8.5 = 127.5
  • Spread Trade Price - Fair Market Price = .5
  • There is .5 tick to distribute.
  • Leg Pricing Assignment rules applied – distribute whole tick value to each leg evenly, remainder applied to leg1
    •  Leg1 = 119 + .5 = 119.5
    •  Leg2 =   8.5+ 0 = 8.5

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SG Strangle

SecuritySubType=SG

The Strangle is an options combination involving the simultaneous purchase (sale) of buying a put at a lower strike price and buying the call at a higher strike price of the same instrument and expiration.  

A Strangle has:

  • One product
  • Two legs
    • The legs must be of same expirations
    • Both legs must have different strikes
    • Leg1 must be a put of a lower strike price
    • Leg2 must be a call of a higher strike price
    • Quantity/side ratio of +1:+1
    • Buying the Strangle buys both legs
    • Selling the Strangle sells both legs

Example

  • Instrument Symbol = UD:U$: SG 0625930013
    • Leg1 = +1 GEH9 P9712
    • Leg2 = +1 GEH9 C9725
    • Buying the Strangle buys the put at a lower strike price and buys the call at a higher strike price
    • Selling the Strangle sells the put at a lower strike price and sells the call at a higher strike price
The sum of the legs cannot be priced at or less than zero. Orders placed for at a price at or less than zero will be rejected. This spread cannot trade at a negative price.

Pricing

The Strangle Trade Price is = (Leg1+Leg2) the sum of both legs

Leg Price Assignment

  • Calculate Fair Price of the Strangle based on fair prices of the legs
  • Calculate the difference between the Strangle trade price and the calculated fair price of the spread
  • Spread Trade Price = Fair Market Price; no remainder to distribute to the legs
  • Any adjustment of the outright leg prices due to remainder will be assigned according to UDS leg pricing assignment rules

Pricing Example – Equal Distribution

Strangle trades at 21.0

  • Strangle Leg1 has Fair Market Price of 9.5
  • Strangle Leg2 has Fair Market Price of 11.5
  • Spread Fair Market Price 9.5 + 11 = 21
  • Spread Trade Price = Fair Market Price; no remainder to distribute to the legs
  • There are 0 ticks to distribute.
    • Strangle Leg1 = 9.5
    • Strangle Leg2 = 11.5

Pricing Example – Unequal Distribution

Strangle trades at 25.5

  • Strangle Leg1 has Fair Market Price of 9.5
  • Strangle Leg2 has Fair Market Price of 11.5
  • Spread Fair Market Price 9.0 + 11 = 21
  • Strangle Trade Price – Fair Market Price = 4.5
  • There are 4.5 ticks to distribute.
  • Leg Pricing Assignment rules applied – distribute whole tick value to each leg evenly, remainder applied to leg1
    • Strangle Leg1 = 12.0
    • Strangle Leg2 = 13.5

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VT Vertical

SecuritySubType=VT

The Vertical is an options spread involving the simultaneous purchase (sale) of buying a call (put) at one strike price and selling a call (put) at a different strike price within the same expiration.

Vertical has:

  • One Product
  • Two legs
    • Both legs must be same expiration
    • Both legs must be calls or puts
    • Both legs must have different strike prices
        • For a Call Vertical
          • Leg1 must be a at a lower strike
          • Leg2 must be a at a higher strike
        • For a Put Vertical
          • Leg1 must be at a higher strike
          • Leg2 must be at a lower strike
  • Quantity/side ratio of the legs is +1:-1
  • Buying the Vertical buys one leg1 and sells leg2
  • Selling the Vertical sells one leg1 and buys leg2

Example

  • Instrument Symbol = UD:U$: VT 0709922760
    • Leg 1 = +1 GEU9 C9737
    • Leg 2 =  -1 GEU9 C9762
The differential of the legs cannot be priced less than zero. Orders placed for at a price less than zero will be rejected. This spread cannot trade at a negative price.

Pricing

The Vertical Trade Price is = (Leg1-Leg2) the differential of both option legs.

Leg Price Assignment

  • Calculate Fair Price of the Vertical based on fair prices of the legs
  • Calculate the difference between the Vertical trade price and the calculated fair price of the spread
  • Spread Trade Price = Fair Market Price; no remainder to distribute to the legs
  • Any adjustment of the outright leg prices due to remainder will be assigned according to UDS leg pricing assignment rules

Pricing Example – Equal Distribution

Vertical trades at 4.0

  • Leg1 has Fair Market Price of = 9
  • Leg2 has Fair Market Price of = 5
  • Spread Fair Market Price = 9 - 5 = 4
  • Spread Trade Price – Fair Market Price = 4 – 4 = 0
  • There are 0 ticks to distribute.
  • Spread Trade Price – Fair Market Price = 1 Fair Market Price; no remainder to distribute to the legs
    • Leg1 = 9
    • Leg2 = 5

Pricing Example – Unequal Distribution

Vertical trades at 4.5

  • Leg1 has Fair Market Price of 9
  • Leg2 has Fair Market Price of 5
  • Spread Fair Market Price = 9 – 5 = 4
  • Spread Trade Price - Fair Market Price = 4.5 – 4= 0.5
  • There are .5 ticks to distribute.
  • Leg Pricing Assignment rules applied – distribute whole tick value to each leg evenly, remainder applied to leg1
    • Leg1 = 9.25
    • Leg2 = 4.75

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BX Box

SecuritySubType=BX

Box is an options combination involving buying a call and selling a put at the same lower strike combined with buying a put and selling a call at the same higher strike within the same instrument and expiration. A Box is therefore composed of four outright options with restrictions on the buys, sells, puts, calls, and strikes allowed. The Box can also be understood as a buy of a call vertical and a buy of a put vertical in one instrument with consistent strikes between the two verticals.

Box has:

  • One Product
  • Four legs
    • Leg1 (buy leg) must be a call at a strike price
    • Leg2 (sell leg) must be a put at same strike price as leg1
    • Leg3 (buy leg) must be a put at a higher strike price than leg1
    • Leg4 (sell leg) must be a call at same strike price as leg3
    • All four legs must be the same expiration
    • Two legs must be calls and two legs must puts
  • Quantity/side ratio of the legs is +1:-1:+1:-1
  • Buying a Box buy Leg1, sell Leg2, buy Leg3, sell Leg4
  • Selling a Box sell Leg1, buy Leg2, sell Leg3, buy Leg4

Example

  • Instrument Symbol = UD:1V: BX 0806948120
    • Leg1 = +1 ESU8 C2500
    • Leg2 = -1 ESU8 P2500
    • Leg3 = +1 ESU8 P2800
    • Leg4 = -1 ESU8 C2800
The differential of the legs cannot be priced less than zero. Orders placed for at a price less than zero will be rejected. This spread cannot trade at a negative price.

Pricing

  • The Box Trade Price is = sum of Buy legs – sum of Sell legs, or
  • Leg1 – Leg2 + Leg3 – Leg4
  • Leg1 + Leg3 – (Leg2 + Leg4)

Leg Price Assignment

  • Calculate Fair Price of the Box based on fair prices of the legs.
  • Calculate the difference between the Box trade price and the calculated fair price of the spread.
  • Spread Trade Price = Fair Market Price; no remainder to distribute to the legs
  • Any adjustment of the outright leg prices due to remainder will be assigned according to UDS leg pricing assignment rules

Pricing Example – Equal Distribution

Box trades at 34700

  • Leg1 has Fair Market Price of = 24775
  • Leg2 has Fair Market Price of = 3175
  • Leg3 has Fair Market Price of = 14950
  • Leg4 has Fair Market Price of = 1750
  • Spread Fair Trade Price = 24775 + 14950 – (3175 + 1750) = 34800
  • Spread Trade Price - Fair Market Price = 34700 – 34800 = -100
  • There are 4 ticks to distribute.
    • Leg1 = 24775 – 25 = 24750
    • Leg2 = 3175 + 25 = 3200
    • Leg3 = 14950 – 25 = 14925
    • Leg4 = 1750 + 25 = 1775

Pricing Example – Unequal Distribution

Box trades at 34775

  • Leg1 has Fair Market Price of = 24775
  • Leg2 has Fair Market Price of = 3175
  • Leg3 has Fair Market Price of = 14950
  • Leg4 has Fair Market Price of = 1750
  • Spread Fair Trade Price = 24775 + 14950 – (3175 + 1750) = 34800
  • Spread Trade Price - Fair Market Price = 34775 – 34800 = 25
  • There is 1 tick to distribute
  • UDS Leg Pricing Assignment rules applied – distribute whole tick value to each leg evenly, remainder applied to leg1
    • Leg1 = 24775 – 25 = 24750
    • Leg2 = 3175
    • Leg3 = 14950
    • Leg4 = 1750

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CC Conditional Curve

SecuritySubType=CC

Conditional Curve is an options spread unique to CME Eurodollar options. A Conditional Curve involves the simultaneous purchase (sale) of a Eurodollar option and the sale (purchase) of a second Eurodollar option. Both options must be either calls or puts, within the same expiration, and must have different underlying futures

Conditional Curve has:

  • Two Products
    • One product must be a Eurodollar mid-curve option
    • One product must be a Eurodollar option or Eurodollar mid-curve option
    • Both products must support the Conditional Curve options spread
  • Two Legs
    • Leg1 (buy leg) must be a call with an earlier underlying expiration compared to Leg2
    • Leg2 (sell leg) must be a call with a later underlying expiration compared to Leg1
    • Leg1 (buy leg) must be a put with an earlier underlying expiration compared to Leg2
    • Leg2 (sell leg) must be a put with a later underlying expiration compared to Leg1
    • Both legs must have the same expiration date
    • Both legs must be calls or puts
    • No specific requirement on strike price.  Typically, the strikes are close together or equal.
    • The legs must have different underlying products
    • For a Call Conditional Curve
    • For a Put Conditional Curve
  • Quantity/side ratio of the legs is +1:-1
  • Buying a Conditional Curve buys leg1 and sells leg2
  • Selling a Conditional Curve sells leg1 and buys leg2

Example

  • Instrument Symbol = UD: U$: CC 0917923555
    • Leg1 = +1 GE0H9 P9662
    • Leg2 = -1 GE2H9 P9662
The differential of the legs must be a tradeable tick for the new combined instrument. In the event that it is not, orders using the price will be rejected. This spread can trade to a minimum price of zero. This spread can also trade at a negative price.

