Spreads and Combinations Available on CME Globex
- Space Sync for Confluence
This topic describes the spread and combination instrument types available on the CME Globex platform.
A spread or combination instrument represents the simultaneous purchase and/or sale of two or more different but related instruments (legs), depending upon spread definition.
All multilegged instruments are technically defined as 'Combinations' in CME Group reference data services, and are commonly referred to as Spreads.
This table shows available exchange-recognized spread and combination types available on CME Globex.
Instrument Type | SecuritySubType | Futures | Options | Cash | Exchange Listed | User Defined |
|---|---|---|---|---|---|---|
BF | ||||||
BO | ||||||
DF | ||||||
SP | ||||||
EQ | ||||||
FX | ||||||
SD | ||||||
EC | ||||||
CF | ||||||
CO | ||||||
C1 | ||||||
PK | ||||||
RT | ||||||
FS | ||||||
SA | ||||||
SB | ||||||
SR | ||||||
WS | ||||||
IS | ||||||
XS | ||||||
DI | ||||||
IV | ||||||
BC | ||||||
IP | ||||||
RI | ||||||
EO | ||||||
SI | ||||||
MS | ||||||
IN | ||||||
SC | ||||||
SW | ||||||
TL | ||||||
EF | ||||||
HO | ||||||
DG | ||||||
ST | ||||||
SG | ||||||
VT | ||||||
BX | ||||||
CC | ||||||
DB | ||||||
HS | ||||||
IC | ||||||
12 | ||||||
13 | ||||||
23 | ||||||
RR | ||||||
GD | ||||||
XT | ||||||
3W | ||||||
3C | ||||||
3P | ||||||
IB | ||||||
JR | ||||||
GT | ||||||
CV | ||||||
GN | ||||||
XF | ||||||
YF | ||||||
SS | ||||||
AB | ||||||
BT | ||||||
AE | ||||||
RV | ||||||
TB | ||||||
TG | ||||||
RB | ||||||
BB |
BF Butterfly
SecuritySubType=BF
A Butterfly is a differential spread composed of three legs having equidistant expirations—the near and deferred expirations of a product on one side of the spread, and twice the quantity of the middle expirations of a product on the other side (1:2:1).
A Butterfly has:
One Product
Three legs
Leg1 (buy leg) must be the nearest expiration
Leg2 (sell leg) must be the middle expiration compared to legs 1 and 3 for two lots
Leg3 (buy leg) must be the most deferred expiration
Quantity/side ratio of the legs is +1:-2:+1
Expiration sequencing for Butterfly:
Leg 1 month < Leg 2 month < Leg 3 month
In addition, expirations differentials must be sequential and equal, Leg 2 month – Leg 1 month = Leg 3 month – Leg 2 month
Example: SR1:BF M9–U9–Z9, the June – Sept. – Dec. butterfly, 9 – 6 = 12 – 9
There are some exceptions to this (grains, meats)
Expiration sequencing for a Broken Butterfly (aka Broken Fly) is:
Leg 1 month < Leg 2 month < Leg 3 month
Example: SR1:BF H9–M9–Z9
Buying a Butterfly buys leg1, sells 2 * leg2, buys leg3
Selling a Butterfly sells leg1, buys 2 * leg2, sells leg3
Example
Instrument Symbol = SR1:BF M9–U9–Z9
Leg1 = +1 SR1M4
Leg2 = -2 SR1U4
Leg3 = +1 SR1Z4
Pricing
The Butterfly Trade Price is = Leg1 – (2 * Leg2) + Leg3
Leg Price Assignment
Leg1 and leg2 are the anchor legs and assigned fair market price
Leg3 is calculated:
Trade Price + Leg 2* Leg2 – Leg1
If leg3 price is outside the daily limits, Leg3 will be adjusted to daily limit and Leg2 is recalculated
Leg1 = Trade Price + (2 * Leg2) – Leg3
Leg2 = (Leg1 + Leg3 – Trade Price)/2
If leg2 is now outside the daily limits, leg2 will be adjusted to the daily limit and leg1 recalculated
Pricing Example
Butterfly trades at 13.5
Leg1 has Fair Market Price of = 9812.5
Leg2 has Fair Market Price of = 9857.5
Leg3 = ((Trade Price) – leg1 + (2 * leg2))
Leg3 = 9916
Pricing Example Legs Calculated Outside of Daily Limits
Leg3 outside daily limit; leg3 reset to daily limit and leg 2 is recalculated
Butterfly trades at 13.5
Leg1 has Fair Market Price of = 9812.5
Leg2 = (Leg2 Settlement Price + Leg3 – Trade Price)/2 (calculated price of leg 2 is off tick since there are two legs. Round one leg up to the nearest on tick price and round one leg down to the nearest on tick price. Those two new prices should sum to the collective calculated price of leg 2)
Leg2 = 9859.50
Leg2 = 9860
Leg3 has a Fair Market Price of = 9901
Leg2 outside daily limit; leg2 reset to daily limit and leg1 recalculated
Butterfly trades at 13.5
Leg1 = Trade Price + (2 * Leg 2) - Leg 3
Leg1 = 13.5 + 19740 – 9875.5 = 9878
Leg2 has a Fair Market Price of = 9870
Leg3 has a Fair Market Price of = 9875.5
Leg1 outside daily limit; leg1 is reset to daily limit and all legs are recalculated starting at leg3.
This process will continue for two rounds. If an on-tick price cannot be determined for the final leg (leg 1) after two attempts, the price stands. Customers can receive a non-settled price for the recalculated leg.
Leg1 outside daily limit; leg1 reset to daily limit and leg3 recalculated.
Butterfly trades at 13.5
Leg1 = 9814
Leg2 has a Fair Market Price of = 9870
Leg3 = ((Trade Price) – leg1 + (2 * leg2))
Leg3 = 9939.5
BO Butterfly
SecuritySubType=BO
The Butterfly is an options spread involving the simultaneous purchase (sale) of a call (put), the sale (purchase) of two calls (puts), and purchase (sale) of a call (put) at different equidistant strike prices with the same expirations.
A Butterfly has:
One Product
Three legs
Leg1 (buy leg) must be a call at the lowest strike price (herein known as strike1) for a quantity of one lot
Leg2 (sell leg) must be a call at the middle strike price (herein known as strike2) for a quantity of two lots
Leg3 (buy leg) must be a call at the highest strike price (herein known as strike3) for a quantity of one lot
The strikes must satisfy this equation (see below, strikes must be equidistant):
strike2 – strike1 = strike3 – strike2
All three legs must be the same expiration
For a call Butterfly
For a put Butterfly
strike1 – strike2 = strike2 – strike3
Leg1 (buy leg) must be a put at the highest strike price (herein known as strike1) for a quantity of one lot
Leg2 (sell leg) must be a put at the middle strike price (herein known as strike2) for a quantity of two lots
Leg3 (buy leg) must be a put at the lowest strike price (herein known as strike3) for a quantity of one lot
The strikes must satisfy this equation (see below, strikes must be equidistant):
Quantity/side ratio of the legs is +1:-2:+1
Buying a Butterfly buys leg1, sells leg2, and buys leg3
Selling a Butterfly sells leg 1, buys leg2, and sells leg3
Example
Instrument Symbol = UD:1N: BO 0808912345
Leg1 = +1 LOU8 C6600
Leg2 = -2 LOU8 C6800
Leg3 = +1 LOU8 C7000
The differential of the legs cannot be priced less than zero. Orders placed for at a price less than zero will be rejected. This spread cannot trade at a negative price.
Pricing
The BO Butterfly Trade Price is = leg1 – (2*leg2) + leg3
Leg Price Assignment
Calculate Fair Price of the Butterfly based on fair prices of the legs.
Calculate the difference between the Butterfly trade price and the calculated fair price of the spread.
Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
Any adjustment of the outright leg prices due to remainder will be assigned according to options combination leg pricing assignment rules.
Pricing Example – Equal Distribution
Butterfly trades at 57
Leg1 has Fair Market Price of = 141
Leg2 has Fair Market Price of = 46
Leg3 has Fair Market Price of = 12
Spread Fair Market Price = 141 + 12 – (2*46) = 61
Spread Trade Price - Fair Market Price = 57 – 61 = -4
There are 4 ticks to distribute
The adjustment is applied evenly as follows:
Leg1 = 141 +1 = 142
Leg2 = 46 + 1 = 45 (Note: this leg is a two lot, so the price adjustment counts double)
Leg3 = 12 - 1 = 13
Pricing Example – Unequal Distribution
Butterfly trades at 59
Leg1 has Fair Market Price of = 141
Leg2 has Fair Market Price of = 46
Leg3 has Fair Market Price of = 12
Spread Fair Market Price = 141 + 12 – (2*46) = 61
Spread Trade Price - Fair Market Price = 59 – 61 = -2
There are 2 ticks to distribute
The adjustment is applied as follows:
Leg1 = 141 -2 = 139
Leg2 = 46
Leg3 = 12
DF Double Butterfly
SecuritySubType = DF
A Double Butterfly is composed of two different Butterfly spreads with the nearest Butterfly expiration purchased (sold) and the furthest Butterfly expiration sold (purchased). The spacing of expirations in both Butterfly spreads needs to be identical, i.e. both need to be “three month” Butterflies. This causes the actual construction of the Double Fly to look like this:
Buy (sell) one of the nearest expiration, sell (buy) three of the second nearest expiration, buy (sell) three of the third nearest expiration, and sell (buy) one of the most deferred expiration.
A Double Butterfly has:
One Product
four legs
Leg1 (buy leg) must be the nearest expiration
Leg2 (sell leg) must be the next nearest expiration
Leg3 (buy leg) must be the third nearest expiration
Leg4 (sell leg) must be the most deferred expiration
Quantity/side ratio of the legs is +1:-3:+3:-1
Expiration sequencing for Double Butterfly:
Leg1 month < Leg2 month < Leg3 month < Leg4 month
In addition, expiration differentials must be sequential and equal, i.e. if Leg1 expires in June and Leg2 expires in Sept., the next two legs must have an expiration differential of three months as well, so Leg3 must expire in Dec. and Leg4 must expire in March of the next year (see symbol below for an example of this)
Example: Instrument Symbol = SR1:DF M9U9Z9H0
Leg1 = +1 SR1M4
Leg2 = -3 SR1U4
Leg3 = +3 SR1Z4
Leg4 = -1 SR1H0
Buying of Double Butterfly buys leg1, sells three of leg2, buys three of leg3, sells leg4
Selling of Double Butterfly sells leg1, buys three of leg2, sells three of leg3, buys leg4
Pricing
The Double Butterfly Trade Price is = Leg1 – (3 * Leg2) + (3 * Leg3) – Leg
Leg Price Assignment
Leg1, leg2 and leg3 are assigned most recent price update
Leg4 is calculated using the differential of the traded spread price:
Leg1 – (3 * Leg2) + (3 * Leg3) – Trade Price
If leg4 price is outside the daily limits, Leg4 will be adjusted to daily limit and Leg1 is recalculated
Leg1 = Trade Price + (3 * Leg2) - (3 * Leg3) +Leg4
Pricing Examples
Double Butterfly trades at 13.5
Leg1 = 9812.5
Leg2 = 9857.5
Leg3 = 9857.0
Leg4 is calculated:
9812.5 – (3 * 9857.5) + (3 * 9857.0) – 13.5
Leg4 = 9797.5
Pricing Example Legs Calculated Outside of Daily Limits
Leg4 outside daily limit; leg4 reset to daily limit and leg1 is recalculated
Double Butterfly trades at 13.5
Leg1 has a calculated price:
Leg1 = Trade Price + (3 * Leg2) - (3 * Leg3) +Leg4
Leg1 = 13.5 +29572.5 – 29571.0 + 9797.5
Leg1 = 9812.5
Leg2 = 9857.5
Leg3 = 9857.0
Leg4 = 9797.5
Calendar
SecuritySubType=SP, EQ, FX, SD, EC
A Calendar spread consists of 2 instruments with the same product with different expiration months. There are variations in Calendar spreads base on the product. Each Calendar spread variation is designated through the use of a different spread type code.
SP Standard Calendar
The Standard Calendar Spread is a futures spread involving the simultaneous purchase (sale) of one product with a nearby expiration and a sale (purchase) of the same product at a deferred expiration. The listing convention of this spread and its corresponding symbol is to have the nearby expiration first and the deferred expiration second, creating a differential spread of nearby expiration minus the deferred expiration.
A Standard Calendar Spread has:
One Product
Two legs
Leg1 (buy leg) must be the nearest expiration
Leg2 (sell leg) must be the deferred expiration
Quantity/side ratio of the legs is +1:-1
Buying a Standard Calendar Spread buys leg1, sells leg2
Selling a Standard Calendar Spread sells leg1, buys leg2
Example
Instrument Symbol = NGZ9-NGF0
Leg1 = +1 NGZ9
Leg2 = -1 NGF0
Pricing
The Standard Calendar Spread Trade Price is = Leg1 – Leg2
Leg Price Assignment
Determine the anchor leg of the Standard Calendar Spread
The leg with the most recent price update (last price update or settlement price) is the anchor leg.
In the event of no price updates, the leg with the nearest expiration will be determined to be the anchor leg
Calculate the non-anchor leg:
If Leg 1 is used as the anchor leg, then Leg 2 = Leg 1 price – Spread Price
If Leg 2 is used as the anchor leg, then Leg 1 = Leg 2 price + Spread Price
If the calculated price is outside the daily limits, set the leg's price to its limit and recalculate the price of the anchor leg
In this example leg1 has the most recent price
Leg1 is the anchor leg
Leg2 is calculated:
Leg2 = Leg1 – Trade Price of spread
Pricing Example
Standard Calendar Spread trades at -105
Leg1 = anchor price of 2558, therefore this is automatically assigned
Leg2 = 2558 – 105 = 2453
In this example leg2 has the most recent price
Leg2 is the anchor leg
Leg1 is calculated:
Leg1 = Leg2 + Trade Price of spread
Pricing Example
Standard Calendar Spread trades at -105
Leg2 = anchor price of 2558, therefore this is automatically assigned
Leg1 = 2558 + (-105) or Leg1 – 105 = 2453
EQ Calendar
This Calendar Spread is a futures spread involving the simultaneous purchase (sale) of a deferred expiration with a sale (purchase) of a nearby expiration within one product. The price of this Calendar Spread is a differential between the two expirations (deferred minus nearby).
This Calendar Spread has:
One Product
Two legs
Leg1 (sell leg) must be the nearest expiration
Leg2 (buy leg) must be the furthest expiration
Quantity/side ratio of the legs is -1:+1
Buying this Calendar Spread sells leg1, buys leg2
Selling this Calendar Spread buys leg1, sells leg2
Example
Instrument Symbol = ESU9-ESZ9
Leg1 = - 1 ESU9
Leg2 = +1 ESZ9
Pricing
This Calendar Spread Trade Price is = Leg2 – Leg1
Leg Price Assignment
Determine the anchor leg of this Calendar Spread
The anchor leg is the prior day settlement price of Leg1
Calculate the non-anchor leg:
Leg 2 = Spread Price + Leg1 price
If the calculated price is outside the daily limits, set the Leg2 price to its limit and recalculate the price of Leg1
Leg1 = Leg2 – Spread Price
Pricing Examples
This Calendar Spread trades at 80.65
Leg1 has a prior day’s settlement of 2880.30
Leg2 = Trade Price + Leg1
80.65 + 2880.30
Leg2 = 2960.95
This Calendar Spread trades at 80.65
Leg2 has a lower limit price of 2967.95
Leg1 = Leg2 – spread trade price
2967.95 – 80.65
Leg2 = 2887.30
FX Deferred Calendar
SecuritySubType = FX
The Deferred Calendar Spread is a futures spread involving the simultaneous purchase (sale) of one product with a deferred expiration and a sale (purchase) of the same product at a nearby expiration. The listing convention of this spread and its corresponding symbol is to have the further expiration listed first and the nearby expiration listed second, creating a differential spread price of deferred expiration price minus the nearby expiration price.
A Deferred Calendar Spread has:
One Product
Two legs
Leg1 (buy leg) must be the deferred expiration
Leg2 (sell leg) must be the nearby expiration
Quantity/side ratio of the legs is +1:-1
Buying a Deferred Calendar Spread buys leg1, sells leg2
Selling a Deferred Calendar Spread sells leg1, buys leg2
Example
Instrument Symbol = GDX9-GDV9
Leg1 = +1 GDX9
Leg2 = -1 GDV9
Pricing
The Deferred Calendar Spread Trade Price is = Leg1 – Leg2
Leg Price Assignment
Determine the anchor leg of the Deferred Calendar Spread
The anchor leg is the prior day settlement for leg2.
Calculate the non-anchor leg:
Leg 2 is used as the anchor leg, then Leg 1 = Leg 2 price + Trade Spread Price
If the calculated price is outside the daily limits, set the leg1 price to its limit and calculate the price of leg2
Leg2= Leg1 - Trade Price of the spread
In this example leg2 has prior day’s settlement price
Deferred Calendar Spread trades at 10
Leg2 prior day settle is 39905
Leg1 is calculated
39905 + 10
Leg1 = 39915
Leg1 = Leg2 + Trade Price of the spread
SD Calendar
SecuritySubType = SD
This Calendar Spread is a futures spread involving the simultaneous purchase (sale) of one product with a deferred expiration and a sale (purchase) of the same product at a nearby expiration. SecuritySubType = SD is specific to FX Calendar spreads. The listing convention of this spread and its corresponding symbol is to have the further expiration listed first and the nearby expiration listed second, creating a differential spread price of deferred expiration price minus the nearby expiration price.
