Henry Hub Options RFQ on CME Direct
In the past, Natural Gas option traders would obtain market quotes from voice brokers or chat platforms. Many traders have now transitioned to on-screen trade execution using the liquid order book found on CME Direct.
CME Direct is the energy market’s top application for trading options strategies on-screen through a Request for Quote (RFQ). An RFQ allows traders to anonymously request instant liquidity in both live and delta-hedged options strategies. It is the quickest way for traders to get instant on-screen quotes on multi-leg option strategies.
It is an anonymous electronic message that goes out to all participants on-screen and requests bids and offers on a specific option strategy. Once submitted, a unique instrument is created, and a variety of liquidity providers instantly respond with bids and offers.
For example, let’s say you’re bullish on the price of Henry Hub Natural Gas and want to buy an option call spread. With just a few clicks, you can build the spread in CME Direct and then submit a request to the market for bids and offers.
Liquidity providers and other participants immediately respond with live, executable bids and offers. You can then trade on those prices, or counter with your own bid or offer. Or you could do nothing at all because you have no obligation to trade on a submitted RFQ. You can always re-submit the RFQ to refresh the liquidity when you’re ready to trade.
RFQ strategies on CME Group’s Henry Hub option screens have become the market’s preferred method of execution. They eliminate leg risk, as multi-leg strategies are executed as a single instrument. They allow efficient price discovery nearly 24 hours a day and they enable you to source liquidity on customized options strategies.
For more information, visit CME Direct