Pricing

The Conditional Curve Trade Price is = Leg1 - Leg2

Leg Price Assignment

  • Calculate Fair Price of the Conditional Curve based on fair prices of the legs.
  • Calculate the difference between the Conditional Curve trade price and the calculated fair price of the spread.
  • Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
  • Any adjustment of the outright leg prices due to remainder will be assigned according to options combination leg pricing assignment rules.

Pricing Example – Equal Distribution

Conditional Curve trades at 1.5

  • Leg1 has Fair Market Price of = 7
  • Leg2 has Fair Market Price of = 7.5
  • Spread Fair Market Price = 7 – 7.5 = – 0.5
  • Spread Trade Price - Fair Market Price = 1.5 – (-0.5) = 2
  • There are 4 ticks to distribute.
  • The adjustment is applied evenly as follows:
    • Leg1 = 7 + 1 = 8
    • Leg2 = 7.5 – 1 = 6.5

Pricing Example – Unequal Distribution

Conditional Curve trades at 1.0

  • Leg1 has Fair Market Price of = 7
  • Leg2 has Fair Market Price of = 7.5
  • Spread Fair Market Price = 7 – 7.5 = – 0.5
  • Spread Trade Price - Fair Market Price = 1.0 – (-0.5) = 1.5
  • There are 3 ticks to distribute.
  • The adjustment is applied evenly as follows:
    • Leg1 = 7 + 1 = 8
    • Leg2 = 7.5 – .5 = 7

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Double Future Butterfly aka Double Fly

Spread type = DF

A Double Butterfly  is composed of two different Butterfly spreads with the nearest Butterfly expiration purchased (sold) and the furthest Butterfly expiration sold (purchased). The spacing of expirations in both Butterfly spreads needs to be identical, i.e. both need to be “three month” Butterflies. This causes the actual construction of the Double Fly to look like this:

Buy (sell) one of the nearest expiration, sell (buy) three of the second nearest expiration, buy (sell) three of the third nearest expiration, and sell (buy) one of the most deferred expiration.

A Double Butterfly has:

  • One Product
  • four legs
    • Leg1 (buy leg) must be the nearest expiration
    • Leg2 (sell leg) must be the next nearest expiration
    • Leg3 (buy leg) must be the third nearest expiration
    • Leg4 (sell leg) must be the most deferred expiration
  • Quantity/side ratio of the legs is +1:-3:+3:-1
  • Expiration sequencing for Double Butterfly:
    • Leg1 month < Leg2 month < Leg3 month < Leg4 month
    • In addition, expiration differentials must be sequential and equal, i.e. if Leg1 expires in June and Leg2 expires in Sept., the next two legs must have an expiration differential of three months as well, so Leg3 must expire in Dec. and Leg4 must expire in March of the next year (see symbol below for an example of this)


Example: Instrument Symbol = GE:DF M9U9Z9H0

  • Leg1 = +1 GEM9
  • Leg2 = -3 GEU9
  • Leg3 = +3 GEZ9
  • Leg4 = -1 GEH0
  • Buying a Double Butterfly buys leg1, sells three of leg2, buys three off leg3, sells leg4
  • Selling a Double Butterfly sells leg1, buys three of leg2, sells three off leg3, buys leg4
This spread can trade at zero and at a negative price.


Pricing

  • The Double Butterfly Trade Price is = Leg1 – (3 * Leg2) + (3 * Leg3) – Leg4


Leg Price Assignment

  • Leg1, leg2 and leg3 are assigned most recent price update  
  • Leg4 is calculated using differential of traded spread price:
    • Leg1 – (3 * Leg2) + (3 * Leg3) – Trade Price
  • If leg4 price is outside the daily limits, Leg4 will be adjusted to daily limit and Leg1 is recalculated
    • Leg1 = Trade Price + (3 * Leg2) - (3 * Leg3) +Leg4
If leg1 recalculated price is outside the daily limit the price will stand.  Customers can receive a non-settled price for the recalculated leg.


Pricing Examples


Double Butterfly trades at 13.5

  • Leg1 = 9812.5
  • Leg2 = 9857.5
  • Leg3 = 9857.0
  • Leg4 is calculated:
    • 9812.5 – (3 * 9857.5) + (3 * 9857.0) – 13.5
    • Leg4 = 9797.5


Pricing Example Legs Calculated Outside of Daily Limits

 

Leg4 outside daily limit; leg4 reset to daily limit and leg1 is recalculated

Double Butterfly trades at 13.5

  • Leg1 has a calculated price:
    • Leg1 = Trade Price + (3 * Leg2) - (3 * Leg3) +Leg4
    • Leg1 = 13.5 +29572.5 – 29571.0 + 9797.5
    • Leg1 = 9812.5
  • Leg2 = 9857.5
  • Leg3 = 9857.0
  • Leg4 = 9797.5

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HS Horizontal Straddle

SecuritySubType=HS

The Horizontal Straddle is an options combination involving the simultaneous purchase (sale) of a call and a put at an identical strike price in a deferred month, and also selling a call and a put at another identical strike price in a nearby month. More specifically, the Horizontal Straddle consist of buying a Straddle in a deferred month and selling a Straddle in a nearby month.

Horizontal Straddle has:

  • One Product
  • Four legs
    • Leg1 must be a buy of a call in a deferred expiration
    • Leg2 must be a buy of a put with the same expiration and strike as Leg1
    • Leg3 must be a sell of a call in a nearby expiration
    • Leg4 must be a sell of a put with the same expiration and strike as Leg3
  • Quantity/side ratio of the legs is +1:+1:-1:-1
  • Buying a Horizontal Straddle buys leg1, buys leg2, sells leg3, and sells leg4
  • Selling a Horizontal Straddle sells leg1, sells leg2, buys leg3, and buys leg4

Example

  • Instrument Symbol = UD:1V: HS 1010946400
    • Leg1 = +1 EWZ8 C2840
    • Leg2 = +1 EWZ8 P2840
    • Leg3 = -1 EWX8 C2850
    • Leg4 = -1 EWX8 P2850
The differential of the legs must be a tradeable tick for the new combined instrument. If not, orders using the price will be rejected. This combination can trade to a minimum price of zero. This combination can also trade at a negative price.

Pricing

The Horizontal Straddle Trade Price is = Leg1 + Leg2 – Leg3 – Leg4

Leg Price Assignment

  • Calculate Fair Price of the Horizontal Straddle based on fair prices of the legs.
  • Calculate the difference between the Horizontal Straddle trade price and the calculated fair price of the spread.
  • Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
  • Any adjustment of the outright leg prices due to remainder will be assigned according to options combination leg pricing assignment rules.

Pricing Example – Equal Distribution

Horizontal Straddle trades at 3900

  • Leg1 has Fair Market Price of = 8500
  • Leg2 has Fair Market Price of = 7275
  • Leg3 has Fair Market Price of = 5750
  • Leg4 has Fair Market Price of = 6325
  • Spread Fair Market Price = 3700
  • Spread Trade Price - Fair Market Price = 3900 – 3700 = 200
  • There are 8 ticks to distribute
  • The adjustment is applied evenly as follows:
    • Leg1 = 8500 + 50 = 8550
    • Leg2 = 7275 + 50 = 7325
    • Leg3 = 5750 – 50 = 5700
    • Leg4 = 6325 – 50 = 6275

Pricing Example – Unequal Distribution

Horizontal Straddle trades at 3875

  • Leg1 has Fair Market Price of = 8500
  • Leg2 has Fair Market Price of = 7275
  • Leg3 has Fair Market Price of = 5750
  • Leg4 has Fair Market Price of = 6325
  • Spread Fair Market Price = 3700
  • Spread Trade Price - Fair Market Price = 3875 – 3700 = 175
  • There are 7 ticks to distribute
  • The adjustment is applied as follows:
    • Leg1 = 8500 + 100 = 8600
    • Leg2 = 7275 + 25 = 7350
    • Leg3 = 5750 – 25 = 5725
    • Leg4 = 6325 – 25 = 6300

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IC Iron Condor

SecuritySubType=IC

The Iron Condor is an options combination involving the simultaneous purchase (sale) of a vertical call spread and a vertical put spread where all legs must be of same expiration. The strike prices must range from lowest to highest in order of the legs. Due to this restriction, the first leg of the spread is the sell of a put.