This Calendar has:
One Product
Two legs
Leg1 (buy leg) must be the deferred expiration
Leg2 (sell leg) must be the nearby expiration
Quantity/side ratio of the legs is +1:-1
Buying this Calendar buys leg1, sells leg2
Selling this Calendar sells leg1, buys leg2
Example
Instrument Symbol = 6BM7-6BJ7
Leg1 = +1 6BM7
Leg2 = - 1 6BJ7
Pricing
This Calendar Trade Price is = Leg1 – Leg2
Leg Price Assignment
Determine the anchor leg of the Calendar
The leg with the most recent price update is the anchor leg.
In the event of no price updates, the leg with the nearest expiration will be determined to be the anchor leg
Calculate the non-anchor leg:
If Leg 1 is used as the anchor leg, then Leg 2 = Leg 1 price – Spread Price
If Leg 2 is used as the anchor leg, then Leg 1 = Leg 2 price + Spread Price
If the calculated price is outside the daily limits, set the leg's price to its limit and recalculate the price of the anchor leg
In this example leg1 has the most recent price
This Calendar trades at 10
Leg1 = 14965
Leg2 is calculated
Leg1 – Trade Price of the spread
14965 - 10
Leg2 = 14955
In this example leg2 has the most recent price
This Calendar trades at 10
Leg2 = 14960
Leg1 is calculated
14960 + 10
Leg1 = 14970
Leg1 = Leg2 + Trade Price
EC Calendar
SecuritySubType = EC
The EC Calendar Spread is a calendar future spread involving the simultaneous purchase (sale) of one product with a nearby expiration and a sale (purchase) of the same product at a deferred expiration. The listing convention of this spread and its corresponding symbol is to have the nearby expiration first and the deferred expiration second, creating a differential spread of the nearby expiration minus the deferred expiration.
EC Calendar Spread structure:
One Product
Two legs
Leg1 (buy leg) must be the nearest expiration
Leg2 (sell leg) must be the deferred expiration
Quantity/side ratio of the legs is +1:-1
Buying an EC Calendar Spread buys leg1, sells leg2
Selling an EC Calendar Spread sells leg1, buys leg2
Example
Instrument Symbol = CLTX1-CLTZ1
Leg1 = +1 CLTX1
Leg2 = -1 CLTZ1
Pricing
The EC Calendar Spread trade price is = Leg1 - Leg2
Leg Price Assignment
Leg1 is the anchor leg and priced at zero
Leg2 is calculated:
Leg1 - Spread Trade Price
EC Calendar Spreads Leg Price Assignment
Leg1 is always priced at zero
Leg2 is always priced at zero minus the EC Calendar Spread traded price
If the EC Calendar Spread traded price is zero, the resulting Leg2 price will be zero
If the EC Calendar Spread traded price is negative, the resulting Leg2 price will be positive
If the EC Calendar Spread traded price is positive, the resulting Leg2 price will be negative
The following examples are of the EC Calendar Spread, using the underlying TAS futures outright contract settlement prices:
Leg1 TAS underlying contract CLX1 settle price = 4961
Leg2 TAS underlying contract CLZ1 settle price = 4980
EC Calendar Spread traded price is 0
CLTX1 is priced at 0
CLTZ1 is priced at 0
Clearing assigns the following:
CLX1 assigned price = 4961
CLZ1 assigned price = 4980
EC Calendar Spread traded price is -2
CLTX1 is priced at 0
CLTZ1 is priced at 2
0- (-2) = 2
Clearing assigns the following:
Leg2 = 4980 + 2 = 4982
CLX1 assigned price = 4961
CLZ1 assigned price = 4980- (-2) = 4982
EC Calendar Spread traded price is 3
CLTX1 is priced at 0
CLTZ1 is priced at -3
0 – 3 = -3
Clearing assigns the following:
CLX1 assigned price = 4961
CLZ1 assigned price = 4980 -3 = 4977
CF Condor
SecuritySubType=CF
A Condor is a differential futures spread composed of one product with four different expirations. Buying (selling) a Condor buys (sells) the nearest and most deferred expirations while simultaneously selling (buying) the middle two expirations.
A Condor has:
One Product
Four legs
Leg1 (buy leg) must be the nearest expiration
Leg2 (sell leg) must be the second nearest expiration
Leg3 (sell leg) must be the third nearest expiration
Leg4 (buy leg) must be the most deferred expiration
Quantity/side ratio of the legs is +1:-1:-1:+1
Expiration sequencing for Condor:
Leg1 month < Leg2 month < Leg3 month < Leg4 month
Example: SR1:CF M9U9Z9H0
Buying a Condor buys leg1, sells leg2, sells leg3, buys leg4
Selling a Condor sells leg1, buys leg2, buys leg3, sells leg4
Example
Instrument Symbol = SR1:CF M9U9Z9H0
Leg1 = +1 SR1M4
Leg2 = -1 SR1U4
Leg3 = -1 SR1Z4
Leg4 = +1 SR1H4
Pricing
The Condor Trade Price is = Leg1 – Leg2 – Leg3 + Leg4
Leg Price Assignment
Leg1, Leg2 and Leg3 are anchor legs and assigned prices based on one of the following rules (priority given to the lowest number rule that applies)
Last traded price
Significant bid or offer that did not trade
Settlement price
Leg4 is calculated:
Leg1 = Trade Price + leg2 + leg3 – leg4
If leg1 has a calculated price outside of the daily limit, leg1 is adjusted to daily limit and leg2 price is recalculated
Leg2 = leg1 – leg3 + leg4 – Trade Price
If leg2 has a calculated price outside the daily limits, leg2 will be adjusted to the daily limit and leg3 recalculated
Leg3 = leg1 - leg2 + leg4 – Trade Price
Trade Price – Leg1 + Leg2 + Leg3
If leg4 price is outside the daily limits, Leg4 will be adjusted to daily limit and Leg1 is recalculated
Pricing Example
Condor trades at 13.5
Leg1 most recent price update = 9812.5
Leg2 most recent price update = 9857.5
Leg3 most recent price update = 9875.5
Leg4 is calculated:
Trade Price – leg1 + leg2 + leg3
13.5 – 9812.5 = -9799 + 9857.5 + 9875.5
Leg4 = 9934
Pricing Example - Legs Calculated Outside of Daily Limits
Leg4 outside daily limit; leg4 reset to daily limit and leg1 is recalculated
Condor trades at 13.5
Leg1 is recalculated:
Leg1 = Trade Price + leg2 + leg3 – leg4
13.5 + 9857.5 + 9875.5 – 9900
Leg1 = 9846.5
Leg2 has Fair Market Price = 9857.5
Leg3 has Fair Market Price = 9875.5
Leg4 = daily limit
Leg4 = 9900
Leg1 outside daily limit; leg1 reset to daily limit and leg2 recalculated
Condor trades at 13.5
Leg1 = daily limit
Leg1 = 9814
Leg2 is recalculated:
Leg2 = leg1 – leg3 + leg4 – Trade Price
9814 – 9875.5 + 9900 – 13.5
Leg2 = 9825
Leg3 has a Fair Market Price of = 9875.5
Leg4 = daily limit
Leg4 = 9900
Leg2 outside daily limit; leg2 reset to daily limit and leg3 recalculated
Condor trades at 13.5
Leg1 = 9814
Leg2 = daily limit
Leg2 = 9870
Leg3 is recalculated:
Leg3 = leg1 – leg2 + leg4 – Trade Price
9814 – 9870 + 9900 – 13.5
Leg3 = 9830
Leg4 = 9900
CO Condor
SecuritySubType=CO
The Condor is an options spread involving the simultaneous purchase (sale) of a call (put), sale (purchase) of a second call (put), sale (purchase) of a third call (put), and purchase (sale) of a fourth call (put). All strike prices must be equidistant (i.e. the interval between the first and second strike must match the interval between the second and third strike, as well as between the third and fourth strike), and of the same expiration.
A Condor has:
One Product
Four legs
For a call Condor
Leg1 (buy leg) must be a call at a certain strike price
Leg2 (sell leg) must be a call at a higher strike price than leg1
Leg3 (sell leg) must be a call at a higher strike price than leg2
Leg4 (buy leg) must be a call at a higher strike price than leg3
For a put Condor
Leg1 (buy leg) must be a put at a certain strike price
Leg2 (sell leg) must be a put at a lower strike price than leg1
Leg3 (sell leg) must be a put at a lower strike price than leg2
Leg4 (buy leg) must be a put at a lower strike price than leg3
Example
Instrument Symbol =
Leg1 = +1
Leg2 = -1
Leg3 = -1
Leg4 = +1
Example
Instrument Symbol = UD:1V: CO 0911959621
Leg1 = +1 ESU8 C2870
Leg2 = -1 ESU8 C2875
Leg3 = -1 ESU8 C2880
Leg4 = +1 ESU8 C2885
Pricing
The Condor Trade Price is = [Leg1+Leg4] – [Leg2+Leg3]
Leg Price Assignment
Calculate Fair Price of the Condor based on fair prices of the legs.
Calculate the difference between the Condor trade price and the calculated fair price of the spread.
Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
Any adjustment of the outright leg prices due to remainder will be assigned according to options combination leg pricing assignment rules.
Pricing Example – Equal Distribution
Condor trades at 150
Leg1 has Fair Market Price of = 2900
Leg2 has Fair Market Price of = 2550
Leg3 has Fair Market Price of = 2150
Leg4 has Fair Market Price of = 1850
Spread Fair Market Price = [2900+1850] – [2550+2150] = 50
Spread Trade Price - Fair Market Price = 150 – 50 = 100
There are 4 ticks to distribute.
The adjustment is applied evenly as follows:
Leg1 = 2900 + 25 = 2925
Leg2 = 2550 – 25 = 2525
Leg3 = 2150 – 25 = 2125
Leg4 = 1850 + 25 = 1875
Pricing Example – Unequal Distribution
Condor trades at 175
Leg1 has Fair Market Price of = 2900
Leg2 has Fair Market Price of = 2550
Leg3 has Fair Market Price of = 2150
Leg3 has Fair Market Price of = 1850
Spread Fair Market Price = [2900+1850] – [2550+2150] = 50
Spread Trade Price - Fair Market Price = 175 – 50 = 125
There are 5 ticks to distribute.
The adjustment is applied as follows:
Leg1 = 2900 + 50 = 2950
Leg2 = 2550 – 25 = 2525
Leg3 = 2150 – 25 = 2125
Leg4 = 1850 + 25 = 1875
C1 Crack One-One
SecuritySubType=C1
The Crack One-One is a futures differential spread involving the simultaneous purchase (sale) of a distilled product (i.e. Gasoline or Ultra Low Sulfur Diesel) with a corresponding sale (purchase) of the raw product from which it was produced (i.e. WTI Crude Oil). The Crack One-One is priced in terms of the raw product which necessitates a mathematical conversion of the distilled product’s price.
A Crack One-One has:
Two different products belonging to the same product group (e.g. energy)
Two legs
Leg1 (buy leg) must be the distilled product
Leg2 (sell leg) must be the raw product
Quantity/side ratio of the legs is +1:-1
Buying a Crack One-One buys leg1, sells 2
Selling a Crack One-One sells leg1, buys 2
Examples
Instrument Symbol = CL:C1 RB-CL M5
Leg1 = +1 RBM5
Leg2 = -1 CLM5
Pricing
The Crack One:One Trade Price is = (Leg1*42/100)-Leg2 price
Leg Price Assignment
Determine the anchor leg of the Crack One-One
The leg with the most recent price update is determined to be the anchor leg
The leg1 price must always be rounded to the nearest 50 tick increment
If leg2 is used as anchor leg, leg2 must be re-calculated once leg1 price is calculated and rounded
Leg1 = [(Spread Price + Leg 2) *100/42], rounded to the nearest 50 tick increment
Leg2 = [(Leg1 * 42) / 100] – Spread Price
If neither leg as a price update then the most recent settlement price of the legs will determine the anchor leg.
If a calculated leg price is outside the daily limits, additional processing will be applied.
Pricing Examples
Example: Leg1 as anchor leg
Crack One-One trades at 2620
Leg1 has Fair Market Price of = 23120
Leg1 = 23120
Leg1 = 23100 (rounded to nearest 50 tick)
Leg2 is calculated
Leg2 = (23100*42/100)-2620
Leg2 = 9702 -2620
Leg2 = 7082
Example: Leg2 anchor Leg
Crack One-One trades at 2620
Leg2 has most recent price
Leg2 = 7112
Leg1 is calculated:
Leg1 = (2620 + 7112) * 100/42
Leg1 = 973200/42
Leg1 = 23171.4286
Leg1 = 23150 (rounded to nearest 50 tick)
Calculate Leg2:
Leg2 = (23150*42/100)-2620
Leg2 = 9723-2620
Leg2 = 7103
PK Pack
SecuritySubType=PK
The Pack is a futures spread involving the simultaneous purchase (sale) of a series four consecutive quarterly instruments (in year duration groups) within the same product. The Pack is an average net differential between the current market price of the legs and the prior day settlement price of the legs.
A Pack has:
One Product
Four legs
Total legs in the pack must be evenly divisible by 4
Expiration of all the legs must be consecutive quarterly outright futures
Quantity/side ratio of the legs is +1:+1:+1:+1
Buying a Pack buys all components
Selling a Pack sells all components
Example
Instrument Symbol = SR1:PK 01Y Z9
Leg1 = +1 SR1Z3
Leg2 = +1 SR1H4
Leg3 = +1 SR1M4
Leg4 = +1 SR1U4
Pricing
The Pack trade price is the average price of the differentials of each leg from its prior day’s settlement price
Leg Price Assignment
Obtain trade price of Pack
Price obtained is the differential for all legs, averaged
Integer portion of the Pack trade price is applied to all legs initially
If the Pack trades +1.25, all legs are initially assigned a price of +1 from their respective settles
If the Pack trades at -5.75, all legs are initially assigned a price of -2 from their respective settles
Adjust most deferred legs up or down a full point until the average differential of the legs is equal to the traded price of the Pack.
The following method calculates the number of legs of the Pack that will not have any further adjustment to their prices.
If the traded Pack price has a decimal of .25, the number of legs not given an additional point adjustment equals the number of years of the pack is multiplied by 3.
If the traded Pack price has a decimal of .50, the number of legs not given an additional point adjustment equals the number of years of the pack is multiplied by 2.
If the traded Pack price has a decimal of .75, the number of legs not given an additional point adjustment equals the number of years of the pack is multiplied by 1.
As a corollary, the number of legs that need to be adjusted up or down a point can be calculated by taking the result of the above calculation and subtracting it from the total number of legs in the product.
Examples
In all pricing examples, we will be using the SR1:PK 01Y Z4 contract.
Components and settlement prices are as follows:
Leg1 = SR1M4, prior day’s settle 9873
Leg2 = SR1U4, prior day’s settle 9858.5
Leg3 = SR1Z4, prior day’s settle 9834.5
Leg4 = SR1H4, prior day’s settle 9821
Pack trades at 5
All legs are adjusted up 5 points
The decimal portion is zero, so no additional adjustments are needed
Results
Leg1 = 9873 + 5 = 9878
Leg2 = 9858.5 + 5 = 9863.5
Leg3 = 9834.5 + 5 = 9839.5
Leg4 = 9821 + 5 = 9826
Pack trades at -5.50
All legs are adjusted by down 5 points
The decimal portion is .50, so (1 year * 2 = 2) legs will not receive an additional adjustment, and 2 (4 total legs – 2 leg that are not changing) will need an additional adjustment
Results
Leg1 = 9873 - 5 = 9868
Leg2 = 9858.5 - 5 = 9853.5
Leg3 = 9834.5 - 6 = 9828.5
Leg4 = 9821- 6 = 9815
Pack trades at +5.25
All legs are adjusted by up 5 points
The decimal portion is .25, so (1 year * 3 = 3) legs will not receive an additional adjustment, and 1 (4 total legs – 3 leg that are not changing) will need an additional adjustment
Results
Leg1 = 9873 + 5 = 9878
Leg2 = 9858.5 + 5 = 9863.5
Leg3 = 9834.5 + 5 = 9839.5
Leg4 = 9821+ 6 = 9827
RT Reduced Tick
SecuritySubType=RT
The Reduced Tick Calendar Spread is the simultaneous purchase (sale) of one product with a nearby expiration and a sale (purchase) of the same product at a deferred expiration. The listing convention of this spread and its corresponding symbol is to have the nearby expiration first and the deferred expiration second, creating a differential spread of nearby expiration minus the deferred expiration. Spreads with SecuritySubType RT will have a smaller tick than their corresponding outright legs.
A Reduced Tick Calendar Spread has:
One Product
Two legs
Leg1 (buy leg) must be the nearest expiration
Leg2 (sell leg) must be the deferred expiration
Quantity/side ratio of the legs is +1:-1
Buying a Reduced Tick Calendar Spread buys leg1, sells leg2
Selling a Reduced Tick Calendar Spread sells leg1, buys leg2
Example
Instrument Symbol = ZNZ9-ZNH0
Leg1 = +1 ZNZ9
Leg2 = -1 ZNH0
Pricing
The Reduced Tick Calendar Spread Trade Price is = Leg1 – Leg2
Leg Price Assignment
Determine the anchor leg of the Reduced Tick Calendar Spread
The leg with the most recent price update is the anchor leg.
In the event of no recent price updates, the prior day settle of the nearby leg will be the anchor leg.
