- 20 Feb 2019
- By CME Group
Frequently Asked Questions:
- What are the scheduled modification changes?
- When will these changes go into effect?*
- Why is CME Group making these changes?
- How is this different from the rule changes that went into effect in October for S&P 500 options?
- Which type of S&P 500 options are affected?
- Will the changes become immediate on all currently listed options?
- Which strike intervals will be affected?
- How are the new strike intervals different than the current rules?
- 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 options offering.
The current strike listing rules have remained unchanged for a considerable length of time. At the current index level, adhering to the current rule has resulted in the listing of strike prices that are not very relevant, but which take up quoting resources for market participants. The reduction of strikes is designed to increase the focus of liquidity provision while providing a more relevant array of strikes.
The new strike listing rule will become effective on March 17th effective for trade date March 18, 2019 for contracts listed after this date. All currently listed strike arrays will be unaffected by this rule change.
Over the last few years the market has benefited from the wide-spread adoption of short-dated S&P 500 options on futures. Over this time market dynamics and participants’ risk management needs have also evolved to a point where the legacy strike array approach is no longer optimal. The short-dated Monday, Wednesday and Friday options were modified in October. The new changes are applicable across all expiries.
Elimination of approximately 30% 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.
The rule changes in October were limited to the weekly options. Since that time, market participants have responded with requests for expanding the rules beyond the weekly options.
The new strike listing rule applies all S&P 500 options on both the S&P 500 ($250 multiplier) and the E-mini S&P 500 ($50 multiplier)
Strikes that were generated according to the rules that existed prior to March 18th will not be removed at this time.
All options, whether Quarterly, EOM, Weeklies, Wednesdays, or Mondays, will adhere to the following schedule.
- 10-point intervals will be brought in roughly six months prior to expiration
- 5-point intervals will be brought in roughly seven weeks prior to expiration
Strike Interval |
% UP |
% DOWN |
|---|---|---|
5-Index Point Intervals |
+5% above prior day's settlement | -15% below prior day's settlement |
10-Index Point Intervals |
+10% above prior day's settlement | -25% below prior day's settlement |
50-Index Point Intervals |
+20% above prior day's settlement | -40% below prior day's settlement |
100-Index Point Intervals |
+30% above prior day's settlement | -50% below prior day's settlement |
Example of strike prices for a Standard and E-mini S&P 500 options contract |
Prior to simplification | Post simplification |
|---|---|---|
| Pricing at 5-point interval | 10% above the 2-year price high of the contract 10% below the 2-year price low |
5% above prior day’s settlement price 15% below prior day’s settlement price |
| Pricing at 10-point interval | 20% above the 2-year price high 20% below the 2-year price low |
10% above prior day’s settlement price 25% below prior day’s settlement price |
| Pricing at 25-point interval | 50% above the 2-year price high 50% below the 2-year price low |
25-point intervals are no longer listed by rule. |
| Pricing at 50-point interval | Currently, these are covered by 25-point intervals |
20% above prior day’s settlement price 40% below prior day’s settlement price |
| Pricing at 100-point interval | Currently, these are covered by 25-point intervals |
30% above prior day’s settlement price 50% below prior day’s settlement price |
*Subject to regulatory approval
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