- 15 Jan 2019
- By CME Group
- What are the scheduled modification changes?
- When will these changes go into effect?
- Why is CME Group making these changes?
- Specifically, what changes are being proposed in the E-mini Nasdaq-100 option complex by expiry?
- How will the one-time reduction in strikes work for Nasdaq-100 options?
- What changes are being proposed in the E-mini Russell 2000 option complex?
- What if a particular strike is still desired by a market participant but would not be listed according to this change?
- Was there an SER and CME Globex Notice connected to these changes?
To optimize our strike offering to be more reflective of customer trading needs, CME Group is introducing a reduction of the number of strikes in our Russell and Nasdaq options offering. Additionally, there will be a one-time elimination of strikes above and below a certain threshold in the Nasdaq options.
The current strike listing rules have remained unchanged for a considerable length of time. Because the index level has increased over time, adhering to the current rule has results in the listing of strike prices that are not statistically relevant, and consume quoting resources for market participants. This more efficient approach is intended to concentrate liquidity in a more relevant array of strikes for all market participants.
The new strike listing rule is effective January 14.
Over time, market dynamics have shifted, and participants’ risk management needs have also evolved to a point where the legacy strike array approach is no longer optimal for these options traded at CME Group.
The elimination of approximately 40% in Nasdaq and 20% in Russell of the available strikes simplifies the strike selection process for customers by providing a more relevant mix of strikes for short-term investors yet will not restrict trading opportunities.
- 100 index point strike price integer multiplies upon listing +30% to -50% of the prior day’s settlement price on the underlying futures contract
- 10 index point strike price integer multiples for the nearest expiration: +10% to -20% of the prior day’s settlement price on the underlying futures contract
- 100 index point strike price integer multiples upon listing: +30% to -50% of the prior day’s settlement price on the underlying futures contract
- 10 index point strike price integer multiples upon listing: +10% to -20% of the prior day’s settlement price on the underlying futures contract
- 100 index point strike price integer multiples upon listing: +30% to -50% of the prior day’s settlement price on the underlying futures contract
- 10 index point strike price integer multiples for the nearest three expirations: +10% to -20% of the prior day’s settlement price on the underlying futures contract
- 10 index point strike price integer multiples upon listing: +10% to -20% of the prior day’s settlement price on the underlying futures contract
Individual strikes will be delisted that:
- Would not have been listed by the new rules
- Have zero open interest in both calls and puts
- Have a higher strike than the upper threshold or lower strike than the lower threshold as laid out in the below table:
|
|
January 9 settlement price for |
Upper Threshold |
Lower Threshold |
|---|---|---|---|---|
| Nasdaq-100 | June Quarterly | NQM9 | +1000 | -1500 |
| Nasdaq-100 | March EOM | NQM9 | +1000 | -1500 |
| Nasdaq-100 | Apr EOM | NQM9 | +1000 | -1500 |
| Nasdaq-100 | Apr Third Friday | NQM9 | +1000 | -1500 |
| Nasdaq-100 | Sep Quarterly | NQZ9 | +500 | -500 |
| Nasdaq-100 | Dec Quarterly | NQZ9 | +500 | -500 |
User Defined Instruments (UDIs) provide a mechanism for adding strikes that are not currently listed. UDIs are enabled for any tenor of options and can be requested at the smallest strike interval allowed; namely an integer multiple of 10 for Nasdaq-100 and an integer multiple of five for Russell 2000.
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