Calculate the non-anchor leg:
If Leg 1 is used as the anchor leg, then Leg 2 = Leg 1 price – Spread Price
If Leg 2 is used as the anchor leg, then Leg 1 = Leg 2 price + Spread Price
If the calculated price is outside the daily limits, set the leg's price to its limit and recalculate the price of the anchor leg
Pricing Examples
Leg1 is the anchor leg
Reduced Tick Calendar Spread trades at 1040
Leg1 = anchor price of 129300
Leg2 = 129300 – 1040 = 128260
Leg2 is the anchor leg
Reduced Tick Calendar Spread trades at 1040
Leg2 = anchor price of 129310
Leg1 = 129310 + 1040 = 130350
FS Strip
Spread type = FS
A Strip is the simultaneous purchase (sale) of one product in consecutive month expirations at the average of the price of the legs. A Strip may be Exchange- or User-Defined. For any single market, only an FS or SA User-Defined Spread type will be recognized.
Spread types Average Price Strip (SA) and Futures Strip (FS) are not supported in the same market. Currently, the FS Strip for 30-Day Federal Funds Futures (ZQ) and Ethanol Futures (EH) is settled to zero. As a result, the trade entry price is a net change from settlement.
A Strip has:
One Product
Minimum of two legs
Maximum of 26 legs
Quantity/side ratio of +1:+1...+1
All legs must have same tick size
Example
Instrument Symbol = ZQ:FS 03M H0
Leg1 = +1 ZQH0
Leg2 = +1 ZQJ0
Leg3 = +1 ZQK0
Pricing
The Strip Trade Price is = (Leg1 + Leg2 + Leg3…LegN)/Total number of legs
Leg Price Assignment
Calculate strip settlement price by averaging all of the legs' most recent settlement prices
Subtract the result from step 1 from the Trade Price
Add the differential from step 2 to each leg's settlement price
Leg prices may not be identical
Pricing Example
Strip trades at 13490
Average leg settlement price is 13550
Leg1 last settle price is 13750
Leg2 last settle price is 13550
Leg3 last settle price is 13350
13490 (Trade price) - 13550 (Average leg settlement price) = -60
Leg1 = 13750 (last settle price) - 60 = 13690
Leg2 = 13550 (last settle price) - 60 = 13490
Leg3 = 13350 (last settle price) - 60 = 13290
SA Average Price Strip
SecuritySubType=SA
The Average Price Strip is a CME recognized future or options spread type involving the simultaneous purchase (sale) of multiple related legs priced as the average of all included legs. Customers trading this product will receive legs priced at the Average Price Strip spread traded price.
This pricing model is unique to this spread type.
Products created with related legs and consecutive expirations will receive spread type SA in their security definition message (both in the tags 55-Symbol and in tag 762-SecuritySubType). Products designated spread type SA are priced as an average.
Products created with related legs and non-consecutive expirations will receive spread type GN in their security definition message (both in the tags 55-Symbol and in tag 762-SecuritySubType). Products designated spread type GN are priced as additive.
An Average Price Strip has three different variations according to whether it is Exchange listed, a User Defined Instrument for futures, or a User Defined Spread for options:
One Product
Minimum of 2 legs
Maximum of 26 legs
For a future Average Price Strip
All legs must be buy side futures
All expirations will be consecutive
Expirations can be measured in days or months depending on the futures contained in the Average Price Strip
Instruments can be exchange listed or user defined. See examples below for symbology.
For an Option Average Price Strip
All legs must be buy side options
All legs must be calls or puts
All legs must have the same strike price
All expirations must be consecutive
Expirations can be measured in days, weeks, or months depending on the Options contained in the Average Price Strip
Quantity/side ratio of the legs is +1 for each individual leg
Buying an Average Price Strip buys each individual leg of the spread
Selling an Average Price Strip sells each individual leg of the spread
Examples
Exchange listed Futures Average Price Strip
Leg1 = +1 NGU9
Leg2 = +1 NGV9
Leg3 = +1 NGX9
First characters are the Futures Group (NG)
Colon separator immediately follows the Group
Spread Type follows the separator
A space character follows the Spread Type
Two digits after the space indicate the number of legs
Following the digits is the period between the legs. M = Month, Y = Year, D = Day
Last, a space followed by the expiration
Instrument Symbol = NG:SA 03M U9
Symbology points
Exchange listed Futures Average Price Strip composed of Daily Futures
Leg1 = +1 JDLV817
Leg2 = +1 JDLV818
Leg3 = +1 JDLV819
First characters are the Futures Group (JDL)
Colon separator immediately follows the Group
Spread Type follows the separator
A space character follows the Spread Type
Two digits after the space indicate the number of legs
Following the digits is the period between the legs. M = Month, Y = Year, D = Day
Last, a space followed by the expiration (in this case, October 17, 2018)
Instrument Symbol = JDL:SA 03D 17V8
Symbology
User defined Futures Average Price Strip
Leg1 = +1 NGJ9
Leg2 = +1 NGK9
Leg3 = +1 NGM9
Leg4 = +1 NGN9
Leg5 = +1 NGQ9
Leg6 = +1 NGV9
Leg7 = +1 NGX9
Leg8 = +1 NGZ9
First characters indicate the instrument is User Defined (UD), followed by a separating colon
Next two characters indicate the instrument Group. For User Defined Instruments containing Futures only, this will be the group code of the contained Futures
Another colon separator follows the group
Next, a space followed by the Spread Type, followed by another space
The following four digits indicate when the date the User Defined Spread was created
The next six digits are the CME Security ID
The symbol does not convey the number of legs or the expiration. This information must be obtained from the Security Definition message.
Instrument Symbol = UD:NG: SA 1015986004
Symbology
User Defined Options Average Price Strip
Leg1 = +1 LOF9 C8000
Leg1 = +1 LOG9 C8000
Leg1 = +1 LOH9 C8000
First characters indicate the instrument is User Defined (UD), followed by a separating colon
Next two characters indicate the instrument Group. For User Defined Instruments containing Options, this will be the group code for the options spread
Another colon separator follows the group
Next, there will either be a space or the letter C. The letter C indicates this User Defined Spread includes one or more covering futures in the package.
The space or the C is followed by the Spread Type, followed by another space
The following four digits indicate when the User Defined Spread was created
The next six digits are the CME Security ID
The symbol does not convey the number of legs or the expiration. This information must be obtained from the Security Definition message.
Instrument Symbol = UD:1N: SA 1015921428
Symbology
Pricing
The Average Price Strip Trade Price is = the average price of all included legs
Leg Price Assignment
The Spread Trade Price is assigned to each leg
Pricing Example – Futures Spread Equal Distribution
Average Price Strip (SA) trades at 1657
For illustration purposes, the spread in this example contains three legs
The trade price is the average of the individual legs
The trade price is applied equally to each of the legs as follows:
Leg1 = 1657
Leg2 = 1657
Leg3 = 1657
Pricing Example – Futures Spread Equal Distribution
Average Price Strip (GN) trades at 1657
For illustration purposes, the spread in this example contains three legs
The trade price is the addition of the individual legs
The trade price is applied equally to each of the legs as follows:
Leg1 = 1657
Leg2 = 1657
Leg3 = 1657
For these spreads, there is no possibility of Unequal Distribution of Prices.
SB Balanced Strip
SecuritySubType=SB
The SB Balanced Strip Spread is the simultaneous purchase or sale of futures strips at the differential price of the legs. SB is only available in futures markets in both Exchange-Defined and User-Defined spreads.
An SB Strip has
One product
Two legs
Quantity/side ratio of +1:-1
Expiration of all legs must be different and symmetric
Legs must be either FS Strips, SA Strips or AB Strips; no mixed Strip legs
FS, SA or AB Strips must have the same number of legs
FS, SA or AB Strips must not share any outright legs
FS, SA or AB Strips must have the same duration (3 months, 6 months, etc.)
Pricing
The Spread Trade Price is the differential of the strip legs
Leg price assignment
Determine anchor strip leg
Leg with most recent trade, best bid/best offer, or Indicative Opening Price; else Leg1
Calculate the non-anchor leg:
If Leg 1 is used as the anchor leg, then Leg 2 = Leg 1 price – Spread Price
If Leg 2 is used as the anchor leg, then Leg 1 = Leg 2 price + Spread Price
Pricing Example
SB Balanced (SA) Strip Spread NG:SB 05M X6-X7 trades at 4
Strip Leg1 has the most recent trade at price 3229 and is designated the anchor
Strip Leg1 = 3229
Strip Leg2 = 3225 (Leg1 Price - Spread Trade Price)
SR Strip
SecuritySubType=SR
The Strip is an options spread involving the simultaneous purchase (sale) of a series of calls or puts at the same strike price comprised of four equidistant expirations.
A Strip has:
One Product
Four legs
Leg1 must be a call in Exp1
Leg2 must be a call in Exp2
Leg3 must be a call in Exp3
Leg4 must be a call in Exp4
Leg1 must be a put in Exp1
Leg2 must be a put in Exp2
Leg3 must be a put in Exp3
Leg4 must be a put in Exp4
All legs must have the same strike price
Each leg must be in consecutive equidistant expirations (Exp1, Exp2, Exp3, Exp4)
All legs must be buys
For a call Strip
For a put Strip
Quantity/side ratio of the legs is +1:+1:+1:+1
Buying a Strip buys all legs
Selling a Strip sells all legs
Example
Instrument Symbol = UD:U$: SR 1203930561
Leg1 = +1 SR1Z3 C9675
Leg2 = +1 SR1H4 C9675
Leg3 = +1 SR1M4 C9675
Leg4 = +1 SR1U4 C9675
Pricing
The Strip Trade Price is = Leg1 + Leg2 + Leg3 + Leg4
Leg Price Assignment
Calculate Fair Price of the Strip based on fair prices of the legs.
Calculate the difference between the Strip trade price and the calculated fair price of the spread.
Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
Any adjustment of the outright leg prices due to remainder will be assigned according to options combination leg pricing assignment rules.
Pricing Example – Equal Distribution
Strip trades at 206.5
Leg1 has Fair Market Price of = 41
Leg2 has Fair Market Price of = 48.5
Leg3 has Fair Market Price of = 54
Leg4 has Fair Market Price of = 59
Spread Fair Market Price = 202.5
Spread Trade Price - Fair Market Price = 206.5 – 202.5 = 4.0
There are 8 ticks to distribute.
The adjustment is applied evenly as follows:
Leg1 = 41 + 1 = 42
Leg2 = 48.5 + 1 = 49.5
Leg3 = 54 + 1 = 55
Leg4 = 59 + 1 = 60
Pricing Example – Unequal Distribution
Strip trades at 207.0
Leg1 has Fair Market Price of = 41
Leg2 has Fair Market Price of = 48.5
Leg3 has Fair Market Price of = 54
Leg4 has Fair Market Price of = 59
Spread Fair Market Price = 202.5
Spread Trade Price - Fair Market Price = 207.0 – 202.5 = 4.5
There are 9 ticks to distribute.
The adjustment is applied as follows:
Leg1 = 41 + 1.5 = 42.5
Leg2 = 48.5 + 1 = 49.5
Leg3 = 54 + 1 = 55
Leg4 = 59 + 1 = 60
WS Unbalanced Strip
SecuritySubType=WS
Unbalanced Strip is a spread between two strips in the same product (Intra-commodity), but with differing durations (to allow for spreads between Winter and Summer, etc.). An Unbalanced Strip is constructed by buying the first expiring strip and selling the later expiring strip (Buy 1 stripExp1, Sell 1 stripExp2). The durations of each strip cannot be equal. The balance of the strip will continue to expire until only one expiration month remains.
Construction: Buy StripLeg1exp1 Sell StripLeg2exp2
Security Definition Example: GL:WS X2-J3
Example: Buy the Spread
Buy 1 November 2012 5Month Strip (GL:SA 05M X2) and
Sell 1 April 2013 7Month Strip (GL:SA 07M J3)
IS Inter-Commodity Futures
SecuritySubType=IS
The Inter-Commodity is a futures spread involving the simultaneous purchase and sale of two instruments in different products with similar ticks. There can be variations in the leg pricing assignments in the Inter-Commodity futures spreads based on the components of the spread.
A Inter-Commodity futures spread has:
Two different products
Two legs
Leg1 is the buy leg
Leg2 is the sell leg
Quantity/side ratio of the legs is +1:-1
Buying a Inter-Commodity spread buys leg1 and sells leg2
Selling a Inter-Commodity spread sells leg1 and buys leg2
Example
Instrument Symbol= NKDU9-NIYU9
Leg1 = +1 NKDU9
Leg2 = -1 NIYU9
Pricing
The Inter-Commodity futures spread Trade Price is equal to Leg1-Leg2.
When a match occurs in an Inter-Commodity spread, the traded differential is applied to either Leg1 or Leg2 to arrive at the price of the other leg.
Nikkei Inter Commodity spread
Example
Instrument Symbol= NKDU9-NIYU9
Leg1 = +1 NKDU9
Leg2 = -1 NIYU9
Leg Price Assignment
The anchor leg price is assigned at Fair Market Price
Calculate the non-anchor leg price:
If Leg1 is used as the anchor leg, then Leg2 = (Leg1 price – Spread Price)
If Leg2 is used as the anchor leg, then Leg1 = (Leg2 price + Spread Price)
A recent significant bid or offer from either outright futures leg. To be significant, a bid must be greater than settle or the most recent traded price of the instrument, or an offer must be less than settle or the most recent traded price of the instrument.
An Indicative Opening Price can be a significant bid or offer in the prior rule.
Most recent traded outright leg in either NKD or NIY products pertaining to the spread in question, i.e. if the spread is NKDU9-NIYU9, an anchor price could be determined by the most recent trade in either NKDU9 or NIYU9.
The previous day’s settlement of the NKD outright futures
Calculate the non-anchor leg price:
If Leg1 is used as the anchor leg, then Leg2 = (Leg1 price – Spread Price)
If Leg2 is used as the anchor leg, then Leg1 = (Leg2 price + Spread Price)
Pricing Example
Example1 – Leg1 as anchor leg
Leg1 NKDU9 assigned Fair Market Price
Nikkei Inter-Commodity Spread - NKDU9-NIYU9 trades at 30
Leg1 = 21260
Leg2 = Leg1 price – Spread price
= 21260-30
=21230
Differential applied to Leg2:
Leg1 = 21260
Leg2 = 21230
Example2 – Leg1 as anchor leg
Leg1 NKDU9 assigned Fair Market Price
Nikkei Inter-Commodity Spread - NKDU9-NIYU9 trades at 30
Leg1 = 21250
Leg2 = Leg1 price – Spread price
= 21250-30
=21220
Differential applied to Leg2:
Leg1 = 21250
Leg2 = 21220
Example3 – Leg2 as anchor leg:
Leg2 NIYU9 assigned Fair Market Price
Nikkei Inter-Commodity Spread - NKDU9-NIYU9 trades at 30
Leg2 = 21245
Leg1 price = Leg2 + Spread price
= 30 + 21245
=21275
Differential applied to Leg1:
Leg1 = 21275
Leg2 = 21245
Example4 – Leg1 as anchor leg:
Leg1 NKDU9 assigned Fair Market Price
Nikkei Inter-Commodity Spread - NKDU9-NIYU9 trades at 30
Leg1 = 21200
Leg2 price = Leg1 price - Spread price
= 21200 - 30
= 21170
Differential applied to Leg2:
Leg1 = 21200
Leg2 = 21170
XS Inter-Commodity Strip
SecuritySubType=XS
The Cross-Commodity Strip Spread is a futures spread involving the simultaneous purchase (sale) of one Average Priced Strip (SA) against the sale (purchase) of a second Average Priced Strip (SA) with the same expiration. Each Averaged Priced Strip must contain the same number of component parts (i.e. three consecutive futures contracts), and each Average Priced Strip must be of a different but related product (i.e. the first Average Priced Strip is WTI Crude while the second Average Priced Strip is Brent Last Day Financial Crude). After the first month of the strip from the first leg of the Cross-Commodity Strip Spread expires, the leg becomes a “balance of” spread. The balance of the Cross-Commodity Strip Spread will continue to decay until only one expiration month remains.
A Cross-Commodity Strip Spread has:
Two Products
Two legs
Each Leg is an Average Priced Strip with the same expiration and duration (number of component contracts)
Leg1 (buy leg) must be one product
Leg2 (sell leg) must be a related but different product from Leg1
Quantity/side ratio of the legs is +1:-1
Buying an Cross-Commodity Strip Spread buys leg1, sells leg2
Selling an Cross-Commodity Strip Spread sells leg1, buys leg2
Example
Instrument Symbol = PW:XS 02M EJL-B6L X9
EJLX9
EJLZ9
B6LX9
B6LZ9
Leg1 = +1 EJL:SA 02M X9 (2 Month Strip)
Leg2 = -1 B6L:SA 02M X9 (2 Month Strip)
Pricing
The Cross-Commodity Strip Spread Trade Price is the differential between the two Average Priced Strips = Leg1 – Leg2
Leg Price Assignment
Determine the anchor leg of the Cross-Commodity Strip Spread
The leg with the most recent price update of the strip (last price update or settlement price) is the anchor leg.
Calculate the non-anchor leg:
If Leg 1 is used as the anchor leg, then Leg2 = Leg1 price – Cross-Commodity Strip Spread Price
If Leg 2 is used as the anchor leg, then Leg1 = Leg2 price + Cross-Commodity Strip Spread Price
Pricing Example
In this example Leg1 has the most recent price.
Cross-Commodity Strip Spread WS:XS 02M CL-BZ G0 trades at -325
Leg1 traded at 5757
Leg1 is the anchor, and assigned a price of 5757
CLG0 is assigned a price of 5757
CLH0 is assigned a price of 5757
Leg2 has its price calculated
Leg2 = 5757 – (–325) = 5757 + 325 = 6082
BZG0 is assigned a price of 6082
BZH0 is assigned a price of 6082
DI Inter-Commodity
SecuritySubType=DI
The DSF Inter-Commodity Calendar is a futures spread involving the simultaneous purchase (sale) of one interest rate product with a corresponding sale (purchase) of a second interest rate product. Both products will have the same monthly expiration. Both products will also have the same underlying term (i.e., both products will be five year notional instruments).
The DSF Inter-Commodity Calendar has:
Two Products
Two legs
This leg will have the same monthly expiration as Leg1
This leg will have the same underlying term as Leg1
Leg1 (buy leg) will be an interest rate product
Leg2 (sell leg) will be a different interest rate product
Quantity/side ratio of the legs is +1: -1
Buying the DSF Inter-Commodity Calendar buys leg1, sells leg2
Selling the DSF Inter-Commodity Calendar sells leg1, buys leg2
Example
Instrument Symbol = ZNZ9-N1UZ9
Leg1 = +1 ZNZ9
Leg2 = -1 N1UZ9
Pricing
The Interest Rate Inter-Commodity Spread Trade Price is = Leg1 – Leg2
Leg Price Assignment
The anchor leg will have the most recent price update; otherwise the prior day’s settlement price from Leg1 is the anchor leg
Calculate the non-anchor leg:
Leg2 = Leg 1 price - Trade Price
Leg 1 = Leg 2 price + Trade Price
If Leg 1 is used as the anchor leg
If Leg 2 is used as the anchor leg
If the calculated price is outside the daily limits, set the leg's price to its limit and recalculate the price of the anchor leg
Pricing Examples
Example: Leg1 as anchor leg
DSF Inter-Commodity Calendar trades at 50
Leg1 has the most recent trade at 130295
Leg2 is calculated:
Leg2 = Leg1 - Trade Price
130295 - 50
Leg2 = 130245
Example: Leg2 as anchor leg
DSF Treasury Inter-Commodity Calendar trades at 50
Leg2 has the most recent trade at 129290
Leg1 is calculated:
Leg1 = Leg2 + Trade Price
129290 + 50
Leg1 = 130020
IV Implied Intercommodity
SecuritySubType=IV
The Implied Ratio Inter-Commodity Spread is an implied-enabled futures ratio spread involving the simultaneous purchase (sale) of two different products with the same expirations of different pre-determined ratios (e.g. 5:2).
A Implied Inter-Commodity Spread has:
Two Products
Two legs
Leg1 (buy leg) all quantities must be the same expiration as leg2
Leg2 (sell leg) all quantities must be the same expiration as leg1
Quantity/side ratio of the legs are pre-determined
A quantity side ratio of +5:-2 will be used in the below example
Buying an Implied Ratio Inter-Commodity Spread buys 5* leg1, sells 2* leg2
Selling an Implied Ratio Inter-Commodity Spread sells 2* leg1, buys 5* leg2
Spread to Spread Trade Pricing
The Implied Ratio Inter-Commodity Spread Trade Price is = Spread to Spread trade.
Leg Price Assignment
Leg1 is calculated:
Leg1 price = Leg1 settle price+ spread price
Leg2 is anchor leg, and priced the prior day’s settlement price
| Current Price | Settlement Price |
|---|---|---|
Spread | 0030 | 0000 |
Leg1 | 129105 | 128265 |
Leg2 | 15717 | 15718 |
Pricing Examples 5:2 Ratio
Instrument Symbol = NOB 05-02 Z9
Leg1 = +5 ZNZ9
Leg2 = -2 ZBZ9
Implied Ratio Inter-Commodity Spread trades at 30
Leg1 is calculated
Leg1 = Leg1 settlement + Spread Trade
Leg1 = 128265 + 30
Leg1 =128295
Leg2 = 15718
Implied Spread Trading
The Implied Ratio Inter-Commodity Spread Implied Price = (Leg1 Recent Price Update – Leg1 Settlement Price) – (Leg2 Recent Price Update – Leg2 Settlement Price/Ratio).
Please see Implied Intercommodity Ratio Spreads for examples.
SI Soy Crush
Spread type = SI
The Soy Crush Spread is a differential spread involving the simultaneous purchase between the raw product (Soybeans), and the yield of its two processed products (Soybean Meal, Soybean Oil). The fixed ratio per leg represents the amount of processed products that can be obtained from the given amount of raw product.
A Soy Crush Spread has:
Three different but related products
Three legs
All legs must be of the same expiration
Leg1 (buy leg) must be a related processed product of leg3
Leg2 (buy leg) must be a related processed product of leg3 but different from Leg1
Leg3 (sell leg) must be the raw but related product of leg1 and leg2
Quantity/side ratio of the legs is +1:+1:-1
Buying a Soy Crush Spread buys leg1, buys 2, sells leg3
Selling a Soy Crush Spread sells leg1, sells 2, buys leg3
Example
Instrument Symbol = SOM:SI K3-K3-K3
Leg1 = +1 ZMK3
Leg2 = +1 ZLK3
Leg3 = -1 ZSK3
The Soy Crush Spread trades at a reduced tick (.25) and is priced in terms of the raw product which necessitates a mathematical conversion to convert Soybean Meal and Soybean oil into cents per bushel.
Pricing
The Soy Crush Spread Trade Price is = (Price of leg1 * .22) + (Price of leg2 * .11) – (Price of leg3)
Leg positions used in this example:
Leg1 – Soybean Meal Futures
Leg2 – Soybean Oil Futures
Leg3 – Soybean Futures
Leg Price Assignment
Anchor legs are the Fair Market Price of two of the three legs
Calculate non-anchor leg:
If calculated price is off tick - Adjust to on tick- off tick price < half the tick round down otherwise round up.
If calculated price outside limits; round down for high limit violation and round up for low limit violation.
If calculated price is off tick - Adjust to on tick- off tick price < half the tick round down otherwise round up.
If calculated price outside limits; round down for high limit violation and round up for low limit violation.
If calculated price is off tick - Adjust to on tick- off tick price < half the tick round down otherwise round up.
If calculated price outside limits; round down for high limit violation and round up for low limit violation.
Leg1 = (Trade Price + Leg3) – (Leg2 * .11)) / .22
Leg2 = (Trade Price + Leg3) – (Leg1 *.22)) / .11
Leg3 = (Leg1 * .22) + (Leg2 * .11) – Trade Price
Leg2 will be adjusted to the closest price that will yield an on-tick price for Leg3. Leg 2 price adjustments should be within 12 X (tick of 1) in the normal case
Recalculate the Leg3
Pricing Example
Pricing Example Leg1 and Leg2 Anchor Legs
Soy Crush Spread trades at 1026
Leg1 has Fair Market Price = 4221
Leg2 has Fair Market Price = 6703
Leg3 is calculated:
Leg3 = (4221*.22) + (6703*0.11) – Trade Price
Leg3 = 639.95 round up nearest .25 tick value 640
Leg2 adjusted price:
Leg2 = 6708
Recalculate Leg3 Price
Leg3 = (4221*.22) + (6708*0.11) – 1026
Leg3 = 640.5
Resulting legs:
Leg1 = Buy 11 lots at 4221
Leg2 = Buy 9 lots at 6708
Leg3 = Sell 10 lots at 640.5
Pricing Example Leg2 and Leg3 Anchor Legs
Soy Crush Spread trades at 1026
Leg1 is calculated:
Leg1 = (1026+640)-(6703*0.11))/0.22
Leg1 = 4221.22727 rounded down to nearest tick value 4221
Leg2 has Fair Market Price = 6703
Leg3 has Fair Market Price = 640
Leg2 adjusted price:
Leg2 = 6708
Recalculate Leg3 Price
Recalculate Leg3 Price
Leg3 = (4221*.22) + (6708*0.11) – 1026
Leg3 = 640.5
Resulting legs:
Leg1 = Buy 11 lots at 4221
Leg2 = Buy 9 lots at 6708
Leg3 = Sell 10 lots at 640
Pricing Example Leg1 and Leg3 Anchor Legs
Soy Crush Spread trades at 1026
Leg1 has Fair Market Price = 4221
Leg3 has Fair Market Price = 640
Leg2 is calculated:
Leg2 = (1026 + 640) - (4221*0.22)) / 0.11
Leg2 = 6703.45 round down to nearest tick value
Leg2 = 6703
Leg2 adjusted price:
Leg2 = 6708
Recalculate Leg3 Price
Leg3 = (4221*.22) + (6708 * 0.11) – 1026
Leg3 = 640.5
Resulting legs:
Leg1 = Buy 11 lots at 4221
Leg2 = Buy 9 lots at 6708
Leg3 = Sell 10 lots at 640.5
BC Buy-Buy Inter-Commodity
SecuritySubType = BC
The Buy-Buy Inter-Commodity Spread is a futures spread involving the simultaneous purchase (sale) of two related products with the same expiration. The Buy-Buy Inter-Commodity Spread is constructed by buying 1 Henry Hub Natural Gas futures contract and buying 1 Henry Hub Natural Gas Index futures contract.
A Buy-Buy Inter-Commodity Spread has:
Two Products
Two legs
Leg1 must be the monthly Henry Hub Natural Gas (Platts FERC) Basis futures
Leg2 (sell leg) must be the Henry Hub Natural Gas (Platts Gas Daily/Platts IFERC) Index futures
Quantity/side ratio of the legs is +1:+1
Buying a Buy-Buy Inter-Commodity Spread buys leg1 , buys leg2
Selling a Buy-Buy Inter-Commodity Spread sells leg1, sells leg2
Example
Instrument Symbol = HB-IN: HB-IN F0
Leg1 = +1 HBF0
Leg2 = +1 INF0
Pricing
The Buy-Buy Inter-Commodity Spread Trade Price is the summation of leg1 and leg2
Leg Price Assignment
Determine the anchor leg of the Buy-Buy Inter-Commodity Spread
The leg with the most recent price update (last price update or settlement price) is the anchor leg.
Calculate the non-anchor leg:
If Leg 1 is used as the anchor leg, then Leg 2 = Spread Price - Leg 1 price
If Leg 2 is used as the anchor leg, then Leg 1 = Spread Price - Leg 2 price
In this example leg1 has the most recent price
Leg1 is the anchor leg
Leg2 is calculated:
Leg2 = Trade Price of spread – leg1
Pricing Example
Buy-Buy Inter-Commodity Spread trades at 4
Leg1 = anchor price of 1, therefore this is automatically assigned
Leg2 = 4 – 1 = 3
In this example leg2 has the most recent price
Leg1 is calculated:
Leg1 = Trade Price of spread - Leg2
Leg2 is the anchor leg
Pricing Example
Buy-Buy Inter-Commodity Spread trades at 4
Leg1 = 4 - 1 = 3
Leg2 = anchor price of 1, therefore this is automatically assigned
IP Inter-Commodity
SecuritySubType = IP
The Inter-Commodity Spread (ICS) calendar spread for futures (commonly known as a “box spread") allows customers to trade Inter-commodity spreads as a single instrument, eliminating leg execution risk. The Inter-Commodity Spread is the net differential between the two ICS spreads.
An Inter-Commodity Spread has:
Two Products
Four legs
Leg1 (buy leg) is first leg of the first inter commodity calendar spread of near expiration
Leg2 (sell leg) is second leg of first the inter commodity calendar spread with the same expiration as leg1
Leg3 (sell leg) is first leg of the second inter commodity calendar spread of deferred expiration
Leg4 (buy leg) is second leg of second inter commodity calendar spread with the same expiration as leg3
Quantity/side ratio of the legs is +1:-1:-1:+1
Buying a Inter-Commodity Spread buys leg1 , sells leg2, sells leg3, buys leg4
Selling a Inter-Commodity Spread sells leg1, buys leg2, buys leg3, sells leg4
Example
Instrument Symbol = NG:HH K1-F2
Leg1 = +1 NGK1
Leg2 = -1 HHK1
Leg3 = -1 NGF2
Leg4 = +1 HHF2
Pricing
The Inter-Commodity Spread Trade Price is the net differential between the two inter commodity calendar spreads = Leg1 – Leg2 – Leg3 + Leg4
Leg Price Assignment
Leg1, Leg2 and Leg3 are anchor legs and assigned the most recent update price.
Leg4 is calculated:
Spread Trade Price – Leg1 + Leg2 + Leg3
If leg4 price is outside the daily limits, Leg4 will be adjusted to daily limit and Leg1 is recalculated
Pricing Example
Inter-Commodity Spread trades at 1
Leg1 = most recent price update 6889
Leg2 = most recent price update 7092
Leg3 = most recent price update 6834
Leg4 is calculated:
Spread Trade Price – Leg1 + Leg2 + Leg3
1 – 6889 + 7092 + 6834
Leg4 = 7038
Inter-Commodity Spread trades at 1
Leg1 = is calculated:
Spread Trade Price + Leg2 + Leg3 – Leg 4
Leg2 = most recent price update 7092
Leg3 = most recent price update 6834
Leg4 = 7038
Reduced Tick Inter-Commodity Spread
SecuritySubType = RI
The Reduced Tick Inter Commodity is a futures spread involving the simultaneous purchase (sale) of two products with a corresponding sale (purchase) of a second related product. Spreads with SecuritySubType RI will have a smaller tick than their corresponding outright legs.
A Reduced Tick Inter Commodity has:
Two different products
Two legs
Leg1 is the buy leg
Leg2 is the sell leg
Quantity/side ratio of the legs is +1:-1
Buying a Reduced Tick Inter Commodity buys leg1, sells leg2
Selling a Reduced Tick Inter Commodity sells leg1, buys leg2
Example
Instrument Symbol = HPZ9-HHZ9
Leg1 = +1 HPZ9
Leg2 = -1 HHZ9
Pricing
The Reduced Tick Inter Commodity Trade Price is = Leg1 – Leg2
Leg Price Assignment
Determine the anchor leg of the Reduced Tick Inter Commodity
The leg with the most recent price update is the anchor leg.
In the event of no recent price updates, the prior day settle of the nearby leg will be the anchor leg.
Calculate the non-anchor leg:
If Leg 1 is used as the anchor leg, then Leg 2 = Leg 1 price – Spread Price
If Leg 2 is used as the anchor leg, then Leg 1 = Leg 2 price + Spread Price
If the calculated price is outside the daily limits, set the leg's price to its limit and recalculate the price of the anchor leg
Pricing Examples
Leg1 is the anchor leg
Reduced Tick Inter Commodity trades at 3.00
Leg1 = anchor price of 2656
Leg2 = 2656 – 3.00 = 2653
Leg2 is the anchor leg
Reduced Tick Inter Commodity trades at 3.0
Leg2= anchor price of 2653
Leg1= 2653 +3.00 = 2656
MS BMD Strip
SecuritySubType=MS
The BMD futures strip consists of multiples of four consecutive, quarterly expirations of a single product with the legs having a +1:+1:+1:+1 ratio. A 1-year strip, for example, consists of an equal number of futures contracts for each of the four consecutive quarters nearest to expiration.
Construction: Buy1exp1 Buy1exp2 Buy1exp3 Buy1exp4
Security Definition Example: FKB3:MS 01Y M8
Example: Buy the Spread
Buy 1 June 2018 3-Month Month Kuala Lumpur Interbank Offered Rate
Buy 1 September 2018 3-Month Month Kuala Lumpur Interbank Offered Rate
Buy 1 December 2018 3-Month Kuala Lumpur Interbank Offered Rate
Buy 1 March 2019 3-Month Kuala Lumpur Interbank Offered Rate
Example: Sell the Spread
Sell 1 June 2018 3-Month Month Kuala Lumpur Interbank Offered Rate
Sell 1 September 2018 3-Month Month Kuala Lumpur Interbank Offered Rate
Sell 1 December 2018 3-Month Kuala Lumpur Interbank Offered Rate
Sell 1 March 2019 3-Month Kuala Lumpur Interbank Offered Rate
IN Invoice Swap
SecuritySubType=IN
An Invoice Swap is an Inter-commodity spread trade consisting of a long (short) Treasury futures contract and a long (short) non-tradeable Interest Rate Swap (IRS).
Construction
Buy 1 Invoice IRS spread buy 1 Treasury futures contract
Security Definition Example: IN:ZTM4L026220NOV14
Example: Buy the Spread
Buy 1 June 2014 2-Year Treasury Invoice Swap Spread, Buy 1 June Treasury Future
Example: Sell the Spread
Sell 1 June 2014 2-Year Treasury Invoice Swap Spread, Sell 1 June Treasury Future
SC Invoice Swap Calendar
SecuritySubType=SC
An Invoice Swap calendar spread lists invoice swaps of the same tenor with consecutive quarters (e.g., 2 yr Dec 2015 vs. 2 yr Mar 2016) as two legs.
Security Definition Example: ZTU50317A-ZTM50317A
Example: Buy the Spread
Buy 1Mar 2016 5Y IN and sell 1 Dec 2015 5Y IN
Example: Sell the Spread
Sell 1Mar 2016 5Y IN and buy 1 Dec 2015 5Y IN
SW Invoice Swap Switch
SecuritySubType=SW
A Treasury Invoice Swaps Switch Spread lists invoice swaps of the same contract month with different tenors with consecutive quarters (e.g., 2 yr Mar 2015 vs. 10 yr Mar 2015) as two legs.
Security Definition Example: ZNM51221A-ZTM50317A
Example: Buy the Spread
Buy 1 Mar 2015 10Y IN and sell 1 Mar 2015 2Y IN
Example: Sell the Spread
Sell 1 Mar 2015 10Y IN and buy 1 Mar 2015 2Y IN
TL Tail
SecuritySubType=TL
The Treasury Tail User Defined Spread has a 1:1 calendar spread as leg 1 and a single future for leg 2. Leg 2 must be one of the 1:1 calendar spread legs (i.e., if Leg 1 is ZFZ5-ZFH6, then Leg 2 must be either ZFZ5 or ZFH6). The side of the outright leg must match the 1:1 calendar spread; Leg 2 must be on the buy side if it is the same as the front month of the calendar and on the sell side if it is the deferred month.
Example: Buy the Spread
Buy 1 ZFZ5-ZFH6, Buy 0.2 ZFZ5 at price 118.078125
Example: Sell the Spread
Sell 1 ZFZ5-ZFH6, Sell 0.2 ZFZ6 at price 118.078125
EF Inter-Exchange Reduced Tick Ratio
SecuritySubType=EF
The EF strategy type involves trading 90-day short term interest rates in a single package across commodities or exchanges.
An EF inter-exchange reduced tick ratio spread has:
Two products in two different DCMs
Expiration 2
Expiration 3
Expiration 1
Interest Rate future (DCM 1)
Interest Rate future (DCM 2)
Expiration 1 shall be the nearest quarterly expiry month for Interest Rate future (DCM 2)
Expirations 2 and 3 shall be the nearest consecutive months for Interest Rate future (DCM 1) dated after Expiration 1
Sixteen legs
Quantity/side ratio of [+3:+3]:-10 (Quantity/side ratio constructed with a bid-side bias)
Construction: Buy3exp2com1 Buy3exp3com1 Sell10exp1com2
Security Definition Example: ZQF8G8-SR1Z3
Pricing
The Inter-Commodity Reduced Tick Ratio Spread Trade Price is the average net differential between the current market price of the two legs of one commodity and one leg of another commodity.
Spread Trade Price = AvgPx(2 sets of Com1) – Com2
Leg Price Assignments
Leg 3 (Com2) is the anchor and assigned the most recent available price from the outright market; trade, best bid/best offer, or Indicative Opening Price.
Legs 1 and 2 (Com1) are assigned prices in line with the outright markets but adjusted if necessary to equal the Spread Trade Price.
Example of trade with leg price adjustment
This example illustrates the leg price assignments after adjustment.
Spread ZQF8G8-SR1Z3 trades at 0.1425
ZQF8 Early Expiry = 98.9750
ZQG8 Later Expiry = 98.9050
SR1Z3 Qtry Expiry = 98.8000
(98.9750+98.9050) / 2 = 98.9425 - 98.8000 = 0.1400
Most Recent Market Prices: (98.9750 + 98.9100) / 2 = 98.9425 - (988.000/10) = 0.1425
Adjusted Leg Prices Assigned:
ZQF8 Early Expiry = 98.9750
ZQG8 Later Expiry = 98.9100
(98.9750 + 98.9100) / 2 = 98.9425 - 98.8000 = 0.1425
HO Calendar Horizontal
SecuritySubType=HO
The Horizontal is an options spread involving the simultaneous purchase (sale) of buying a call (put) in a deferred expiration and selling a call (put) of the same strike in an earlier expiration
A Horizontal has:
One Product
Two legs
Both legs must be of different expiration
First leg must be the deferred expiration to the second leg
First leg must be a buy
Both legs must have the same strike
Both legs must be calls or puts
Buying the Horizontal buys leg1 and sells leg2
Selling the Horizontal sells the leg1 and buys leg2
Quantity/side ratio of the legs is +1:-1
Example
Instrument Symbol = UD:1V: HO 0709947215
Leg 1 =+1 ESZ8 P2300
Leg 2 = -1 ESU8 P2300
Pricing
The Horizontal Trade Price is = (Leg1-Leg2) the differential of the legs
Leg Price Assignment
Calculate Fair Price of the Horizontal based on fair prices of the legs.
Calculate the difference between the Horizontal trade price and the calculated fair price of the spread.
Spread Trade Price = Fair Market Price; no remainder to distribute to the legs
Any adjustment of the outright leg prices due to remainder will be assigned according to UDS leg pricing assignment rules
Pricing Example – Equal Distribution
Horizontal trades at 20
Leg1 has Fair Market Price of 130
Leg2 has Fair Market Price of 120
Spread Fair Market Price = 130-120 =10
Spread Trade Price – Fair Market Price = 10
There are 10 ticks to distribute
Leg1 = 130 +5 = 135
Leg2 = 120 - 5 = 115
Pricing Example – Unequal Distribution
Horizontal trades at 15
Leg1 has Fair Market Price of 130
Leg2 has Fair Market Price of 120
Spread Trade Price - Fair Market Price = 15 – 10 = 5
There are 5 ticks to distribute
Leg Pricing Assignment rules applied – distribute whole tick value to each leg evenly, remainder applied to leg1
Leg1 = 130 + 3 = 133
Leg2 = 120 - 2 = 118
133 - 118 = 15
DG Calendar Diagonal
SecuritySubType=DG
The Diagonal is an option spread involving the simultaneous purchase (sale) of a call (put) in a deferred expiration and a sale (purchase) of a call (put) in an earlier expiration.
A Diagonal has:
One Product
Two legs
For a Call Diagonal
First leg must be a buy of a call in a deferred expiration
Second leg must be a sell of a call in a nearby expiration (compared to leg1)
For a Put Diagonal
First leg must be a buy of a put in a deferred expiration
Second leg must be a sell of a put in a nearby expiration (compared to leg1)
Both legs must be of different expirations
Both legs must be of different strike prices
First leg must be the deferred expiration compared to the second leg
Buying the Diagonal buys leg1 and sells leg2
Selling the Diagonal sells the leg1 and buys leg2
Quantity/side ratio of the legs is +1:-1
Products created without following strike price construction rules below will receive spread type GN in their security definition message (both in the tags 55-Symbol and in tag 762-SecuritySubType).
Examples
Instrument Symbol = UD:1V: DG 1112959471
Leg 1 = +1 EWF9 C2940
Leg 2 = -1 EWX8 C2865
Pricing
The Diagonal Trade Price is = (Leg1-Leg2) the differential of the legs
Leg Price Assignment
Calculate Fair Price of the Diagonal based on fair prices of the legs.
Calculate the difference between the Diagonal trade price and the calculated fair price of the spread.
Spread Trade Price = Fair Market Price; no remainder to distribute to the legs
Any adjustment of the outright leg prices due to remainder will be assigned according to UDS leg pricing assignment rules
Pricing Example – Equal Distribution
Diagonal trades at 850
Leg1 has Fair Market Price of 850
Leg2 has Fair Market Price of 130
Spread Fair Market Price = 850-130 = 720
Spread Trade Price – Fair Market Price = 850 – 720 = 130
There are 26 ticks to distribute (smallest tick is in the Leg2 price)
Ticks are divided up equally as follows:
Diagonal Leg1 = 850 + 65 = 915
Diagonal Leg2 = 130 – 65 = 65
Pricing Example – Unequal Distribution
Diagonal trades at 825
Leg1 has Fair Market Price of 850
Leg2 has Fair Market Price of 130
Spread Fair Market Price = 850-130 = 720
Spread Trade Price – Fair Market Price = 825 – 720 = 105
There are 21 ticks to distribute
Leg Pricing Assignment rules applied – distribute whole tick value to each leg evenly, remainder applied to leg2:
Diagonal Leg1 = 850 + 50 = 900
Diagonal Leg2 = 130 – 55 = 75
ST Straddle
SecuritySubType=ST
The Straddle is an options combination involving the simultaneous purchase (sale) of both a call and put of the same strike and expiration.
A Straddle has:
One Product
Two legs
Both legs must be same expiration
Both legs must have the same strike
One leg must be a call
One leg must be a put
Quantity/side ratio of the legs is +1:+1
Buying the Straddle buys both legs
Selling the Straddle sells both legs
Example
Instrument Symbol = UD:U$: ST 0625928966
Leg 1 = +1 SR1U4 C9712
Leg 2 = +1 SR1U4 P9712
Pricing
The Straddle Trade Price is = (Leg1+Leg2) the sum of both option legs
Leg Price Assignment
Calculate Fair Price of the Straddle based on fair prices of the legs
Calculate the difference between the Straddle trade price and the calculated fair price of the spread
Spread Trade Price = Fair Market Price; no remainder to distribute to the legs
Any adjustment of the outright leg prices due to remainder will be assigned according to UDS leg pricing assignment rules
Pricing Example – Equal Distribution
Straddle trades at 127.5
Leg1 has Fair Market Price of 119
Leg2 has Fair Market Price of 8.5
Spread Fair Market Price = 119 + 8.5 = 127.5
There are 0 ticks to distribute.
Trade Price = Fair Market Price; no remainder to distribute to the legs
Leg1 = 119 + 0 = 119
Leg2 = 8.5 + 0 = 8.5
Pricing Example – Unequal Distribution
Straddle trades at 128
Leg1 has Fair Market Price of 119
Leg2 has Fair Market Price of 8.5
Spread Fair Market Price 119 + 8.5 = 127.5
Spread Trade Price - Fair Market Price = .5
There is .5 tick to distribute.
Leg Pricing Assignment rules applied – distribute whole tick value to each leg evenly, remainder applied to leg1
Leg1 = 119 + .5 = 119.5
Leg2 = 8.5+ 0 = 8.5
SG Strangle
SecuritySubType=SG
The Strangle is an options combination involving the simultaneous purchase (sale) of buying a put at a lower strike price and buying the call at a higher strike price of the same instrument and expiration.
A Strangle has:
One product
Two legs
The legs must be of same expirations
Both legs must have different strikes
Leg1 must be a put of a lower strike price
Leg2 must be a call of a higher strike price
Quantity/side ratio of +1:+1
Buying the Strangle buys both legs
Selling the Strangle sells both legs
Example
Instrument Symbol = UD:U$: SG 0625930013
Leg1 = +1 SR1H4 P9712
Leg2 = +1 SR1H4 C9725
Buying the Strangle buys the put at a lower strike price and buys the call at a higher strike price
Selling the Strangle sells the put at a lower strike price and sells the call at a higher strike price
Pricing
The Strangle Trade Price is = (Leg1+Leg2) the sum of both legs
Leg Price Assignment
Calculate Fair Price of the Strangle based on fair prices of the legs
Calculate the difference between the Strangle trade price and the calculated fair price of the spread
Spread Trade Price = Fair Market Price; no remainder to distribute to the legs
Any adjustment of the outright leg prices due to remainder will be assigned according to UDS leg pricing assignment rules
Pricing Example – Equal Distribution
Strangle trades at 21.0
Strangle Leg1 has Fair Market Price of 9.5
Strangle Leg2 has Fair Market Price of 11.5
Spread Fair Market Price 9.5 + 11 = 21
Spread Trade Price = Fair Market Price; no remainder to distribute to the legs
There are 0 ticks to distribute.
Strangle Leg1 = 9.5
Strangle Leg2 = 11.5
Pricing Example – Unequal Distribution
Strangle trades at 25.5
Strangle Leg1 has Fair Market Price of 9.5
Strangle Leg2 has Fair Market Price of 11.5
Spread Fair Market Price 9.0 + 11 = 21
Strangle Trade Price – Fair Market Price = 4.5
There are 4.5 ticks to distribute.
Leg Pricing Assignment rules applied – distribute whole tick value to each leg evenly, remainder applied to leg1
Strangle Leg1 = 12.0
Strangle Leg2 = 13.5
VT Vertical
SecuritySubType=VT
The Vertical is an options spread involving the simultaneous purchase (sale) of buying a call (put) at one strike price and selling a call (put) at a different strike price within the same expiration.
A Vertical has:
One Product
Two legs
Both legs must be same expiration
Both legs must be calls or puts
Both legs must have different strike prices
For a Call Vertical
Leg1 must be a at a lower strike
Leg2 must be a at a higher strike
For a Put Vertical
Leg1 must be at a higher strike
Leg2 must be at a lower strike
Quantity/side ratio of the legs is +1:-1
Buying the Vertical buys one leg1 and sells leg2
Selling the Vertical sells one leg1 and buys leg2
Example
Instrument Symbol = UD:U$: VT 0709922760
Leg 1 = +1 SR1U4 C9737
Leg 2 = -1 SR1U4 C9762
Pricing
The Vertical Trade Price is = (Leg1-Leg2) the differential of both option legs.
Leg Price Assignment
Calculate Fair Price of the Vertical based on fair prices of the legs
Calculate the difference between the Vertical trade price and the calculated fair price of the spread
Spread Trade Price = Fair Market Price; no remainder to distribute to the legs
Any adjustment of the outright leg prices due to remainder will be assigned according to UDS leg pricing assignment rules
Pricing Example – Equal Distribution
Vertical trades at 4.0
Leg1 has Fair Market Price of = 9
Leg2 has Fair Market Price of = 5
Spread Fair Market Price = 9 - 5 = 4
Spread Trade Price – Fair Market Price = 4 – 4 = 0
There are 0 ticks to distribute.
Spread Trade Price – Fair Market Price = 1 Fair Market Price; no remainder to distribute to the legs
Leg1 = 9
Leg2 = 5
Pricing Example – Unequal Distribution
Vertical trades at 4.5
Leg1 has Fair Market Price of 9
Leg2 has Fair Market Price of 5
Spread Fair Market Price = 9 – 5 = 4
Spread Trade Price - Fair Market Price = 4.5 – 4= 0.5
There are .5 ticks to distribute.
Leg Pricing Assignment rules applied – distribute whole tick value to each leg evenly, remainder applied to leg1
Leg1 = 9.25
Leg2 = 4.75
BX Box
SecuritySubType=BX
A Box is an options combination involving buying a call and selling a put at the same lower strike combined with buying a put and selling a call at the same higher strike within the same instrument and expiration. A Box is therefore composed of four outright options with restrictions on the buys, sells, puts, calls, and strikes allowed. The Box can also be understood as a buy of a call vertical and a buy of a put vertical in one instrument with consistent strikes between the two verticals.
A Box has:
One Product
Four legs
Leg1 (buy leg) must be a call at a strike price
Leg2 (sell leg) must be a put at same strike price as leg1
Leg3 (buy leg) must be a put at a higher strike price than leg1
Leg4 (sell leg) must be a call at same strike price as leg3
All four legs must be the same expiration
Two legs must be calls and two legs must puts
Quantity/side ratio of the legs is +1:-1:+1:-1
Buying a Box buy Leg1, sell Leg2, buy Leg3, sell Leg4
Selling a Box sell Leg1, buy Leg2, sell Leg3, buy Leg4
Example
Instrument Symbol = UD:1V: BX 0806948120
Leg1 = +1 ESU8 C2500
Leg2 = -1 ESU8 P2500
Leg3 = +1 ESU8 P2800
Leg4 = -1 ESU8 C2800
Pricing
The Box Trade Price is = sum of Buy legs – sum of Sell legs, or
Leg1 – Leg2 + Leg3 – Leg4
Leg1 + Leg3 – (Leg2 + Leg4)
Leg Price Assignment
Calculate Fair Price of the Box based on fair prices of the legs.
Calculate the difference between the Box trade price and the calculated fair price of the spread.
Spread Trade Price = Fair Market Price; no remainder to distribute to the legs
Any adjustment of the outright leg prices due to remainder will be assigned according to UDS leg pricing assignment rules
Pricing Example – Equal Distribution
Box trades at 34700
Leg1 has Fair Market Price of = 24775
Leg2 has Fair Market Price of = 3175
Leg3 has Fair Market Price of = 14950
Leg4 has Fair Market Price of = 1750
Spread Fair Trade Price = 24775 + 14950 – (3175 + 1750) = 34800
Spread Trade Price - Fair Market Price = 34700 – 34800 = -100
There are 4 ticks to distribute.
Leg1 = 24775 – 25 = 24750
Leg2 = 3175 + 25 = 3200
Leg3 = 14950 – 25 = 14925
Leg4 = 1750 + 25 = 1775
Pricing Example – Unequal Distribution
Box trades at 34775
Leg1 has Fair Market Price of = 24775
Leg2 has Fair Market Price of = 3175
Leg3 has Fair Market Price of = 14950
Leg4 has Fair Market Price of = 1750
Spread Fair Trade Price = 24775 + 14950 – (3175 + 1750) = 34800
Spread Trade Price - Fair Market Price = 34775 – 34800 = 25
There is 1 tick to distribute
UDS Leg Pricing Assignment rules applied – distribute whole tick value to each leg evenly, remainder applied to leg1
Leg1 = 24775 – 25 = 24750
Leg2 = 3175
Leg3 = 14950
Leg4 = 1750
CC Conditional Curve
SecuritySubType=CC
A Conditional Curve is an options spread unique to CME SOFR options. A Conditional Curve involves the simultaneous purchase (sale) of a SOFR option and the sale (purchase) of a second SOFR option. Both options must be either calls or puts, within the same expiration, and must have different underlying futures.
A Conditional Curve has:
Two Products
One product must be a SOFR mid-curve option
One product must be a SOFR option or SOFR mid-curve option
Both products must support the Conditional Curve options spread
Two Legs
Leg1 (buy leg) must be a call with an earlier underlying expiration compared to Leg2
Leg2 (sell leg) must be a call with a later underlying expiration compared to Leg1
Leg1 (buy leg) must be a put with an earlier underlying expiration compared to Leg2
Leg2 (sell leg) must be a put with a later underlying expiration compared to Leg1
Both legs must have the same expiration date
Both legs must be calls or puts
No specific requirement on strike price. Typically, the strikes are close together or equal.
The legs must have different underlying products
For a Call Conditional Curve
For a Put Conditional Curve
Quantity/side ratio of the legs is +1:-1
Buying a Conditional Curve buys leg1 and sells leg2
Selling a Conditional Curve sells leg1 and buys leg2
Example
Instrument Symbol = UD: U$: CC 0917923556
Leg1 = +1 SR1H4 P9478
Leg2 = -1 SR3Z3 P9472
Pricing
The Conditional Curve Trade Price is = Leg1 - Leg2
Leg Price Assignment
Calculate Fair Price of the Conditional Curve based on fair prices of the legs.
Calculate the difference between the Conditional Curve trade price and the calculated fair price of the spread.
Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
Any adjustment of the outright leg prices due to remainder will be assigned according to options combination leg pricing assignment rules.
Pricing Example – Equal Distribution
Conditional Curve trades at 1.5
Leg1 has Fair Market Price of = 7
Leg2 has Fair Market Price of = 7.5
Spread Fair Market Price = 7 – 7.5 = – 0.5
Spread Trade Price - Fair Market Price = 1.5 – (-0.5) = 2
There are 4 ticks to distribute.
The adjustment is applied evenly as follows:
Leg1 = 7 + 1 = 8
Leg2 = 7.5 – 1 = 6.5
Pricing Example – Unequal Distribution
Conditional Curve trades at 1.0
Leg1 has Fair Market Price of = 7
Leg2 has Fair Market Price of = 7.5
Spread Fair Market Price = 7 – 7.5 = – 0.5
Spread Trade Price - Fair Market Price = 1.0 – (-0.5) = 1.5
There are 3 ticks to distribute.
The adjustment is applied evenly as follows:
Leg1 = 7 + 1 = 8
Leg2 = 7.5 – .5 = 7
DB Double
SecuritySubType=DB
The Double is an option spread involving the simultaneous purchase of two calls or two puts with the same expiration.
A Double has:
One Product
Two legs
Leg1 (buy leg) must be a call
Leg2 (buy leg) must be a call at a higher strike price
Leg1 (buy leg) must be a put
Leg2 (buy leg) must be a put at a lower strike price
Both legs must be the same expiration
For a call Double
For a put Double
Quantity/side ratio of the legs is +1:+1
Buying a Double buys leg1, buys leg2
Selling a Double sells leg1, sells leg2
Example
Instrument Symbol = UD:1V: DB 1010944618
Leg1 = +1 ESZ8 C2865
Leg2 = +1 ESZ8 C2880
The lowest acceptable price for this spread is one of the following:
Since the instruments will have the same tick rules, twice the minimum tick
Twice the value of cabinet is acceptable provided the resulting price is a valid tradeable tick
Pricing
The Double Trade Price is = Leg1 + Leg2
Leg Price Assignment
Calculate Fair Price of the Double based on fair prices of the legs.
Calculate the difference between the Double trade price and the calculated fair price of the spread.
Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
Any adjustment of the outright leg prices due to remainder will be assigned according to options combination leg pricing assignment rules.Pricing Example – Equal Distribution
Double trades at 6500
Leg1 has Fair Market Price of = 3500
Leg2 has Fair Market Price of = 2900
Spread Fair Market Price = 6400
Spread Trade Price - Fair Market Price = 6500 – 6400 = 100
There are 4 ticks to distribute.
The adjustment is applied evenly as follows:
Leg1 = 3500 + 50 = 3550
Leg2 = 2900 + 50 = 2950
Pricing Example – Unequal Distribution
Double trades at 6475
Leg1 has Fair Market Price of = 3500
Leg2 has Fair Market Price of = 2900
Spread Fair Market Price = 6400
Spread Trade Price - Fair Market Price = 6475 – 6400 = 75
There are 3 ticks to distribute.
The adjustment is applied as follows:
Leg1 = 3500 + 50 = 3550
Leg2 = 2900 + 25 = 2925
HS Horizontal Straddle
SecuritySubType=HS
The Horizontal Straddle is an options combination involving the simultaneous purchase (sale) of a call and a put at an identical strike price in a deferred month, and also selling a call and a put at another identical strike price in a nearby month. More specifically, the Horizontal Straddle consist of buying a Straddle in a deferred month and selling a Straddle in a nearby month.
A Horizontal Straddle has:
One Product
Four legs
Leg1 must be a buy of a call in a deferred expiration
Leg2 must be a buy of a put with the same expiration and strike as Leg1
Leg3 must be a sell of a call in a nearby expiration
Leg4 must be a sell of a put with the same expiration and strike as Leg3
Quantity/side ratio of the legs is +1:+1:-1:-1
Buying a Horizontal Straddle buys leg1, buys leg2, sells leg3, and sells leg4
Selling a Horizontal Straddle sells leg1, sells leg2, buys leg3, and buys leg4
Example
Instrument Symbol = UD:1V: HS 1010946400
Leg1 = +1 EWZ8 C2840
Leg2 = +1 EWZ8 P2840
Leg3 = -1 EWX8 C2850
Leg4 = -1 EWX8 P2850
Pricing
The Horizontal Straddle Trade Price is = Leg1 + Leg2 – Leg3 – Leg4
Leg Price Assignment
Calculate Fair Price of the Horizontal Straddle based on fair prices of the legs.
Calculate the difference between the Horizontal Straddle trade price and the calculated fair price of the spread.
Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
Any adjustment of the outright leg prices due to remainder will be assigned according to options combination leg pricing assignment rules.
Pricing Example – Equal Distribution
Horizontal Straddle trades at 3900
Leg1 has Fair Market Price of = 8500
Leg2 has Fair Market Price of = 7275
Leg3 has Fair Market Price of = 5750
Leg4 has Fair Market Price of = 6325
Spread Fair Market Price = 3700
Spread Trade Price - Fair Market Price = 3900 – 3700 = 200
There are 8 ticks to distribute
The adjustment is applied evenly as follows:
Leg1 = 8500 + 50 = 8550
Leg2 = 7275 + 50 = 7325
Leg3 = 5750 – 50 = 5700
Leg4 = 6325 – 50 = 6275
Pricing Example – Unequal Distribution
Horizontal Straddle trades at 3875
Leg1 has Fair Market Price of = 8500
Leg2 has Fair Market Price of = 7275
Leg3 has Fair Market Price of = 5750
Leg4 has Fair Market Price of = 6325
Spread Fair Market Price = 3700
Spread Trade Price - Fair Market Price = 3875 – 3700 = 175
There are 7 ticks to distribute
The adjustment is applied as follows:
Leg1 = 8500 + 100 = 8600
Leg2 = 7275 + 25 = 7350
Leg3 = 5750 – 25 = 5725
Leg4 = 6325 – 25 = 6300
IC Iron Condor
SecuritySubType=IC
The Iron Condor is an options combination involving the simultaneous purchase (sale) of a vertical call spread and a vertical put spread where all legs must be of same expiration. The strike prices must range from lowest to highest in order of the legs. Due to this restriction, the first leg of the spread is the sell of a put.
An Iron Condor has:
One Product
Four legs
Leg1 (sell leg) must be a put
Leg2 (buy leg) must be a put at a higher strike price than leg1
Leg3 (buy leg) must be a call at a higher strike price than leg2
Leg4 (sell leg) must be a call at a higher strike price than leg3
All legs must be the same expiration
Quantity/side ratio of the legs is -1:+1:+1:-1
Buying an Iron Condor sells leg1, buys leg2, buys leg3, and sells leg4
Selling an Iron Condor buys leg1, sells leg2, sells leg3, and buys leg4
Example
Instrument Symbol = UD:1N: IC 1008910354
Leg1 = -1 LOZ8 P6150
Leg2 = +1 LOZ8 P6200
Leg3 = +1 LOZ8 C7000
Leg4 = -1 LOZ8 C7050
Pricing
The Iron Condor Trade Price is = Leg2 + Leg3 – Leg1 – Leg4
Leg Price Assignment
Calculate Fair Price of the Iron Condor based on fair prices of the legs.
Calculate the difference between the Iron Condor trade price and the calculated fair price of the spread.
Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
Any adjustment of the outright leg prices due to remainder will be assigned according to options combination leg pricing assignment rules.
Pricing Example – Equal Distribution
Iron Condor trades at 40
Leg1 has Fair Market Price of = 11
Leg2 has Fair Market Price of = 12
Leg3 has Fair Market Price of = 444
Leg4 has Fair Market Price of = 409
Spread Fair Market Price = 36
Spread Trade Price - Fair Market Price = 40 – 36 = 4
There are 4 ticks to distribute.
The adjustment is applied evenly as follows:
Leg1 = 11 – 1 = 10
Leg2 = 12 + 1 = 13
Leg3 = 444 + 1 = 445
Leg4 = 409 – 1 = 408
Pricing Example – Unequal Distribution
Iron Condor trades at 39
Leg1 has Fair Market Price of = 11
Leg2 has Fair Market Price of = 12
Leg3 has Fair Market Price of = 444
Leg4 has Fair Market Price of = 409
Spread Fair Market Price = 36
Spread Trade Price - Fair Market Price = 39 – 36 = 3
There are 3 ticks to distribute.
The adjustment is applied as follows:
Leg1 = 11
Leg2 = 12 + 3 = 15
Leg3 = 444
Leg4 = 409
12 Ratio 1x2
SecuritySubType=12
The Ratio 1x2 is an options spread involving the simultaneous purchase (sale) of one call (put) and the sale (purchase) of two calls (puts) at different strike prices and same expirations.
A Ratio 1X2 has:
One Product
Two legs
Leg1 (buy leg) must be a call at a lower strike price for a quantity of one lot
Leg2 (sell leg) must be a call at a higher strike price for a quantity of two lots
Leg1 (buy leg) must be a put at a higher strike price for a quantity of one lot
Leg2 (sell leg) must be a put at a lower strike price for a quantity of two lots
Both legs must be the same expiration
For a call 1x2
For a put 1x2
Quantity/side ratio of the legs is +1:-2
Buying a Ratio 1x2 buys leg1 and sells leg2
Selling a Ratio 1x2 sells leg1 and buys leg2
Example
Instrument Symbol = UD:U$: 12 0716928272
Leg1 = +1 SR1U4 P9800
Leg2 = -2 SR1U4 P9762
Pricing
The Ratio 1x2 Trade Price is = Leg1 – (2*Leg2)
Leg Price Assignment
Calculate Fair Price of the Ratio 1x2 based on fair prices of the legs.
Calculate the difference between the Ratio 1x2 trade price and the calculated fair price of the spread.
Spread Trade Price = Fair Market Price; no remainder to distribute to the legs
Any adjustment of the outright leg prices due to remainder will be assigned according to UDS leg pricing assignment rules
Pricing Example – Equal Distribution
Ratio 1x2 trades at 24.0
Leg1 has Fair Market Price of = 46.5
Leg2 has Fair Market Price of = 10.5 * 2 = 21
Spread Fair Trade Price = (1*46.5) – (2*10.5) = 25.5
Spread Trade Price - Fair Market Price = 24.0 – 25.5 = -1.5
There is a total of 3 ticks to distribute, but a tick to the second leg counts double
The adjustment can be applied evenly as a result
Leg1 = 46.5 - .5 = 46
Leg2 = (21 + 1) / 2 = 11
46 – (11*2) = 24
Pricing Example – Unequal Distribution
Ratio 1x2 trades at 24.5
Leg1 has Fair Market Price of = 46.5
Leg2 has Fair Market Price of = 10.5 * 2 = 21
Spread Fair Trade Price = 46.5 – (2*10.5) = 25.5
Spread Trade Price - Fair Market Price = 24.5 – 25.5 = -1
Leg Pricing Assignment rules applied – distribute whole tick value to each leg evenly
There is a total of 2 whole ticks to distribute, but a tick to the second leg counts double
Because of this, the whole adjustment applies to leg 1 only
Leg1 = 46.5 – 1 = 45.5
Leg2 = -21 / 2 = 10.5
45.5 – (10.5 * 2) = 24.5
13 Ratio 1x3
SecuritySubType=13
The Ratio 1X3 is an options spread involving the simultaneous purchase (sale) of buying one call (put) and selling three calls (puts) at different strike prices and same expirations.
A 13 Ratio 1X3 has:
One Product
Two legs
Leg1 (buy leg) must be a call at a lower strike price for a quantity of one lot
Leg2 (sell leg) must be a call at a higher strike price for a quantity of three lots
Leg1 (buy leg) must be a put at a higher strike price for a quantity of one lot
Leg2 (sell leg) must be a put at a lower strike price for a quantity of three lots
Both legs must be the same expiration
For a call 1x3
For a put 1x3
Quantity/side ratio of the legs is +1:-3
Buying a Ratio 1x3 buys leg1 and sells leg2
Selling a Ratio 1x3 sells leg1 and buys leg2
Example
Instrument Symbol = UD:1V: 13 0730958091
Leg 1 = +1 ESZ8 P2200
Leg 2 = -3 ESZ8 P1700
Pricing
The 13 Ratio 1X3 Trade Price is = (1*leg1) - (3*leg2)
Leg Price Assignment
Calculate Fair Price of the Ratio 1x3 based on fair prices of the legs.
Calculate the difference between the Ratio 1x3 trade price and the calculated fair price of the spread.
Spread Trade Price = Fair Market Price; no remainder to distribute to the legs
Any adjustment of the outright leg prices due to remainder will be assigned according to UDS leg pricing assignment rules
Pricing Example – Equal Distribution
Ratio 1x3 trades at 265
Leg1 has Fair Market Price of = 800
Leg2 has Fair Market Price of = 185
Spread Fair Market Price = (800*1) – (185*3) = 245
Spread Trade Price - Fair Market Price = 265 – 245 = 20
There are 4 ticks to distribute, a tick to the second leg counts triple
Distribute whole tick value to each leg evenly
Leg1 = 800 + 5 = 805
Leg2 = 185 – 5 = 180
805 - (180*3) = 265
Note – 805 is an untradeable tick for this instrument, however it is legal for leg assignment
The differential of the legs must be a tradeable tick for the new combined instrument. In the event that it is not, orders using the price will be rejected. This spread can trade to a minimum price of zero. This spread can also trade at a negative price.
Pricing Example – Unequal Distribution
Ratio 1x3 trades at 260
Leg1 has Fair Market Price of = 800
Leg2 has Fair Market Price of = 185
Spread Fair Market Price = 800 – (185*3) = 245
Spread Trade Price – Fair Market Price = 260 – 245 = 15
There are 3 ticks to distribute, a tick to the second leg counts triple
UDS Leg Pricing Assignment rules applied – distribute whole tick value to each leg evenly, remainder applied to leg1
Leg1 = 800 + 15 = 815
Leg2 = 185
815 – (185*3) = 260
23 Ratio 2x3
SecuritySubType=23
The Ratio 2x3 is an options spread involving the simultaneous purchase (sale) of two calls (puts) and sale (purchase) of three calls (puts) at different strike prices with the same expirations.
A Ratio 2x3 has:
One Product
Two legs
Leg1 (buy leg) must be a call at a lower strike price for a quantity of two lots
Leg2 (sell leg) must be a call at a higher strike price for a quantity of three lots
Leg1 (buy leg) must be a put at a higher strike price for a quantity of two lots
Leg2 (sell leg) must be a put at a lower strike price for a quantity of three lots
Both legs must be the same expiration
For a call 2x3
For a put 2x3
Quantity/side ratio of the legs is +2:-3
Buying a Ratio 2x3 buys leg1 and sells leg2
Selling a Ratio 2x3 sells leg1 and buys leg2
Example
Instrument Symbol = UD:1V: 23 0806947512
Leg1 = +2 ESU8 P2800
Leg2 = -3 ESU8 P2725
Pricing
The Ratio 2x3 Trade Price is = (2*leg1) – (3*leg2)
Leg Price Assignment
Calculate Fair Price of the Ratio 2X3 based on fair prices of the legs.
Calculate the difference between the Ratio 2X3 trade price and the calculated fair price of the spread.
Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
Any adjustment of the outright leg prices due to remainder will be assigned according to UDS leg pricing assignment rules.
Pricing Example – Equal Distribution
Ratio 2x3 trades at 1000
Leg1 has Fair Market Price of = 2350
Leg2 has Fair Market Price of = 1275
Spread Fair Market Price = (2*2350) – (3*1275) = 875
Spread Trade Price - Fair Market Price = 1000 – 875 = 125
There are 5 ticks to distribute, a tick to the first leg counts double and a tick to the second leg counts triple.
The adjustment is applied evenly as follows:
Leg1 = 2350 + 25 = 2375
Leg2 = 1275 – 25 = 1250
(2375*2) – (1250*3) = 1000
Pricing Example – Unequal Distribution
Ratio 2x3 trades at 925
Leg1 has Fair Market Price of = 2350
Leg2 has Fair Market Price of = 1275
Spread Fair Market Price = (2*2350) – (3*1275) = 875
Spread Trade Price - Fair Market Price = 925 – 875 = 50
There are 2 ticks to distribute, a tick to the first leg counts double and a tick to the second leg counts triple
UDS Leg Pricing Assignment rules applied – distribute whole tick value to each leg evenly, remainder applied to leg1
The adjustment is applied as follows:
Leg1 = 2350 + 25 = 2375
Leg2 = 1275
(2375*2) – (1275*3) = 925
RR Risk Reversal
SecuritySubType=RR
The Risk Reversal is an options combination involving the simultaneous purchase (sale) of a call and sale(purchase) of a put with the same expirations. The strike price of the put must be lower or equal to the strike price of the call.
A Risk Reversal has:
One Product
Two legs
Leg1 (buy leg) must be a call at a strike price equal to or higher than the put
Leg2 (sell leg) must be a put at a strike price equal to or lower than the call
Both legs must be the same expiration
One leg must be a call and one leg must be a put
Quantity/side ratio of the legs is +1:-1
Buying a Risk Reversal buys leg1 and sells leg2
Selling a Risk Reversal sells leg1 and buys leg2
Example
Instrument Symbol = UD:1V: RR 0910956914
Leg1 = +1 ESU8 C2920
Leg2 = -1 ESU8 P2775
Pricing
The Risk Reversal Trade Price = Leg1 – Leg2
Leg Price Assignment
Calculate Fair Price of the Risk Reversal based on fair prices of the legs.
Calculate the difference between the Risk Reversal trade price and the calculated fair price of the spread.
Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
Any adjustment of the outright leg prices due to remainder will be assigned according to UDS leg pricing assignment rules.
Pricing Example – Equal Distribution
Risk Reversal trades at -125
Leg1 has Fair Market Price of = 260
Leg2 has Fair Market Price of = 335
Spread Fair Market Price = 260 – 335 = -75
Spread Trade Price - Fair Market Price = -125 – (-75) = -50
There are 10 ticks to distribute
The adjustment is applied evenly as follows:
Leg1 = 260 – 25 = 235
Leg2 = 335 + 25 = 360
235 – 360 = -125
Pricing Example – Unequal Distribution
Risk Reversal trades at -120
Leg1 has Fair Market Price of = 260
Leg2 has Fair Market Price of = 335
Spread Fair Market Price = 260 – 335 = -75
Spread Trade Price - Fair Market Price = -120 – (-75) = -45
There are 9 ticks to distribute
The adjustment is applied evenly as follows:
Leg1 = 260 – 25 = 235
Leg2 = 335 + 20 = 355
235 – 355 = -120
Example
Instrument Symbol = UD:1V: RR 0910956914
Leg1 = +1 ESU8 C2920
Leg2 = -1 ESU8 P2775
Pricing
The Risk Reversal Trade Price is = Leg1 – Leg2
GD Average Priced Strip Combination
SecuritySubType=GD
The Average Priced Strip Combination is an options spread or combination involving the simultaneous purchase or sale of more than one Average Priced Strips (SA).
A GD Strip has:
One Product
Leg components made up of Averaged Price Strips
Minimum of two legs if recursive
Minimum of four legs if non-recursive
Maximum of 26 legs
Buying the Average Priced Strip Combination buys all buy components and sells all sell components
Selling the Average Priced Strip Combination sells all buy components and buys all sell components
Example
Instrument Symbol = UD:1N: GD 1114915128
+1 LOF9 P5800
+1 LOG9 P5800
+1 LOH9 P5800
- 1 LOF9 P5000
- 1 LOG9 P5000
- 1 LOH9 P5000
Globex identifies the following components as the first Average Priced Strip:
Globex identifies the following components as the second Average Priced Strip:
Pricing
The Average Priced Strip Combination minimum tradeable price is the sum of the minimum prices of the Average Priced Strip components.
The Average Priced Strip Combination Trade Price is = The sum of the Average Priced Strips components in the combination
Each Leg is then assigned the price of the Average Priced Strip
Leg Price Assignment
Calculate the fair value of the Average Priced Strip Combination based on fair prices of the legs.
Calculate the difference between the Average Priced Strip Combination trade price and the calculated fair price of the spread.
Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
Any adjustment to the Averaged Price Strips due to remainder will be assigned according to Averaged Priced Strip Combination leg pricing assignment rules.
Apply adjusted Averaged Price Strips prices to each of the components legs
The following examples use the above instrument UD:1N: GD 1114915128.
Pricing Example – Equal Distribution
Average Priced Strip Combination trades at 275
Leg1 has Fair Market Price of = 321
Leg2 has Fair Market Price of = 420
Leg3 has Fair Market Price of = 451
The first recognized Average Priced Strip price is = (321+420+451)/3 = 397.3 or 397 after rounding
Leg4 has Fair Market Price of = 72
Leg5 has Fair Market Price of = 131
Leg6 has Fair Market Price of = 181
The second recognized Average Priced Strip price is = (72+131+181)/3 = 128
Spread Fair Market Price = 397 – 128 = 269
Spread Trade Price - Fair Market Price = 275 – 269 = 6
There are 6 ticks to distribute between two recognized Average Priced Strips
The adjustments are applied as follows:
First Average Priced Strip = 397 + 3 = 400
Leg’s 1, 2, and 3 are each assigned a price of 400
Second Average Priced Strip = 128 – 3 = 125
Leg’s 4, 5, and 6 are each assigned a price of 125
Pricing Example – Unequal Distribution
Average Priced Strip Combination trades at 274
Leg1 has Fair Market Price of = 321
Leg2 has Fair Market Price of = 420
Leg3 has Fair Market Price of = 451
The first recognized Average Priced Strip price is = (321+420+451)/3 = 397.3 or 397 after rounding
Leg4 has Fair Market Price of = 72
Leg5 has Fair Market Price of = 131
Leg6 has Fair Market Price of = 181
The second recognized Average Priced Strip price is = (72+131+181)/3 = 128
Spread Fair Market Price = 397 – 128 = 269
Spread Trade Price - Fair Market Price = 275 – 269 = 5
There are 5 ticks to distribute between two recognized Average Priced Strips
The adjustments are applied as follows:
First Average Priced Strip = 397 + 3 = 400
Leg’s 1, 2, and 3 are each assigned a price of 400
Second Average Priced Strip = 128 – 2 = 126
Leg’s 4, 5, and 6 are each assigned a price of 126
XT Xmas Tree
SecuritySubType=XT
The Xmas Tree is an options spread involving the simultaneous purchase (sale) of buying a call (put), selling a call (put), and selling another call (put) of equidistant strike prices within the same expirations.
An Xmas Tree has:
One Product
Three legs
All legs must be the same expiration
For a call Xmas Tree
Leg1 (buy leg) must be a call at a certain strike price
Leg2 (sell leg) must be a call at a higher strike price than leg1
Leg3 (sell leg) must be a call at a higher strike price than leg2
The difference in strikes must be equal, i.e. Strike3-Strike2=Strike2-Strike1
For a put Xmas Tree
Leg1 (buy leg) must be a put at a certain strike price
Leg2 (sell leg) must be a put at a lower strike price than leg1
Leg3 (sell leg) must be a put at a lower strike price than leg2
The difference in strikes must be equal, i.e. Strike1-Strike2=Strike2-Strike3
Quantity/side ratio of the legs is +1:-1:-1
Buying a Xmas Tree buys leg1 and sells leg2 and leg3
Selling a Xmas Tree sells leg1 and buys leg2 and leg3
Example
Instrument Symbol = UD:1V: XT 0910958788
Leg1 = +1 ESU8 C2950
Leg2 = -1 ESU8 C2975
Leg3 = -1 ESU8 C3000
Pricing
The Xmas Trade Price = Leg1 - Leg2 - Leg3
Leg Price Assignment
Calculate Fair Price of the Xmas Tree based on fair prices of the legs.
Calculate the difference between the Xmas Tree trade price and the calculated fair price of the spread.
Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
Any adjustment of the outright leg prices due to remainder will be assigned according to UDS leg pricing assignment rules.
Pricing Example – Equal Distribution
Xmas Tree trades at 30
Leg1 has Fair Market Price of = 90
Leg2 has Fair Market Price of = 45
Leg3 has Fair Market Price of = 30
Spread Fair Market Price = 90 – 45 – 30 = 15
Spread Trade Price - Fair Market Price = 30 – 15 = 15
There are 3 ticks to distribute.
The adjustment is applied evenly as follows:
Leg1 = 90 + 5 = 95
Leg2 = 45 – 5 = 40
Leg3 = 30 – 5 = 25
95 – 40 – 25 = 30
Pricing Example – Unequal Distribution
Xmas Tree trades at 25
Leg1 has Fair Market Price of = 90
Leg2 has Fair Market Price of = 45
Leg3 has Fair Market Price of =30
Spread Fair Market Price = 90 – 45 – 30 = 15
Spread Trade Price - Fair Market Price = 25 – 15 = 10
There are 2 ticks to distribute.
The adjustment is applied as follows:
Leg1 = 90 + 10 = 100
Leg2 = 45
Leg3 = 30
100 – 45 – 30 = 25
3W 3-Way
SecuritySubType=3W
The Call 3-Way is an options combination involving the simultaneous purchase (sale) of a call, the sale (purchase) of a second call, and the sale (purchase) of a put. Leg1’s strike price must be between Leg2’s higher strike price and Leg3’s lower strike price. All legs must have the same expiration. More specifically, the 3-Way combination is the simultaneous purchase of a vertical call spread and sale of a put against it.
The Put 3-Way is an options combination involving the simultaneous purchase (sale) of a put, the sale (purchase) of a second put, and the sale (purchase) of a call. Leg1’s strike price must be between Leg2’s lower strike price and Leg3’s higher strike price. All legs must have the same expiration. More specifically, the 3-Way combination is the simultaneous purchase of a vertical put spread and sale of a call against it.
A 3-Way has:
One Product
Three legs
Leg1 (buy leg) must be a call
Leg2 (sell leg) must be a call at a higher strike price than leg1
Leg3 (sell leg) must be a put at a lower strike price than leg1
Leg1 (buy leg) must be a put
Leg2 (sell leg) must be a put at a lower strike price than leg1
Leg3 (sell leg) must be a call at a higher strike price than leg1
All legs must be the same expiration
For a call 3-Way
For a put 3-Way
Quantity/side ratio of the legs is +1:-1:-1
Buying a 3-Way buys leg1, sells leg2, sells leg3
Selling a 3-Way sells leg1, buys leg2, buysleg3
Example
Instrument Symbol = UD:1V: 3W 1010948130
Leg1 = +1 ESZ8 P2800
Leg2 = -1 ESZ8 P2780
Leg3 = -1 ESZ8 C3000
Pricing
The 3-Way Trade Price is = Leg1 – Leg2 – Leg3
Leg Price Assignment
Calculate Fair Price of the 3-Way based on fair prices of the legs.
Calculate the difference between the 3-Way trade price and the calculated fair price of the spread.
Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
Any adjustment of the outright leg prices due to remainder will be assigned according to options combination leg pricing assignment rules.
Pricing Example – Equal Distribution
3-Way trades at 525
Leg1 has Fair Market Price of = 10200
Leg2 has Fair Market Price of = 9300
Leg3 has Fair Market Price of = 405
Spread Fair Market Price = 495
Spread Trade Price - Fair Market Price = 525 – 495 = 30
There are 6 ticks to distribute.
The adjustment is applied evenly as follows:
Leg1 = 10200 + 10 = 10210
Leg2 = 9300 – 10 = 9290
Leg3 = 405 – 10 = 395
Pricing Example – Unequal Distribution
3-Way trades at 550
Leg1 has Fair Market Price of = 10200
Leg2 has Fair Market Price of = 9300
Leg3 has Fair Market Price of = 405
Spread Fair Market Price = 495
Spread Trade Price - Fair Market Price = 550 – 495 = 55
There are 11 ticks to distribute.
The adjustment is applied as follows:
Leg1 = 10200 + 25 = 10225
Leg2 = 9300 – 15 = 9285
Leg3 = 405 – 15 = 390
3C 3-Way Straddle versus Call
SecuritySubType=3C
The 3-Way Call Straddle is an options combination involving the simultaneous purchase (sale) of a call and a put at the same strike price, while selling an additional call at a different strike price. All legs must be of same expiration. More specifically, the 3-Way Call Straddle options combination is the simultaneous purchase (sale) of a Straddle and sale (purchase) of a call within the same expiration.
A 3-Way Call Straddle has:
One Product
Three legs
Leg1 (buy leg) must be a call
Leg2 (buy leg) must be a put at same strike price as leg1
Leg3 (sell leg) must be a call at a different strike price than Legs 1 and 2
All legs must be the same expiration
For a call 3-Way Call Straddle
Quantity/side ratio of the legs is +1:+1:-1
Buying a 3-Way Call Straddle buys leg1, buys leg2, sells leg3
Selling a 3-Way Call Straddle sells leg1, sells leg2, buys leg3
Example
Instrument Symbol = UD:U$: 3C 1015931432
Leg1 = +1 SR1Z3 C9750
Leg2 = +1 SR1Z3 P9750
Leg3 = -1 SR1Z3 C9800
Pricing
The 3-Way Call Straddle Trade Price is = Leg1 + Leg2 – Leg3
Leg Price Assignment
Calculate Fair Price of the 3-Way Call Straddle based on fair prices of the legs.
Calculate the difference between the 3-Way Call Straddle trade price and the calculated fair price of the spread.
Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
Any adjustment of the outright leg prices due to remainder will be assigned according to options combination leg pricing assignment rules.
Pricing Example – Equal Distribution
3-Way Call Straddle trades at 22
Leg1 has Fair Market Price of = 1.5
Leg2 has Fair Market Price of = 19
Leg3 has Fair Market Price of = 1.5
Spread Fair Market Price = 1.5 + 19 - 1.5 = 19
Spread Trade Price - Fair Market Price = 22 – 19 = 3
There are 6 ticks to distribute.
The adjustment is applied evenly as follows:
Leg1 = 1.5 + 1 = 2.5
Leg2 = 19 + 1 = 20
Leg3 = 1.5 – 1 = .5
Pricing Example – Unequal Distribution
3-Way Call Straddle trades at 21
Leg1 has Fair Market Price of = 1.5
Leg2 has Fair Market Price of = 19
Leg3 has Fair Market Price of = 1.5
Spread Fair Market Price = 1.5 + 19 - 1.5 = 19
Spread Trade Price - Fair Market Price = 21 – 19 = 2
There are 4 ticks to distribute.
The adjustment is applied evenly as follows:
Leg1 = 1.5 + 1 = 2.5
Leg2 = 19 + .5 = 19.5
Leg3 = 1.5 – .5 = 1
3P 3-Way Straddle versus Put
SecuritySubType=3P
The 3-Way Put Straddle is an options combination involving the simultaneous purchase (sale) of a call, and a put at the same strike price, while selling an additional put at a different strike price. All legs must be of the same expiration. The 3-Way Put Straddle options combination can be understood as the simultaneous purchase (sale) of a Straddle and sale (purchase) of a put within the same expiration.
A 3-Way Put Straddle has:
One Product
Three legs
Leg1 (buy leg) must be a call
Leg2 (buy leg) must be a put at same strike price as leg1
Leg3 (sell leg) must be a put at a different strike price than Legs 1 and 2
All legs must be the same expiration
For a put 3-Way Put Straddle
Quantity/side ratio of the legs is +1:+1:-1
Buying a 3-Way Put Straddle buys leg1, buys leg2, sells leg3
Selling a 3-Way Put Straddle sells leg1, sells leg2, buys leg3
Example
Instrument Symbol = UD:U$: 3P 1015931394
Leg1 = +1 SR1M4 C9725
Leg2 = +1 SR1M4 P9725
Leg3 = -1 SR1M4 P9700
Pricing
The 3-Way Put Straddle Trade Price is = Leg1 + Leg2 – Leg3
Leg Price Assignment
Calculate Fair Price of the 3-Way Put Straddle based on fair prices of the legs.
Calculate the difference between the 3-Way Put Straddle trade price and the calculated fair price of the spread.
Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
Any adjustment of the outright leg prices due to remainder will be assigned according to options combination leg pricing assignment rules.
Pricing Example – Equal Distribution
3-Way Put Straddle trades at 25
Leg1 has Fair Market Price of = 5
Leg2 has Fair Market Price of = 32
Leg3 has Fair Market Price of =13.5
Spread Fair Market Price = 23.5
Spread Trade Price - Fair Market Price = 25 – 23.5 = 1.5
There are 3 ticks to distribute.
The adjustment is applied evenly as follows:
Leg1 = 5 + .5 = 5.5
Leg2 = 32 + .5 = 32.5
Leg3 = 13.5 - .5 = 13
Pricing Example – Unequal Distribution
3-Way Put Straddle trades at 24
Leg1 has Fair Market Price of = 5
Leg2 has Fair Market Price of = 32
Leg3 has Fair Market Price of =13.5
Spread Fair Market Price = 23.5
Spread Trade Price - Fair Market Price = 24 – 23.5 =.5
There are 1 ticks to distribute.
The adjustment is applied evenly as follows:
Leg1 = 5 + .5 = 5.5
Leg2 = 32
Leg3 = 13.5
IB Iron Butterfly
SecuritySubType=IB
The Iron Butterfly is an options combination involving the simultaneous sale (purchase) of a put, the purchase (sale) of a second put, the purchase (sale) of a call, and the sale (purchase) of a second call. All components must have the same expiration. The first leg of the Iron Butterfly must be a sell. Although the strikes are not required to be consecutive or equidistant, the middle strikes of the buy put and buy call must be identical. The Iron Butterfly can also be understood as the simultaneous sale (purchase) of a Strangle (SG) and the purchase (sale) of a Straddle (ST).
A Iron Butterfly has:
One Product
Four legs
Leg1 (sell leg) must be a put at the lowest strike price
Leg2 (buy leg) must be a put at the middle strike price
Leg3 (buy leg) must be a call at the same middle strike price as Leg2
Leg4 (sell leg) must be a call at the highest strike price
All four legs must be the same expiration
Quantity/side ratio of the legs is -1:+1:+1:-1
Strike Values Leg1 < Leg2 = Leg3 < Leg4
Buying a Iron Butterfly sells leg1, buys leg2, buys leg3, and sells leg4
Selling a Iron Butterfly buys leg 1, sells leg2, sells leg3, and buys leg4
Example
Instrument Symbol = UD:1V: 0807949953
Leg1 = -1 EWU8 P2710
Leg2 = +1 EWU8 P2810
Leg3 = +1 EWU8 C2810
Leg4 = -1 EWU8 C2870
Pricing
The Iron Butterfly Trade Price is = Leg2 + Leg3 – (Leg1 + Leg4)
Leg Price Assignment
Calculate Fair Price of the Iron Butterfly based on fair prices of the legs.
Calculate the difference between the Iron Butterfly trade price and the calculated fair price of the spread.
Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
Any adjustment of the outright leg prices due to remainder will be assigned according to options combination leg pricing assignment rules.
Pricing Example – Equal Distribution
Iron Butterfly trades at 150
Leg1 has Fair Market Price of = 27
Leg2 has Fair Market Price of = 119
Leg3 has Fair Market Price of = 65
Leg4 has Fair Market Price of = 11
Spread Fair Market Price = 119 + 65 – (27 + 11) = 146
Spread Trade Price - Fair Market Price = 150 -146 =
There are 4 ticks to distribute
The adjustment is applied evenly as follows:
Leg1 = 27 – 1 = 26
Leg2 = 119 + 1 = 120
Leg3 = 65 + 1 = 66
Leg4 = 11 – 1 = 10
Pricing Example – Unequal Distribution
Iron Butterfly trades at 149
Leg1 has Fair Market Price of = 27
Leg2 has Fair Market Price of = 119
Leg3 has Fair Market Price of = 65
Leg4 has Fair Market Price of = 11
Spread Fair Market Price = 119 + 65 – (27 + 11) = 146
Spread Trade Price - Fair Market Price = 149 – 146 = 3
There are 3 ticks to distribute
The adjustment is applied as follows:
Leg1 = 27
Leg2 = 119 + 3
Leg3 = 65
Leg4 = 11
JR Jelly Roll
SecuritySubType=JR
The Jelly Roll is an options combination involves the simultaneous sale (purchase) of call and purchase (sale) of a put at one strike price in a nearby expiration while also making a purchase (sale) of a call and sale (purchase) of a put at another strike price in a deferred expiration. There is no additional requirement for the strike prices. The Jelly Roll can be understood as the simultaneous sale of a nearby same strike Risk Reversal and purchase of a deferred same strike Risk Reversal. It is important to note that, with this combination, the first leg is a sell leg.
A Jelly Roll has:
One Product
Four legs
Leg1 (sell leg) must be a call
Leg2 (buy leg) must be a put at a same strike price and expiration as leg1
Leg3 (buy leg) must be a call at a deferred expiration compared to Leg’s 1 and 2
Leg4 (sell leg) must be a put at a same strike price and expiration as leg3
Quantity/side ratio of the legs is -1:+1:+1:-1
Buying a Jelly Roll sell leg1, buy leg2, buy leg3, and sell leg4
Selling a Jelly Roll buys leg1, sells leg2, sells leg3, and buys leg4
Example
Instrument Symbol = UD:1V: JR 1015959369
Leg1 = -1 ESZ8 C2775
Leg2 = +1 ESZ8 P2775
Leg3 = +1 ESM9 C2775
Leg4 = -1 ESM9 P2775
Pricing
The Jelly Roll Trade Price is = Leg2 + Leg3 – Leg1 – Leg4
Leg Price Assignment
Calculate Fair Price of the Jelly Roll based on fair prices of the legs.
Calculate the difference between the Jelly Roll trade price and the calculated fair price of the spread.
Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
Any adjustment of the outright leg prices due to remainder will be assigned according to options combination leg pricing assignment rules.
Pricing Example – Equal Distribution
Jelly Roll trades at 1675
Leg1 has Fair Market Price of = 8725
Leg2 has Fair Market Price of = 5975
Leg3 has Fair Market Price of = 16850
Leg4 has Fair Market Price of = 12525
Spread Fair Market Price = 1575
Spread Trade Price - Fair Market Price = 1675 – 1575 = 100
There are 4 ticks to distribute
The adjustment is applied evenly as follows:
Leg1 = 8725 – 25 = 8700
Leg2 = 5975 + 25 = 6000
Leg3 = 16850 + 25 = 16875
Leg4 = 12525 – 25 = 12500
Pricing Example – Unequal Distribution
Jelly Roll trades at 1650
Leg1 has Fair Market Price of = 8725
Leg2 has Fair Market Price of = 5975
Leg3 has Fair Market Price of = 16850
Leg4 has Fair Market Price of = 12525
Spread Fair Market Price = 1575
Spread Trade Price - Fair Market Price = 1650 – 1575 = 75
There are 3 ticks to distribute
The adjustment is applied evenly as follows:
Leg1 = 8725
Leg2 = 5975 + 75 = 6050
Leg3 = 16850
Leg4 = 12525
GT Guts
SecuritySubType=GT
The Guts is an options combination involving the simultaneous purchase (sale) of call and a put within the same expiration. Unlike a Straddle and Strangle, a Guts combination has the strike price of the put higher than the strike price of the call.
A Guts combination has:
One Product
Two legs
Both legs must be the same expiration
Leg1 (buy leg) must be a call
Leg2 (buy leg) must be a put at a higher strike price than Leg1
Quantity/side ratio of the legs is +1:+1
Buying a Guts buys leg1, buys leg2
Selling a Guts sells leg1, sells leg2
Example
Instrument Symbol = UD:1N: GT 1016922333
Leg1 = +1 LOF9 C6900
Leg2 = +1 LOF9 P7350
Pricing
The Guts Trade Price is = Leg1 + Leg2
Leg Price Assignment
Calculate Fair Price of the Guts based on fair prices of the legs.
Calculate the difference between the Guts trade price and the calculated fair price of the spread.
Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
Any adjustment of the outright leg prices due to remainder will be assigned according to options combination leg pricing assignment rules.
Pricing Example – Equal Distribution
Guts trades at 883
Leg1 has Fair Market Price of = 450
Leg2 has Fair Market Price of = 423
Spread Fair Market Price = 873
Spread Trade Price - Fair Market Price = 883 – 873 = 10
There are 10 ticks to distribute
The adjustment is applied evenly as follows:
Leg1 = 450 + 5 = 455
Leg2 = 423 + 5 = 428
Pricing Example – Unequal Distribution
Guts trades at 884
Leg1 has Fair Market Price of = 450
Leg2 has Fair Market Price of = 423
Spread Fair Market Price = 873
Spread Trade Price - Fair Market Price = 884 – 873 = 11
There are 11 ticks to distribute
The adjustment is applied as follows:
Leg1 = 450 + 6 = 456
Leg2 = 423 + 5 = 428
CV Covered
SecuritySubType=CV
The CV Covered is the simultaneous purchase or sale of outright options or options spreads or combination with one or more outright futures; for example, buying call options and selling futures or selling put options and selling futures. The creator of the UDS is responsible for defining the direction, delta, price, and expiration of the futures leg(s). Covereds pricing and leg assignments follow the rules of the options leg; i.e., an outright options covered with a future is priced following the rules of the option leg and a VT Vertical covered with a future is priced following the rules of the VT Vertical. The CV Covered is identified with tag 762-SecuritySubType=CV:XX, where XX is either "FO" for an outright option or the options spread type (e.g., "GN", "VT"). CV Covered is available as an options-futures User-Defined Spread only.
A CV Covered has:
Many products
At least one and up to 25 outright futures legs, with defined directions, deltas, prices and terms
At least one options outright or options spread
Any quantity ratio, so long as the ratio has the least common denominator possible
Any side ratio, as long as the first option outright or options spread leg is a buy
Pricing
The Spread Trade Price is the price or differential of the outright options or options spread legs
A CV Covered SA Strip follows the SA pricing rules
A CV Covered GD Strip Spread follows the GD pricing rules
Leg price assignment
If options leg(s) are a spread or combination, the Spread Trade Price is calculated following the defined spread rules
If options leg is an outright, the Spread Trade Price is assigned to the options leg
Multiply the Delta times the total number of traded options
Assign the futures quantity at the Futures Leg Price
Pricing Example
CV Covered trades 100 lots at 25
Leg1 is a 1 lot buy options outright
Leg2 is a 1 lot sell futures outright, Delta 47 and price 200,000
Outright options Leg1 is assigned Spread Trade Price of 25
Futures outright Leg2 sells 47 lots (Delta * traded options quantity) at defined price of 200,000.
EO Reduced Tick Options
SecuritySubType=EO
The Reduced Tick Options Spread is an inter-commodity options spread which can also be constructed as a combination consisting of the simultaneous purchase(sale) of an American Style Natural Gas Option with the sale (purchase) of a European Style Natural Gas Option. There are no restrictions regarding option type, strike, or expiration for either leg.
Uniqueness and differences of the Reduced Tick Options Spread are highlighted in the table below:
Instrument | CME Globex Price example | CME Globex Settlement | CME Globex Tick Size | Notes |
|---|---|---|---|---|
ONX8 C3150 | 64 | 64 | 1 | Underlying product is NGX8, American Style option. |
LNEX8 C3150 | 630 | 633 | 10 | Underlying product is NGX8, European Style option.
|
Reduced Tick Options Spread UD:EO | 1 | .7 | .1 |
|
A Reduced Tick Options Spread has:
Two Products
Two legs
Both products must be of different NYMEX Energy Product Groups of unequal ticks
Leg1 (buy leg) must be an outright option with Globex Symbol beginning ON (ex. ONX8 C3150)
Leg2 (sell leg) must be an outright option with Globex Symbol beginning LNE (ex. LNEX8 C3150)
There are no requirements for option type, strike price, or expiration between the two legs
If both legs are calls or puts, the resulting instrument is a Spread
If one leg is a call and one leg is a put, the resulting instrument is a Combination
Quantity/side ratio of the legs is +1:-1
Buying a Reduced Tick Options Spread or Combination buys leg1 and sells leg2
Selling a Reduced Tick Options Spread or Combination sells leg1 and buys leg2
Example
Instrument Symbol = UD:1T: EO 1026911365
Leg1 = +1 ONX8 C3150
Leg2 = -1 LNEX8 C3150
Pricing
The EO Reduced Tick trade price is = Leg1 – Leg2
Leg Price Assignment
Calculate Fair Price of the Reduced Tick Options Spread or Combination based on fair prices of the legs.
Calculate the difference between the Reduced Tick Options Spread or Combination trade price and the calculated fair price of the spread.
Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
Any adjustment of the outright leg prices due to remainder will be assigned according to options combination leg pricing assignment rules.
Pricing Example – Equal Distribution
EO Reduced Tick trades at 3.0
Leg1 has Fair Market Price of = 64
Leg2 has Fair Market Price of = 630
Spread Fair Market Price = 64 – (630/10) = 1.0
Spread Trade Price - Fair Market Price = 3.0 – 1.0 = 2.0
There are 2 ticks to distribute.
The adjustment is applied evenly as follows:
Leg1 = 64 + 1 = 65
Leg2 = 630 – 10 = 620
Pricing Example – Unequal Distribution
EO Reduced Tick trades at 2.9
Leg1 has Fair Market Price of = 64
Leg2 has Fair Market Price of = 630
Spread Fair Market Price = 64 – (630/10) = 1.0
Spread Trade Price - Fair Market Price = 2.9 – 1.0 = 1.9
There are 1.9 ticks to distribute.
The adjustment is applied as follows:
Leg1 = 64 + 1.9 = 65.9
Leg2 = 630
GN Generic
SecuritySubType=GN
If the spread or combination requested by the user is not identified as one of the CME Globex recognized spread types, but has a valid construction, the instrument will be created exactly as the user requested and designated in market data as 'GN' (generic).
Under the generic designation, the user can create options spread instruments composed of multiple spread types. For example, a unique options spread instrument can be created by combining the configurations of a Vertical options spread and Xmas tree options spread into a unique Generic instrument.
Generic spreads can contain up to 26 outrights. This count is irrespective of leg ratio. For example, when the user submits a proposed user defined spread to CME Globex containing an options butterfly (buy1, sell2, buy1) as a leg, CME Globex will count that instrument as 3 (buy/sell/buy) instruments against the 26 instrument limit.
For additional information, see User-Defined Spread (UDS).
For advanced information on UDS construction rules, see UDS - Validation and Messaging Rules.
CME FX Link (XF, YF)
CME FX Link is traded on CME Globex as the differential between CME FX Futures and OTC Spot FX, resulting in the simultaneous execution of FX Futures cleared by CME Group, and OTC Spot FX transactions subject to bilateral OTC relationships. The CME FX Link spreads consist of OTC FX Spot vs. each of the front three quarterly CME FX Futures. Three consecutive CME FX Link months are listed for eligible currency pairs. A new spread will be added two weeks prior to the last trade date of an expiring CME FX Future. The OTC FX Spot leg is only tradeable as part of the CME FX Link spread.
The spreads are traded as a differential between FX Futures and OTC spot, with both legs expressed in OTC quote convention. Therefore, the spread construction is either non-inverted or inverted, depending on whether the quoting convention of the related futures leg is inverted or non-inverted with respect to the typical OTC convention for that currency pair.
With a non-inverted CME FX Link Spread (XF):
The CME FX Future follows the same convention as the OTC market.
The buyer of the spread buys CME FX futures and sells OTC spot. The seller sells CME futures and buys OTC spot.
With an inverted CME FX Link Spread (YF):
The CME FX Future is inverted from the standard OTC convention.
The buyer of the spread sells CME FX futures and sells OTC spot. The seller buys CME futures and buys OTC spot.
Non-Inverted CME FX Link Spread (XF)
Construction: Buy1FXFutureExp1 Sell1FXOTCSpot
Security Definition Example: 6E:XF:EURUSD:M8
Example: Buy the Spread
Buy 1 March 2018 CME Euro FX Future and
Sell 1 Euro / US Dollar Spot
Example: Sell the Spread
Sell 1 March 2018 CME Euro FX Future and
Buy 1 Euro / US Dollar Spot
Inverted CME FX Link Spread (YF)
Construction: Sell1FXFutureExp1 Sell1FXOTCSpot
Security Definition Example: 6J:YF:USDJPY:M8
Example: Buy the Spread
Sell 1 March 2018 Japanese Yen Future and
Sell 1 US Dollar / Japanese Yen Spot
Example: Sell the Spread
Buy 1 March 2018 Japanese Yen Future and
Buy 1 US Dollar / Japanese Yen Spot
Selling an inverted FX futures contract is the same as buying the contract in OTC terms.
Pricing
This section provides an overview of FX Link Pricing. For more detailed pricing information, consult the FX Link quotation and pricing guide. The full economic terms of the spot instrument will be available on CME STP.
Pricing Overview
The formula for spot rate for non-inverted and inverted spreads is outlined below. The FX Link spot leg is rounded based on the Security Definition minimum tick precision (tag 969-MinPriceIncrement), after the calculations below are performed. The trade date for FX Link is the market data trade date, not the clearing trade date. Tag 527-SecondaryExecID allows linking the spread summary fill notice with the leg fill notices to determine price information.
Pricing Formula
Non-Inverted (XF)
Spot Price = Future Price – Spread Price
Inverted (YF)
Spot Price = (1/ Futures Price) – Spread Price
Notional Calculations
Non-Inverted (XF)
Base Notional = Contract Size * Contract Quantity
Quote Notional = Base Notional * Spot Price
Inverted (YF)
Base Notional = Quote Notional / Spot Price
Quote Notional = Contract Size * Contract Quantity
Value Date
USD/CAD = T+1 business days, all other currency pairs are T+2 business days
Value date must be a valid day in both currencies’ calendars.
SS Straddle Strip
SecuritySubType=SS
The Straddle Strip is an options combination involving the simultaneous purchase (sale) of four consecutive quarterly Straddles at the same strike price.
A Straddle Strip has:
One Product
Eight legs
Leg1 must be a call in Exp1
Leg2 must be a put in Exp1
Leg3 must be a call in Exp2
Leg4 must be a put in Exp2
Leg5 must be a call in Exp3
Leg6 must be a put in Exp3
Leg7 must be a call in Exp4
Leg8 must be a put in Exp4
All legs must have the same strike price
Each put and call pair must be in consecutive quarterly expirations (Exp1, Exp2, Exp3, Exp4)
All legs must be buys
Quantity/side ratio of the legs is +1:+1:+1:+1:+1:+1:+1:+1
Buying a Straddle Strip buys all eight legs
Selling a Straddle Strip sells all eight legs
Example
Instrument Symbol = UD:U$: SS 1024924968
Leg1 = +1 SR1Z3 C9687
Leg2 = +1 SR1Z3 P9687
Leg3 = +1 SR1H4 C9687
Leg4 = +1 SR1H4 P9687
Leg5 = +1 SR1M4 C9687
Leg6 = +1 SR1M4 P9687
Leg7 = +1 SR1U4 C9687
Leg8 = +1 SR1U4 P9687
Pricing
The Straddle Strip Trade Price is = Leg1 + