Equity Options on Futures: Options Blocks Enhancements

New option block rules on CME S&P 500 options on futures offer flexibility and an efficient alternative to OTC synthetic combos.

Three New Enhancements: Designed to help you manage risk with more flexibility

  • Allowance of delta-neutral S&P 500 options blocks
  • Reduced minimum block threshold for S&P 500 options from 250 contracts to 100 contracts during non-U.S. trading hours1
  • Extended block trade reporting time window from 5 to 15 minutes during non-U.S. hours for all block-eligible equity index futures and options products2

Introduction to Equity Options Blocks Enhancements

Understanding Delta-Neutral CME S&P 500 Options Blocks

  • You can block S&P 500 futures (Standard and E-mini) as part of a delta-neutral Standard S&P 500 options on futures trade.
  • 100% of the trade can be privately negotiated and consummated, and subsequently reported to CME3
  • Each S&P 500 option leg in a block trade is required to satisfy a minimum of 250 contracts4 

Key Benefits

No Break-Up Risk: 100% match guarantee when you execute a delta-neutral covered options block trade at CME Group. The trade is bilateral with no need to expose the trade.

Alternative to OTC Transactions: Trading delta-neutral is the preferred convention for larger S&P 500 index options trades requiring capital commitment. Covered options block trades can replace the need for an OTC synthetic combo.

Risk Management: Mitigate counterparty credit exposure and associated risk with S&P 500 futures and options on futures, centrally cleared at CME.

Capital Efficiency: Save with margin offsets on listed, delta-neutral covered futures and options block trades for relief from charges commonly levied on OTC transactions from Basel, RWA and SLR

Reduced Paperwork:  No ISDA or CSA documentation is required executing a covered futures and options block trade at CME Group.

View a Delta-Neutral Block Trade Ticket in CME Direct

Sources

  1. Non-US trading hours are between 4pm-7am CT Monday-Friday on regular business days and at any time on the weekends. Please note there will be no changes to the minimum 250-lot block size for the S&P 500 options during Regular U.S. Trading Hours.
  2. Non-US trading hours are between 4pm-7am CT Monday-Friday on regular business days and at any time on the weekends. Please note there will be no changes to 5-minute reporting window for block-eligible equity index futures or options products during Regular U.S. Trading Hours
  3. http://www.cmegroup.com/rulebook/files/cme-group-Rule-526.pdf
  4. While the number of covering futures contracts can be below the option leg minimum of 250, the delta of the futures contracts must equal the net delta of the option legs.