An Iron Condor has:

  • One Product
  • Four legs
    • Leg1 (sell leg) must be a put
    • Leg2 (buy leg) must be a put at a higher strike price than leg1
    • Leg3 (buy leg) must be a call at a higher strike price than leg2
    • Leg4 (sell leg) must be a call at a higher strike price than leg3
    • All legs must be the same expiration
  • Quantity/side ratio of the legs is -1:+1:+1:-1
  • Buying an Iron Condor sells leg1, buys leg2, buys leg3, and sells leg4
  • Selling an Iron Condor buys leg1, sells leg2, sells leg3, and buys leg4

Example

  • Instrument Symbol = UD:1N: IC 1008910354
    • Leg1 = -1 LOZ8 P6150
    • Leg2 = +1 LOZ8 P6200
    • Leg3 = +1 LOZ8 C7000
    • Leg4 = -1 LOZ8 C7050
The sum of the legs cannot be priced less than zero. Orders placed for at a price less than zero will be rejected. This spread cannot trade at a negative price.

Pricing

The Iron Condor Trade Price is = Leg2 + Leg3 – Leg1 – Leg4

Leg Price Assignment

  • Calculate Fair Price of the Iron Condor based on fair prices of the legs.
  • Calculate the difference between the Iron Condor trade price and the calculated fair price of the spread.
  • Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
  • Any adjustment of the outright leg prices due to remainder will be assigned according to options combination leg pricing assignment rules.

Pricing Example – Equal Distribution

Iron Condor trades at 40

  • Leg1 has Fair Market Price of = 11
  • Leg2 has Fair Market Price of = 12
  • Leg3 has Fair Market Price of = 444
  • Leg4 has Fair Market Price of = 409
  • Spread Fair Market Price = 36
  • Spread Trade Price - Fair Market Price = 40 – 36 = 4
  • There are 4 ticks to distribute.
  • The adjustment is applied evenly as follows:
    • Leg1 = 11 – 1 = 10
    • Leg2 = 12 + 1 = 13
    • Leg3 = 444 + 1 = 445
    • Leg4 = 409 – 1 = 408

Pricing Example – Unequal Distribution

Iron Condor trades at 39

  • Leg1 has Fair Market Price of = 11
  • Leg2 has Fair Market Price of = 12
  • Leg3 has Fair Market Price of = 444
  • Leg4 has Fair Market Price of = 409
  • Spread Fair Market Price = 36
  • Spread Trade Price - Fair Market Price = 39 – 36 = 3
  • There are 3 ticks to distribute.
  • The adjustment is applied as follows:
    • Leg1 = 11
    • Leg2 = 12 + 3 = 15
    • Leg3 = 444
    • Leg4 = 409

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12 Ratio 1x2

SecuritySubType=12

The Ratio 1x2 is an options spread involving the simultaneous purchase (sale) of one call (put) and the sale (purchase) of two calls (puts) at different strike prices and same expirations.

Ratio 1X2 has:

  • One Product
  • Two legs
    • Leg1 (buy leg) must be a call at a lower strike price for a quantity of one lot
    • Leg2 (sell leg) must be a call at a higher strike price for a quantity of two lots
    • Leg1 (buy leg) must be a put at a higher strike price for a quantity of one lot
    • Leg2 (sell leg) must be a put at a lower strike price for a quantity of two lots
    • Both legs must be the same expiration
    • For a call 1x2
    • For a put 1x2
  • Quantity/side ratio of the legs is +1:-2
  • Buying a Ratio 1x2 buys leg1 and sells leg2
  • Selling a Ratio 1x2 sells leg1 and buys leg2

Example

  • Instrument Symbol = UD:U$: 12 0716928272
    • Leg1 = +1 GEU8 P9800
    • Leg2 = -2 GEU8 P9762
The differential of the legs must be a tradeable tick for the new combined instrument. For example, with the above GE option legs a tradeable tick would be 46.5 - (2*10.5 )= 25.5 (Globex pricing). Because this price is a differential involving a ratio, the spread can trade at a negative price.

Pricing

The Ratio 1x2 Trade Price is = Leg1 – (2*Leg2)

Leg Price Assignment

  • Calculate Fair Price of the Ratio 1x2 based on fair prices of the legs.
  • Calculate the difference between the Ratio 1x2 trade price and the calculated fair price of the spread.
  • Spread Trade Price = Fair Market Price; no remainder to distribute to the legs
  • Any adjustment of the outright leg prices due to remainder will be assigned according to UDS leg pricing assignment rules

Pricing Example – Equal Distribution

Ratio 1x2 trades at 24.0

  • Leg1 has Fair Market Price of = 46.5
  • Leg2 has Fair Market Price of = 10.5 * 2 = 21
  • Spread Fair Trade Price = (1*46.5) – (2*10.5) = 25.5
  • Spread Trade Price - Fair Market Price = 24.0 – 25.5 = -1.5
  • There is a total of 3 ticks to distribute, but a tick to the second leg counts double
  • The adjustment can be applied evenly as a result
    • Leg1 = 46.5 - .5 = 46
    • Leg2 = (21 + 1) / 2 = 11
    • 46 – (11*2) = 24

Pricing Example – Unequal Distribution

Ratio 1x2 trades at 24.5

  • Leg1 has Fair Market Price of = 46.5
  • Leg2 has Fair Market Price of = 10.5 * 2 = 21
  • Spread Fair Trade Price = 46.5 – (2*10.5) = 25.5
  • Spread Trade Price - Fair Market Price = 24.5 – 25.5 = -1
  • Leg Pricing Assignment rules applied – distribute whole tick value to each leg evenly
  • There is a total of 2 whole ticks to distribute, but a tick to the second leg counts double
  • Because of this, the whole adjustment applies to leg 1 only
    • Leg1 = 46.5 – 1 = 45.5
    • Leg2 = -21 / 2 = 10.5
    • 45.5 – (10.5 * 2) = 24.5

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13 Ratio 1x3

SecuritySubType=13

The Ratio 1X3 is an options spread involving the simultaneous purchase (sale) of buying one call (put) and selling three calls (puts) at different strike prices and same expirations.

13 Ratio 1X3 has:

  • One Product
  • Two legs
    • Leg1 (buy leg) must be a call at a lower strike price for a quantity of one lot
    • Leg2 (sell leg) must be a call at a higher strike price for a quantity of three lots
    • Leg1 (buy leg) must be a put at a higher strike price for a quantity of one lot
    • Leg2 (sell leg) must be a put at a lower strike price for a quantity of three lots
    • Both legs must be the same expiration
    • For a call 1x3
    • For a put 1x3
  • Quantity/side ratio of the legs is +1:-3
  • Buying a Ratio 1x3 buys leg1 and sells leg2
  • Selling a Ratio 1x3 sells leg1 and buys leg2

Example

  • Instrument Symbol = UD:1V: 13 0730958091
    • Leg 1 = +1 ESZ8 P2200
    • Leg 2 = -3 ESZ8 P1700
The differential of the legs must be a tradeable tick for the new combined instrument. For example, with the above option legs a fair value price would be 800 - (3*190 )= 430 (CME Globex pricing). The cited instrument trades with a VTT increment of 5 if the price is less than 500, so the price of 430 is valid. Because this price is a differential involving a ratio, the spread can trade at a negative price.

Pricing

The 13 Ratio 1X3 Trade Price is = (1*leg1) - (3*leg2)

Leg Price Assignment

  • Calculate Fair Price of the Ratio 1x3 based on fair prices of the legs.
  • Calculate the difference between the Ratio 1x3 trade price and the calculated fair price of the spread.
  • Spread Trade Price = Fair Market Price; no remainder to distribute to the legs
  • Any adjustment of the outright leg prices due to remainder will be assigned according to UDS leg pricing assignment rules

Pricing Example – Equal Distribution

Ratio 1x3 trades at 265

  • Leg1 has Fair Market Price of = 800
  • Leg2 has Fair Market Price of = 185
  • Spread Fair Market Price = (800*1) – (185*3) = 245
  • Spread Trade Price - Fair Market Price = 265 – 245 = 20
  • There are 4 ticks to distribute, a tick to the second leg counts triple
  • Distribute whole tick value to each leg evenly
    • Leg1 = 800 + 5 = 805
    • Leg2 = 185 – 5 = 180
    • 805 - (180*3) = 265
    • Note – 805 is an untradeable tick for this instrument, however it is legal for leg assignment

The differential of the legs must be a tradeable tick for the new combined instrument.  In the event that it is not, orders using the price will be rejected. This spread can trade to a minimum price of zero. This spread can also trade at a negative price.

Pricing Example – Unequal Distribution

Ratio 1x3 trades at 260

  • Leg1 has Fair Market Price of = 800
  • Leg2 has Fair Market Price of = 185
  • Spread Fair Market Price = 800 – (185*3) = 245
  • Spread Trade Price – Fair Market Price = 260 – 245 = 15
  • There are 3 ticks to distribute, a tick to the second leg counts triple
  • UDS Leg Pricing Assignment rules applied – distribute whole tick value to each leg evenly, remainder applied to leg1
    • Leg1 = 800 + 15 = 815
    • Leg2 = 185
    • 815 – (185*3) = 260

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23 Ratio 2x3

SecuritySubType=23

The Ratio 2x3 is an options spread involving the simultaneous purchase (sale) of two calls (puts) and sale (purchase) of three calls (puts) at different strike prices with the same expirations.

