Given the success and liquidity development of Micro E-mini futures, market participants have been looking for similar, right-sized tools to manage risk and trade their option-related strategies.
In response to overwhelming demand, CME Group is listing options on Micro E-mini S&P 500 and Micro E-mini Nasdaq-100 futures contracts. These options provide both a smaller notional value and precision risk management to all traders.
Let’s look at these contracts in more detail.
First, the underlying futures contract. The micro options will derive their value from their respective Micro E-mini futures contracts. Upon expiration, they will deliver a Micro E-mini futures contract.
It’s important for traders to know and understand the underlying futures contract that the option will deliver. Contract specifications and other tools are available on cmegroup.com to assist traders in identifying the underlying future for each option.
Like the Micro E-mini futures contracts, the options on these futures will have a contract multiplier that is 1/10th that of the classic E-mini contracts. For example, an option on the E-mini S&P 500 futures contract has a fifty-dollar multiplier, just like the underlying future.
Similarly, an option on the Micro E-mini S&P 500 futures contract will have a five-dollar multiplier, just like its underlying future.
For options on the Micro E-mini Nasdaq-100 futures contract, the contract multiplier is two dollars. Because the contract multiplier for the futures contract is two dollars.
These smaller, right-sized, Micro E-mini options contracts will allow for greater precision in your option trading strategies.
The minimum price fluctuation, or tick increment, for micro options will be dependent upon the options cost, or premium.
It is important to note that the option premium itself can be affected by several factors – including the price of the underlying futures, volatility, interest rates, and time to maturity – just to mention a few.
For the Micro E-mini S&P 500 options, the minimum tick increment is generally point two five index points – equal to one dollar and twenty-five cents per option.
If the option is priced at or below five, the minimum tick increment is reduced to zero point zero five index points – equal to twenty-five cents.
For the Micro E-mini Nasdaq-100 options, the minimum tick increment is point two five index points – equal to fifty cents per option.
If the option is priced at or below five, the minimum tick increment is reduced to zero point zero five index points – equal to ten cents.
Options are either European or American style, which dictates how they can be exercised.
Here’s some additional information you should know about options on Micro E-mini futures.
They will be available to trade on CME’s Globex electronic platform, Sunday afternoon through Friday afternoon, nearly 24 hours per day.
Similar to other CME Group equity index products, margin offsets will be available, and the options are cleared through CME Clearing.
There you have it, options on Micro E-mini futures contracts, another option for precision risk management and capital efficient market expression.
To learn more about options on futures - click here.