Note:  The value of 'Execlnst' that indicates a volatility-quoted trade, is "r", not "I" as previously indicated.

CME Group plans to offer volatility-quoted foreign currency options for trading on the CME Globex® electronic trading platform, beginning in the first quarter of 2008.  Volatility–based quoting facilitates “delta-neutral” trading, reducing the execution risk that is inherent to trading in premium-quoted options. 

Volatility-quoted options trading will work as follows:

• You submit your order to CME Globex, specifying the volatility-quoted option (as opposed to the normal premium-quoted option).

• You specify the price in volatility terms -- ie, as the volatility of the option instead of its premium.  (We call this the "volatility price", or simply the "vol price".)

• The order matches on the volatility price.

• You now receive two iLink fill messages:  (a) one for the option itself, and (b) a second one for an opposite-side-of-the-market futures trade.  Together, the option and the future comprise a delta-neutral option-future spread.

For the full text of this advisory . . .