Ratio 2x3 has:

  • One Product
  • Two legs
    • Leg1 (buy leg) must be a call at a lower strike price for a quantity of two lots
    • Leg2 (sell leg) must be a call at a higher strike price for a quantity of three lots
    • Leg1 (buy leg) must be a put at a higher strike price for a quantity of two lots
    • Leg2 (sell leg) must be a put at a lower strike price for a quantity of three lots
    • Both legs must be the same expiration
    • For a call 2x3
    • For a put 2x3
  • Quantity/side ratio of the legs is +2:-3
  • Buying a Ratio 2x3 buys leg1 and sells leg2
  • Selling a Ratio 2x3 sells leg1 and buys leg2

Example

Instrument Symbol = UD:1V: 23 0806947512

    • Leg1 = +2 ESU8 P2800
    • Leg2 = -3 ESU8 P2725
The differential of the legs must be a tradeable tick for the new combined instrument.  In the event that it is not, orders using the price will be rejected. This spread can trade to a minimum price of zero. This spread can also trade at a negative price.

Pricing

The Ratio 2x3 Trade Price is = (2*leg1) – (3*leg2)

Leg Price Assignment

  • Calculate Fair Price of the Ratio 2X3 based on fair prices of the legs.
  • Calculate the difference between the Ratio 2X3 trade price and the calculated fair price of the spread.
  • Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
  • Any adjustment of the outright leg prices due to remainder will be assigned according to UDS leg pricing assignment rules.

Pricing Example – Equal Distribution

Ratio 2x3 trades at 1000

  • Leg1 has Fair Market Price of = 2350
  • Leg2 has Fair Market Price of = 1275
  • Spread Fair Market Price = (2*2350) – (3*1275) = 875
  • Spread Trade Price - Fair Market Price = 1000 – 875 = 125
  • There are 5 ticks to distribute, a tick to the first leg counts double and a tick to the second leg counts triple.
  • The adjustment is applied evenly as follows:
    • Leg1 = 2350 + 25 = 2375
    • Leg2 = 1275 – 25 = 1250
    • (2375*2) – (1250*3) = 1000

Pricing Example – Unequal Distribution

Ratio 2x3 trades at 925

  • Leg1 has Fair Market Price of = 2350
  • Leg2 has Fair Market Price of = 1275
  • Spread Fair Market Price = (2*2350) – (3*1275) = 875
  • Spread Trade Price - Fair Market Price = 925 – 875 = 50
  • There are 2 ticks to distribute, a tick to the first leg counts double and a tick to the second leg counts triple
  • UDS Leg Pricing Assignment rules applied – distribute whole tick value to each leg evenly, remainder applied to leg1
  • The adjustment is applied as follows:
    • Leg1 = 2350 + 25 = 2375
    • Leg2 = 1275
    • (2375*2) – (1275*3) = 925

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RR Risk Reversal

SecuritySubType=RR

The Risk Reversal is an options combination involving the simultaneous purchase (sale) of a call and sale(purchase) of a put with the same expirations.  The strike price of the put must be lower or equal to the strike price of the call.

Risk Reversal has:

  • One Product
  • Two legs
    • Leg1 (buy leg) must be a call at a strike price equal to or higher than the put
    • Leg2 (sell leg) must be a put at a strike price equal to or lower than the call
    • Both legs must be the same expiration
    • One leg must be a call and one leg must be a put
  • Quantity/side ratio of the legs is +1:-1
  • Buying a Risk Reversal buys leg1 and sells leg2
  • Selling a Risk Reversal sells leg1 and buys leg2

Example

  • Instrument Symbol = UD:1V: RR 0910956914
    • Leg1 = +1 ESU8 C2920
    • Leg2 = -1 ESU8 P2775
The differential of the legs must be a tradeable tick for the new combined instrument. In the event that it is not, orders using the price will be rejected. This combination can also trade at a negative price.

Pricing

The Risk Reversal Trade Price = Leg1 – Leg2

Leg Price Assignment

  • Calculate Fair Price of the Risk Reversal based on fair prices of the legs.
  • Calculate the difference between the Risk Reversal trade price and the calculated fair price of the spread.
  • Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
  • Any adjustment of the outright leg prices due to remainder will be assigned according to UDS leg pricing assignment rules.

Pricing Example – Equal Distribution

Risk Reversal trades at -125

  • Leg1 has Fair Market Price of = 260
  • Leg2 has Fair Market Price of = 335
  • Spread Fair Market Price = 260 – 335 = -75
  • Spread Trade Price - Fair Market Price = -125 – (-75) = -50
  • There are 10 ticks to distribute
  • The adjustment is applied evenly as follows:
    • Leg1 = 260 – 25 = 235
    • Leg2 = 335 + 25 = 360
    • 235 – 360 = -125

Pricing Example – Unequal Distribution

Risk Reversal trades at -120

  • Leg1 has Fair Market Price of = 260
  • Leg2 has Fair Market Price of = 335
  • Spread Fair Market Price = 260 – 335 = -75
  • Spread Trade Price - Fair Market Price = -120 – (-75) = -45
  • There are 9 ticks to distribute
  • The adjustment is applied evenly as follows:
    • Leg1 = 260 – 25 = 235
    • Leg2 = 335 + 20 = 355
    • 235 – 355 = -120

Example

  • Instrument Symbol = UD:1V: RR 0910956914
    • Leg1 = +1 ESU8 C2920
    • Leg2 = -1 ESU8 P2775
The differential of the legs must be a tradeable tick for the new combined instrument. In the event that it is not, orders using the price will be rejected. This spread can also trade at a negative price.

Pricing

The Risk Reversal Trade Price is = Leg1 – Leg2

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GD Average Priced Strip Combination

SecuritySubType=GD

The Average Priced Strip Combination is an options spread or combination involving the simultaneous purchase or sale of more than one Average Priced Strips (SA).

GD Strip has:

  • One Product
  • Leg components made up of Averaged Price Strips
    • Minimum of two legs if recursive
    • Minimum of four legs if non-recursive
    • Maximum of 26 legs
  • Buying the Average Priced Strip Combination buys all buy components and sells all sell components
  • Selling the Average Priced Strip Combination sells all buy components and buys all sell components

Example

  • Instrument Symbol = UD:1N: GD 1114915128
    • +1 LOF9 P5800
    • +1 LOG9 P5800
    • +1 LOH9 P5800
    • - 1 LOF9 P5000
    • - 1 LOG9 P5000
    • - 1 LOH9 P5000
    • Globex identifies the following components as the first Average Priced Strip:
    • Globex identifies the following components as the second Average Priced Strip:

If all Average Priced Strip components in the Average Priced Strip Combination are buys, the instrument can only trade at a positive price. If at least one component of the Average Priced Strips is comprised of sell components, the resulting Average Priced Strip Combination can trade at a positive, negative, or zero price.

Pricing

  • The Average Priced Strip Combination minimum tradeable price is the sum of the minimum prices of the Average Priced Strip components. 
  • The Average Priced Strip Combination Trade Price is = The sum of the Average Priced Strips components in the combination
  • Each Leg is then assigned the price of the Average Priced Strip

Leg Price Assignment

  • Calculate the fair value of the Average Priced Strip Combination based on fair prices of the legs.
  • Calculate the difference between the Average Priced Strip Combination trade price and the calculated fair price of the spread.
  • Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
  • Any adjustment to the Averaged Price Strips due to remainder will be assigned according to Averaged Priced Strip Combination leg pricing assignment rules.
  • Apply adjusted Averaged Price Strips prices to each of the components legs

The following examples use the above instrument UD:1N: GD 1114915128.

Pricing Example – Equal Distribution

Average Priced Strip Combination trades at 275

  • Leg1 has Fair Market Price of = 321
  • Leg2 has Fair Market Price of = 420
  • Leg3 has Fair Market Price of = 451
  • The first recognized Average Priced Strip price is = (321+420+451)/3 = 397.3 or 397 after rounding
  • Leg4 has Fair Market Price of = 72
  • Leg5 has Fair Market Price of = 131
  • Leg6 has Fair Market Price of = 181
  • The second recognized Average Priced Strip price is = (72+131+181)/3 = 128
  • Spread Fair Market Price = 397 – 128 = 269
  • Spread Trade Price - Fair Market Price = 275 – 269 = 6
  • There are 6 ticks to distribute between two recognized Average Priced Strips
  • The adjustments are applied as follows:
    • First Average Priced Strip = 397 + 3 = 400
    • Leg’s 1, 2, and 3 are each assigned a price of 400
    • Second Average Priced Strip = 128 – 3 = 125
    • Leg’s 4, 5, and 6 are each assigned a price of 125

Pricing Example – Unequal Distribution

Average Priced Strip Combination trades at 274

  • Leg1 has Fair Market Price of = 321
  • Leg2 has Fair Market Price of = 420
  • Leg3 has Fair Market Price of = 451
  • The first recognized Average Priced Strip price is = (321+420+451)/3 = 397.3 or 397 after rounding
  • Leg4 has Fair Market Price of = 72
  • Leg5 has Fair Market Price of = 131
  • Leg6 has Fair Market Price of = 181
  • The second recognized Average Priced Strip price is = (72+131+181)/3 = 128
  • Spread Fair Market Price = 397 – 128 = 269
  • Spread Trade Price - Fair Market Price = 275 – 269 = 5
  • There are 5 ticks to distribute between two recognized Average Priced Strips
  • The adjustments are applied as follows:
    • First Average Priced Strip = 397 + 3 = 400
    • Leg’s 1, 2, and 3 are each assigned a price of 400
    • Second Average Priced Strip = 128 – 2 = 126
    • Leg’s 4, 5, and 6 are each assigned a price of 126

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XT Xmas Tree

SecuritySubType=XT

The Xmas Tree is an options spread involving the simultaneous purchase (sale) of buying a call (put), selling a call (put), and selling another call (put) of equidistant strike prices within the same expirations.

An Xmas Tree has:

  • One Product
  • Three legs
    • Leg1 (buy leg) must be a call at a certain strike price
    • Leg2 (sell leg) must be a call at a higher strike price than leg1
    • Leg3 (sell leg) must be a call at a higher strike price than leg2
    • The difference in strikes must be equal, i.e. Strike3-Strike2=Strike2-Strike1
    • Leg1 (buy leg) must be a put at a certain strike price
    • Leg2 (sell leg) must be a put at a lower strike price than leg1
    • Leg3 (sell leg) must be a call at a lower strike price than leg2
    • The difference in strikes must be equal, i.e. Strike1-Strike2=Strike2-Strike3
    • All legs must be the same expiration
    • For a call Xmas Tree
    • For a put Xmas Tree
  • Quantity/side ratio of the legs is +1:-1:-1
  • Buying a Xmas Tree buys leg1 and sells leg2 and leg3
  • Selling a Xmas Tree sells leg1 and buys leg2 and leg3

Example

Instrument Symbol = UD:1V: XT 0910958788

  • Leg1 = +1 ESU8 C2950
  • Leg2 = -1 ESU8 C2975
  • Leg3 = -1 ESU8 C3000
The differential of the legs must be a tradeable tick for the new combined instrument. If not, orders using the price will be rejected. This spread can also trade at a negative price.

Pricing

The Xmas Trade Price = Leg1 - Leg2 - Leg3

Leg Price Assignment

  • Calculate Fair Price of the Xmas Tree based on fair prices of the legs.
  • Calculate the difference between the Xmas Tree trade price and the calculated fair price of the spread.
  • Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
  • Any adjustment of the outright leg prices due to remainder will be assigned according to UDS leg pricing assignment rules.

Pricing Example – Equal Distribution

Xmas Tree trades at 30

  • Leg1 has Fair Market Price of = 90
  • Leg2 has Fair Market Price of = 45
  • Leg3 has Fair Market Price of = 30
  • Spread Fair Market Price = 90 – 45 – 30 = 15
  • Spread Trade Price - Fair Market Price = 30 – 15 = 15
  • There are 3 ticks to distribute.
  • The adjustment is applied evenly as follows:
    • Leg1 = 90 + 5 = 95
    • Leg2 = 45 – 5 = 40
    • Leg3 = 30 – 5 = 25
    • 95 – 40 – 25 = 30

Pricing Example – Unequal Distribution

Xmas Tree trades at 25

  • Leg1 has Fair Market Price of = 90
  • Leg2 has Fair Market Price of = 45
  • Leg3 has Fair Market Price of =30
  • Spread Fair Market Price = 90 – 45 – 30 = 15
  • Spread Trade Price - Fair Market Price = 25 – 15 = 10
  • There are 2 ticks to distribute.
  • The adjustment is applied as follows:
    • Leg1 = 90 + 10 = 100
    • Leg2 = 45
    • Leg3 = 30
    • 100 – 45 – 30 = 25

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3W 3-Way

SecuritySubType=3W

The Call 3-Way is an options combination involving the simultaneous purchase (sale) of a call, the sale (purchase) of a second call, and the sale (purchase) of a put. Leg1’s strike price must be between Leg2’s higher strike price and Leg3’s lower strike price. All legs must have the same expiration. More specifically, the 3-Way combination is the simultaneous purchase of a vertical call spread and sale of a put against it.

The Put 3-Way is an options combination involving the simultaneous purchase (sale) of a put, the sale (purchase) of a second put, and the sale (purchase) of a call. Leg1’s strike price must be between Leg2’s lower strike price and Leg3’s higher strike price. All legs must have the same expiration. More specifically, the 3-Way combination is the simultaneous purchase of a vertical put spread and sale of a call against it.

3-Way has:

  • One Product
  • Three legs
    • Leg1 (buy leg) must be a call
    • Leg2 (sell leg) must be a call at a higher strike price than leg1
    • Leg3 (sell leg) must be a put at a lower strike price than leg1
    • Leg1 (buy leg) must be a put
    • Leg2 (sell leg) must be a put at a lower strike price than leg1
    • Leg3 (sell leg) must be a call at a higher strike price than leg1
    • All legs must be the same expiration
    • For a call 3-Way
    • For a put 3-Way
  • Quantity/side ratio of the legs is +1:-1:-1
  • Buying a 3-Way buys leg1, sells leg2, sells leg3
  • Selling a 3-Way sells leg1, buys leg2, buysleg3

Example

  • Instrument Symbol = UD:1V: 3W 1010948130
    • Leg1 = +1 ESZ8 P2800
    • Leg2 = -1 ESZ8 P2780
    • Leg3 = -1 ESZ8 C3000
The differential of the legs must be a tradeable tick for the new combined instrument. If not, orders using the price will be rejected. This spread can trade  at a price of zero. This spread can also trade at a negative price. Leg prices can be assigned at an untradeable ticks.

Pricing

The 3-Way Trade Price is = Leg1 – Leg2 – Leg3

Leg Price Assignment

  • Calculate Fair Price of the 3-Way based on fair prices of the legs.
  • Calculate the difference between the 3-Way trade price and the calculated fair price of the spread.
  • Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
  • Any adjustment of the outright leg prices due to remainder will be assigned according to options combination leg pricing assignment rules.

Pricing Example – Equal Distribution

3-Way trades at 525

  • Leg1 has Fair Market Price of = 10200
  • Leg2 has Fair Market Price of = 9300
  • Leg3 has Fair Market Price of = 405
  • Spread Fair Market Price = 495
  • Spread Trade Price - Fair Market Price = 525 – 495 = 30
  • There are 6 ticks to distribute.
  • The adjustment is applied evenly as follows:
    • Leg1 = 10200 + 10 = 10210
    • Leg2 = 9300 – 10 = 9290
    • Leg3 = 405 – 10 = 395

Pricing Example – Unequal Distribution

3-Way trades at 550

  • Leg1 has Fair Market Price of = 10200
  • Leg2 has Fair Market Price of = 9300
  • Leg3 has Fair Market Price of = 405
  • Spread Fair Market Price = 495
  • Spread Trade Price - Fair Market Price = 550 – 495 = 55
  • There are 11 ticks to distribute.
  • The adjustment is applied as follows:
    • Leg1 = 10200 + 25 = 10225
    • Leg2 = 9300 – 15 = 9285
    • Leg3 = 405 – 15 = 390

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3C 3-Way Straddle versus Call

SecuritySubType=3C

The 3-Way Call Straddle is an options combination involving the simultaneous purchase (sale) of a call and a put at the same strike price, while selling an additional call at a different strike price. All legs must be of same expiration. More specifically, the 3-Way Call Straddle options combination is the simultaneous purchase (sale) of a Straddle and sale (purchase) of a call within the same expiration.

3-Way Call Straddle has:

  • One Product
  • Three legs
    • Leg1 (buy leg) must be a call
    • Leg2 (buy leg) must be a put at same strike price as leg1
    • Leg3 (sell leg) must be a call at a different strike price than Legs 1 and 2
    • All legs must be the same expiration
    • For a call 3-Way Call Straddle
  • Quantity/side ratio of the legs is +1:+1:-1
  • Buying a 3-Way Call Straddle buys leg1, buys leg2, sells leg3
  • Selling a 3-Way Call Straddle sells leg1, sells leg2, buys leg3

Example

  • Instrument Symbol = UD:U$: 3C 1015931432
    • Leg1 = +1 GEZ8 C9750
    • Leg2 = +1 GEZ8 P9750
    • Leg3 = -1 GEZ8 C9800
The differential of the legs must be a tradeable tick for the new combined instrument. In the event that it is not, orders using the price will be rejected. This spread can trade at a price of zero. This spread can also trade at a negative price.

Pricing

The 3-Way Call Straddle Trade Price is = Leg1 + Leg2 – Leg3

Leg Price Assignment

  • Calculate Fair Price of the 3-Way Call Straddle based on fair prices of the legs.
  • Calculate the difference between the 3-Way Call Straddle trade price and the calculated fair price of the spread.
  • Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
  • Any adjustment of the outright leg prices due to remainder will be assigned according to options combination leg pricing assignment rules.

Pricing Example – Equal Distribution

3-Way Call Straddle trades at 22

  • Leg1 has Fair Market Price of = 1.5
  • Leg2 has Fair Market Price of = 19
  • Leg3 has Fair Market Price of = 1.5
  • Spread Fair Market Price = 1.5 + 19 - 1.5 = 19
  • Spread Trade Price - Fair Market Price = 22 – 19 = 3
  • There are 6 ticks to distribute.
  • The adjustment is applied evenly as follows:
    • Leg1 = 1.5 + 1 = 2.5
    • Leg2 = 19 + 1 = 20
    • Leg3 = 1.5 – 1 = .5

Pricing Example – Unequal Distribution

3-Way Call Straddle trades at 21

  • Leg1 has Fair Market Price of = 1.5
  • Leg2 has Fair Market Price of = 19
  • Leg3 has Fair Market Price of = 1.5
  • Spread Fair Market Price = 1.5 + 19 - 1.5 = 19
  • Spread Trade Price - Fair Market Price = 21 – 19 = 2
  • There are 4 ticks to distribute.
  • The adjustment is applied evenly as follows:
    • Leg1 = 1.5 + 1 = 2.5
    • Leg2 = 19 + .5 = 19.5
    • Leg3 = 1.5 – .5 = 1

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3P 3-Way Straddle versus Put

SecuritySubType=3P

The 3-Way Put Straddle is an options combination involving the simultaneous purchase (sale) of a call, and a put at the same strike price, while selling an additional put at a different strike price. All legs must be of the same expiration. The 3-Way Put Straddle options combination can be understood as the simultaneous purchase (sale) of a Straddle and sale (purchase) of a put within the same expiration.

3-Way Put Straddle has:

  • One Product
  • Three legs
    • Leg1 (buy leg) must be a call
    • Leg2 (buy leg) must be a put at same strike price as leg1
    • Leg3 (sell leg) must be a put at a  different strike price than Legs 1 and 2
    • All legs must be the same expiration
    • For a put 3-Way Put Straddle
  • Quantity/side ratio of the legs is +1:+1:-1
  • Buying a 3-Way Put Straddle buys leg1, buys leg2, sells leg3
  • Selling a 3-Way Put Straddle sells leg1, sells leg2, buys leg3

Example

  • Instrument Symbol = UD:U$: 3P 1015931394
    • Leg1 = +1 GEM9 C9725
    • Leg2 = +1 GEM9 P9725
    • Leg3 = -1 GEM9 P9700
The differential of the legs must be a tradeable tick for the new combined instrument. If not, orders using the price will be rejected. This spread can trade to at a price of zero. This spread can also trade at a negative price.


Pricing

The 3-Way Put Straddle Trade Price is = Leg1 + Leg2 – Leg3

Leg Price Assignment

  • Calculate Fair Price of the 3-Way Put Straddle based on fair prices of the legs.
  • Calculate the difference between the 3-Way Put Straddle trade price and the calculated fair price of the spread.
  • Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
  • Any adjustment of the outright leg prices due to remainder will be assigned according to options combination leg pricing assignment rules.

Pricing Example – Equal Distribution

3-Way Put Straddle trades at 25

  • Leg1 has Fair Market Price of = 5
  • Leg2 has Fair Market Price of = 32
  • Leg3 has Fair Market Price of =13.5
  • Spread Fair Market Price = 23.5
  • Spread Trade Price - Fair Market Price = 25 – 23.5 = 1.5
  • There are 3 ticks to distribute.
  • The adjustment is applied evenly as follows:
    • Leg1 = 5 + .5 = 5.5
    • Leg2 = 32 + .5 = 32.5
    • Leg3 = 13.5 - .5 = 13

Pricing Example – Unequal Distribution

3-Way Put Straddle trades at 24

  • Leg1 has Fair Market Price of = 5
  • Leg2 has Fair Market Price of = 32
  • Leg3 has Fair Market Price of =13.5
  • Spread Fair Market Price = 23.5
  • Spread Trade Price - Fair Market Price = 24 – 23.5 =.5
  • There are 1 ticks to distribute.
  • The adjustment is applied evenly as follows:
    • Leg1 = 5 + .5 = 5.5
    • Leg2 = 32
    • Leg3 = 13.5

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IB Iron Butterfly

SecuritySubType=IB

The Iron Butterfly is an options combination involving the simultaneous sale (purchase) of a put, the purchase (sale) of a second put, the purchase (sale) of a call, and the sale (purchase) of a second call. All components must have the same expiration. The first leg of the  Iron Butterfly must be a sell. Although the strikes are not required to be consecutive or equidistant, the middle strikes of the buy put and buy call must be identical. The Iron Butterfly can also be understood as the simultaneous sale (purchase) of a Strangle (SG) and the purchase (sale) of a Straddle (ST).

Iron Butterfly has:

  • One Product
  • Four legs
    • Leg1 (sell leg) must be a put at  the lowest strike price
    • Leg2 (buy leg) must be a put at the middle strike price
    • Leg3 (buy leg) must be a call at the same middle strike price as Leg2
    • Leg4 (sell leg) must be a call at the highest strike price
    • All four legs must be the same expiration
  • Quantity/side ratio of the legs is -1:+1:+1:-1
  • Strike Values Leg1 < Leg2 = Leg3 < Leg4
  • Buying a Iron Butterfly sells leg1, buys leg2, buys leg3, and sells leg4
  • Selling a Iron Butterfly buys leg 1, sells leg2, sells leg3, and buys leg4

Example

  • Instrument Symbol = UD:1V: 0807949953
    • Leg1 = -1 EWU8 P2710
    • Leg2 = +1 EWU8 P2810
    • Leg3 = +1 EWU8 C2810
    • Leg4 = -1 EWU8 C2870
The differential of the legs cannot be priced less than zero. Orders placed at a price less than zero will be rejected. This combination cannot trade at a negative price.

Pricing

The Iron Butterfly Trade Price is = Leg2 + Leg3 – (Leg1 + Leg4)

Leg Price Assignment

  • Calculate Fair Price of the Iron Butterfly based on fair prices of the legs.
  • Calculate the difference between the Iron Butterfly trade price and the calculated fair price of the spread.
  • Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
  • Any adjustment of the outright leg prices due to remainder will be assigned according to options combination leg pricing assignment rules.

Pricing Example – Equal Distribution

Iron Butterfly trades at 150

  • Leg1 has Fair Market Price of = 27
  • Leg2 has Fair Market Price of = 119
  • Leg3 has Fair Market Price of = 65
  • Leg4 has Fair Market Price of = 11
  • Spread Fair Market Price = 119 + 65 – (27 + 11) = 146
  • Spread Trade Price - Fair Market Price = 150 -146 =
  • There are 4 ticks to distribute
  • The adjustment is applied evenly as follows:
    • Leg1 = 27 – 1 = 26
    • Leg2 = 119 + 1 = 120
    • Leg3 = 65 + 1 = 66
    • Leg4 = 11 – 1 = 10

Pricing Example – Unequal Distribution

Iron Butterfly trades at 149

  • Leg1 has Fair Market Price of = 27
  • Leg2 has Fair Market Price of = 119
  • Leg3 has Fair Market Price of = 65
  • Leg4 has Fair Market Price of = 11
  • Spread Fair Market Price = 119 + 65 – (27 + 11) = 146
  • Spread Trade Price - Fair Market Price = 149 – 146 = 3
  • There are 3 ticks to distribute
  • The adjustment is applied as follows:
    • Leg1 = 27
    • Leg2 = 119 + 3
    • Leg3 = 65
    • Leg4 = 11

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JR Jelly Roll

SecuritySubType=JR

The Jelly Roll is an options combination involves the simultaneous sale (purchase) of call and purchase (sale) of a put at one strike price in a nearby expiration while also making a purchase (sale) of a call and sale (purchase) of a put at another strike price in a deferred expiration. There is no additional requirement for the strike prices. The Jelly Roll can be understood as the simultaneous sale of a nearby same strike Risk Reversal and purchase of a deferred same strike Risk Reversal. It is important to note that, with this combination, the first leg is a sell leg.

Jelly Roll has:

  • One Product
  • Four legs
    • Leg1 (sell leg) must be a call
    • Leg2 (buy leg) must be a put at a same strike price and expiration as leg1
    • Leg3 (buy leg) must be a call at a deferred expiration compared to Leg’s 1 and 2
    • Leg4 (sell leg) must be a put at a same strike price and expiration as leg3
  • Quantity/side ratio of the legs is -1:+1:+1:-1
  • Buying a Jelly Roll sell leg1, buy leg2, buy leg3, and sell leg4
  • Selling a Jelly Roll buys leg1, sells leg2, sells leg3, and buys leg4

Example

  • Instrument Symbol = UD:1V: JR 1015959369
    • Leg1 = -1 ESZ8 C2775
    • Leg2 = +1 ESZ8 P2775
    • Leg3 = +1 ESM9 C2775
    • Leg4 = -1 ESM9 P2775
The differential of the legs must be a tradeable tick for the new combined instrument. Orders submitted with an untradeable tick will be rejected. This spread can trade at a price of zero. This spread can also trade at a negative price.

Pricing

The Jelly Roll Trade Price is = Leg2 + Leg3 – Leg1 – Leg4

Leg Price Assignment

  • Calculate Fair Price of the Jelly Roll based on fair prices of the legs.
  • Calculate the difference between the Jelly Roll trade price and the calculated fair price of the spread.
  • Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
  • Any adjustment of the outright leg prices due to remainder will be assigned according to options combination leg pricing assignment rules.

Pricing Example – Equal Distribution

Jelly Roll trades at 1675

  • Leg1 has Fair Market Price of = 8725
  • Leg2 has Fair Market Price of = 5975
  • Leg3 has Fair Market Price of = 16850
  • Leg4 has Fair Market Price of = 12525
  • Spread Fair Market Price = 1575
  • Spread Trade Price - Fair Market Price = 1675 – 1575 = 100
  • There are 4 ticks to distribute
  • The adjustment is applied evenly as follows:
    • Leg1 = 8725 – 25 = 8700
    • Leg2 = 5975 + 25 = 6000
    • Leg3 = 16850 + 25 = 16875
    • Leg4 = 12525 – 25 = 12500

Pricing Example – Unequal Distribution

Jelly Roll trades at 1650

  • Leg1 has Fair Market Price of = 8725
  • Leg2 has Fair Market Price of = 5975
  • Leg3 has Fair Market Price of = 16850
  • Leg4 has Fair Market Price of = 12525
  • Spread Fair Market Price = 1575
  • Spread Trade Price - Fair Market Price = 1650 – 1575 = 75
  • There are 3 ticks to distribute
  • The adjustment is applied evenly as follows:
    • Leg1 = 8725
    • Leg2 = 5975 + 75 = 6050
    • Leg3 = 16850
    • Leg4 = 12525

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GT Guts

SecuritySubType=GT

The Guts is an options combination involving the simultaneous purchase (sale) of call and a put within the same expiration. Unlike a Straddle and Strangle, a Guts combination has the strike price of the put higher than the strike price of the call.

Guts combination has:

  • One Product
  • Two legs
    • Both legs must be the same expiration
    • Leg1 (buy leg) must be a call
    • Leg2 (buy leg) must be a put at a higher strike price than Leg1
  • Quantity/side ratio of the legs is +1:+1
  • Buying a Guts buys leg1, buys leg2
  • Selling a Guts sells leg1, sells leg2

Example

  • Instrument Symbol = UD:1N: GT 1016922333
    • Leg1 = +1 LOF9 C6900
    • Leg2 = +1 LOF9 P7350
The minimum price of the spread is the sum of the minimum ticks of the legs. The resulting tick must be a tradeable tick or the price will be rejected.

Pricing

The Guts Trade Price is = Leg1 + Leg2

Leg Price Assignment

  • Calculate Fair Price of the Guts based on fair prices of the legs.
  • Calculate the difference between the Guts trade price and the calculated fair price of the spread.
  • Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
  • Any adjustment of the outright leg prices due to remainder will be assigned according to options combination leg pricing assignment rules.

Pricing Example – Equal Distribution

Guts trades at 883

  • Leg1 has Fair Market Price of = 450
  • Leg2 has Fair Market Price of = 423
  • Spread Fair Market Price = 873
  • Spread Trade Price - Fair Market Price = 883 – 873 = 10
  • There are 10 ticks to distribute
  • The adjustment is applied evenly as follows:
    • Leg1 = 450 + 5 = 455
    • Leg2 = 423 + 5 = 428

Pricing Example – Unequal Distribution

Guts trades at 884

  • Leg1 has Fair Market Price of = 450
  • Leg2 has Fair Market Price of = 423
  • Spread Fair Market Price = 873
  • Spread Trade Price - Fair Market Price = 884 – 873 = 11
  • There are 11 ticks to distribute
  • The adjustment is applied as follows:
    • Leg1 = 450 + 6 = 456
    • Leg2 = 423 + 5 = 428

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CV Covered

SecuritySubType=CV

The CV Covered is the simultaneous purchase or sale of outright options or options spreads or combination 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 options 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 or combination, 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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EO Reduced Tick Options Spread

SecuritySubType=EO

The Reduced Tick Options Spread  is an inter-commodity options spread which can also be constructed as a combination consisting of the simultaneous purchase(sale) of an American Style Natural Gas Option with the sale (purchase) of a European Style Natural Gas Option. There are no restrictions regarding option type, strike, or expiration for either leg.

Uniqueness and differences of the Reduced Tick Options Spread are highlighted in the table below:

Instrument

CME Globex Price example

CME Globex Settlement

CME Globex Tick Size

Notes

ONX8 C3150

64

64

1

Underlying product is NGX8, American Style option.

LNEX8 C3150

630

633

10

Underlying product is NGX8, European Style option. 

  1. Price lists an extra character
  2. The tick of 10 is equivalent to the tick of 1 in the ON
  3. During trading, this extra character will always be zero
  4. Settlement allows the last character to be any digit including zero

Reduced Tick Options Spread

UD:EO

1

.7

.1

  1. Product is priced in ON terms
  2. Spread price is ON – LNE with LNE converted to ON terms
  3. Conversion requires LNE price to be divided by 10
  4. Price assignment for the LNE leg can be an untradeable tick (the last digit may not be zero)

A Reduced Tick Options Spread has:

  • Two Products
  • Two legs
  • Both products must be of different NYMEX Energy Product Groups of unequal ticks
    • Leg1 (buy leg) must be an outright option with Globex Symbol beginning ON (ex. ONX8 C3150)
    • Leg2 (sell leg) must be an outright option with Globex Symbol beginning LNE (ex. LNEX8 C3150)
    • There are no requirements for option type, strike price, or expiration between the two legs
    • If both legs are calls or puts, the resulting instrument is a Spread
    • If one leg is a call and one leg is a put, the resulting instrument is a Combination
  • Quantity/side ratio of the legs is +1:-1
  • Buying a Reduced Tick Options Spread or Combination buys leg1 and sells leg2
  • Selling a Reduced Tick Options Spread or Combination sells leg1 and buys leg2

Example

  • Instrument Symbol = UD:1T: EO 1026911365
    • Leg1 = +1 ONX8 C3150
    • Leg2 = -1 LNEX8 C3150
The differential of the legs must be a tradeable tick for the new combined instrument. Orders submitted with an untradeable tick will be rejected. This spread can trade to a price of zero. This spread can also trade at a negative price.

Pricing

  • The EO Reduced Tick trade price is = Leg1 – Leg2

Leg Price Assignment

  • Calculate Fair Price of the Reduced Tick Options Spread or Combination based on fair prices of the legs.
  • Calculate the difference between the Reduced Tick Options Spread or Combination trade price and the calculated fair price of the spread.
  • Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
  • Any adjustment of the outright leg prices due to remainder will be assigned according to options combination leg pricing assignment rules.

Pricing Example – Equal Distribution

EO Reduced Tick trades at 3.0

  • Leg1 has Fair Market Price of = 64
  • Leg2 has Fair Market Price of = 630
  • Spread Fair Market Price = 64 – (630/10) = 1.0
  • Spread Trade Price - Fair Market Price = 3.0 – 1.0 = 2.0
  • There are 2 ticks to distribute.
  • The adjustment is applied evenly as follows:
    • Leg1 = 64 + 1 = 65
    • Leg2 = 630 – 10 = 620

Pricing Example – Unequal Distribution

EO Reduced Tick trades at 2.9

  • Leg1 has Fair Market Price of = 64
  • Leg2 has Fair Market Price of = 630
  • Spread Fair Market Price = 64 – (630/10) = 1.0
  • Spread Trade Price - Fair Market Price = 2.9 – 1.0 = 1.9
  • There are 1.9 ticks to distribute.
  • The adjustment is applied as follows:
    • Leg1 = 64 + 1.9 = 65.9
    • Leg2 = 630

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Generic

SecuritySubType=GN

If the spread or combination requested by the user is not identified as one of the CME Globex 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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CME FX Link (XF, YF)

CME FX Link is traded on CME Globex as the differential between CME FX Futures and OTC Spot FX, resulting in the simultaneous execution of FX Futures cleared by CME Group, and OTC Spot FX transactions subject to bilateral OTC relationships. The CME FX Link spreads consist of OTC FX Spot vs. each of the front three quarterly CME FX Futures. Three consecutive CME FX Link months are listed for eligible currency pairs. A new spread will be added two weeks prior to the last trade date of an expiring CME FX Future. The OTC FX Spot leg is only tradeable as part of the CME FX Link spread.

The spreads are traded as a differential between FX Futures and OTC spot, with both legs expressed in OTC quote convention. Therefore, the spread construction is either non-inverted or inverted, depending on whether the quoting convention of the related futures leg is inverted or non-inverted with respect to the typical OTC convention for that currency pair.

With a non-inverted CME FX Link Spread (XF):

    • The CME FX Future follows the same convention as the OTC market.
    • The buyer of the spread buys CME FX futures and sells OTC spot. The seller sells CME futures and buys OTC spot.  

With an inverted CME FX Link Spread (YF):

    • The CME FX Future is inverted from the standard OTC convention.
    • The buyer of the spread sells CME FX futures and sells OTC spot. The seller buys CME futures and buys OTC spot.

Non-Inverted CME FX Link Spread (XF)

Construction: Buy1FXFutureExp1  Sell1FXOTCSpot

Security Definition Example6E:XF:EURUSD:M8 

Example: Buy the Spread

Buy 1 March 2018 CME Euro FX Future and

Sell 1 Euro / US Dollar Spot 

Example: Sell the Spread

Sell 1 March 2018 CME Euro FX Future and

Buy 1 Euro / US Dollar Spot 

Inverted CME FX Link Spread (YF)

Construction: Sell1FXFutureExp1  Sell1FXOTCSpot

Security Definition Example: 6J:YF:USDJPY:M8 

Example: Buy the Spread

Sell 1 March 2018 Japanese Yen Future and

Sell 1 US Dollar / Japanese Yen Spot 

Example: Sell the Spread

Buy 1 March 2018 Japanese Yen Future and

Buy 1 US Dollar / Japanese Yen Spot

Selling an inverted FX futures contract is the same as buying the contract in OTC terms.

Pricing

This section provides an overview of FX Link Pricing. For more detailed pricing information, consult the FX Link quotation and pricing guide. The full economic terms of the spot instrument will be available on CME STP.

Pricing Overview

The formula for spot rate for non-inverted and inverted spreads is outlined below. The FX Link spot leg is rounded based on the Security Definition minimum tick precision (tag 969-MinPriceIncrement), after the calculations below are performed. The trade date for FX Link is the market data trade date, not the clearing trade date. Tag 527-SecondaryExecID allows linking the spread summary fill notice with the leg fill notices to determine price information.

Pricing Formula

  • Non-Inverted (XF)
    • Spot Price = Future Price – Spread Price
  • Inverted (YF)
    • Spot Price = (1/ Futures Price) – Spread Price

Notional Calculations

  • Non-Inverted (XF)
    • Base Notional = Contract Size * Contract Quantity
    • Quote Notional = Base Notional * Spot Price
  • Inverted (YF)
    • Base Notional = Quote Notional / Spot Price
    • Quote Notional = Contract Size * Contract Quantity

Value Date

  • USD/CAD = T+1 business days, all other currency pairs are T+2 business days
  • Value date must be a valid day in both currencies’ calendars.

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SS Straddle Strip

SecuritySubType=SS

The Straddle Strip is an options combination involving the simultaneous purchase (sale) of four consecutive quarterly Straddles at the same strike price.

Straddle Strip has:

  • One Product
  • Eight legs
    • Leg1 must be a call in Exp1
    • Leg2 must be a put in Exp1
    • Leg3 must be a call in Exp2
    • Leg4 must be a put in Exp2
    • Leg5 must be a call in Exp3
    • Leg6 must be a put in Exp3
    • Leg7 must be a call in Exp4
    • Leg8 must be a put in Exp4
    • All legs must have the same strike price
    • Each put and call pair must be in consecutive quarterly expirations (Exp1, Exp2, Exp3, Exp4)
    • All legs must be buys
  • Quantity/side ratio of the legs is +1:+1:+1:+1:+1:+1:+1:+1
  • Buying a Straddle Strip buys all eight legs
  • Selling a Straddle Strip sells all eight legs

Example

  • Instrument Symbol = UD:U$: SS 1024924968
    • Leg1 = +1 GEZ0 C9687
    • Leg2 = +1 GEZ0 P9687
    • Leg3 = +1 GEH1 C9687
    • Leg4 = +1 GEH1 P9687
    • Leg5 = +1 GEM1 C9687
    • Leg6 = +1 GEM1 P9687
    • Leg7 = +1 GEU1 C9687
    • Leg8 = +1 GEU1 P9687
The minimum tradeable price of a Straddle Strip is the sum of the minimum prices of the legs provided it results in a tradeable tick for the combination.  Orders entered below this minimum price or at an untradeable tick will be rejected.  This combination cannot trade zero or negative.

Pricing

The Straddle Strip Trade Price is = Leg1 + Leg2 + Leg3 + Leg4 + Leg5 + Leg6 + Leg7 + Leg8

Leg Price Assignment

  • Calculate Fair Price of the Straddle Strip based on fair prices of the legs.
  • Calculate the difference between the Straddle Strip trade price and the calculated fair price of the spread.
  • Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
  • Any adjustment of the outright leg prices due to remainder will be assigned according to options combination leg pricing assignment rules.

Pricing Example – Equal Distribution

Straddle Strip trades at 348

  • Leg1 has Fair Market Price of = 39.5
  • Leg2 has Fair Market Price of = 38
  • Leg3 has Fair Market Price of = 43
  • Leg4 has Fair Market Price of = 40
  • Leg5 has Fair Market Price of = 47.5
  • Leg6 has Fair Market Price of = 42.5
  • Leg7 has Fair Market Price of = 49.5
  • Leg8 has Fair Market Price of = 44
  • Spread Fair Market Price = 39.5 + 38 + 43 + 40 + 47.5 + 42.5 + 49.5 + 44 = 344
  • Spread Trade Price - Fair Market Price = 348 – 344 = 4
  • There are 8 ticks to distribute.
  • The adjustment is applied evenly as follows:
    • Leg1 = 39.5 + .5 = 40
    • Leg2 = 38 + .5 = 38.5
    • Leg3 = 43 + .5 = 43.5
    • Leg4 = 40 + .5 = 40.5
    • Leg5 = 47.5 + .5 = 48
    • Leg6 = 42.5 + .5 = 43
    • Leg7 = 49.5 + .5 = 50
    • Leg8 = 44 + .5 = 44.5

Pricing Example – Unequal Distribution

Straddle Strip trades at 347.5

  • Leg1 has Fair Market Price of = 39.5
  • Leg2 has Fair Market Price of = 38
  • Leg3 has Fair Market Price of = 43
  • Leg4 has Fair Market Price of = 40
  • Leg5 has Fair Market Price of = 47.5
  • Leg6 has Fair Market Price of = 42.5
  • Leg7 has Fair Market Price of = 49.5
  • Leg8 has Fair Market Price of = 44
  • Spread Fair Market Price = 39.5 + 38 + 43 + 40 + 47.5 + 42.5 + 49.5 + 44 = 344
  • Spread Trade Price - Fair Market Price = 347.5 – 344 = 3.5
  • There are 7 ticks to distribute.
  • Leg Pricing Assignment rules applied – whole tick and remainder applied to leg1:
  • The adjustment is applied as follows:
    • Leg1 = 39.5 + 3.5 = 43
    • Leg2 = 38
    • Leg3 = 43
    • Leg4 = 40
    • Leg5 = 47.5
    • Leg6 = 42.5
    • Leg7 = 49.5
    • Leg8 = 44

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AB Averaged Price Bundle

SecuritySubType=AB

The Averaged Price Bundle is a futures spread involving the simultaneous purchase (sale) of futures positions at the averaged price of the legs.

This strategy is available as a futures exchange-defined spread only.

Averaged Price Bundle spread has:

  • One product
  • Minimum of four legs
  • Maximum of 40 legs
  • Expiration of all the legs must be consecutive quarterly outright futures
  • Quantity/side ratio +1:+1:+1:+1:…+1

Example:

  • Instrument Symbol = SR3: AB
  • Leg1 fair market price = xxxx
  • Leg2 fair market price = xxxx
  • Leg3 fair market price = xxxx
  • Leg4 fair market price = xxxx

Note

The fair market price can be either the most recent available prices from outright markets; trade, best bid/best offer, or Indicative Opening Price.


Pricing:

  • The Averaged Price Bundle spread trade price is = (Leg1+Leg2+…LegN) / total number of legs
  • Leg price assignment:
    • Any fair market eligible .25 tick legs are rounded up to .50 tick
    • The difference between the total spread trade price (multiplying the trade price by the number of legs) and the sum of the spread fair market price is calculated:
      • [(Trade price * number of legs) – (Sum of the legs’ fair market price)]
      • The average differential from step 2 is applied to each leg’s fair market price
      • Legs may be adjusted to equal spread trade price
    • Any adjustment of the outright leg prices due to remainder will be assigned according to the Averaged Price Bundle leg pricing assignment rules. The remainder will be applied in .50 increments starting with most deferred leg.


Pricing Example – Equal Distribution:

Averaged Price Bundle trades at 9705.0

  • Leg1 fair market price = 9706.5
  • Leg2 fair market price = 9705.5
  • Leg3 fair market price = 9703.5
  • Leg4 fair market price = 9702.5
  • Total spread trade price – sum of fair market price
  • 38820.0000 – 38818.0000 = 2
    • Apply average differential to each leg:
    • Leg1 = 9707.0
    • Leg2 = 9706.0
    • Leg3 = 9704.0
    • Leg4 = 9703.0


Pricing Example – Unequal Distribution:

Averaged Price Bundle trades at 9700.0

  • Leg1 fair market price = 9706.0
  • Leg2 fair market price = 9705.5
  • Leg3 fair market price = 9703.5
  • Leg4 fair market price = 9702.5
  • Total spread trade price – sum of fair market price
  • 38800.0 – 38817.5 = -17.5
    • Averaged Price Bundle remainder leg pricing assignment rules applied
    • Apply average differential to each leg
    • Apply remainder starting with most deferred leg
    • The legs are adjusted as follows:
    • Leg1 = 9702.0
    • Leg2 = 9701.0
    • Leg3 = 9699.0
    • Leg4 = 9698.0

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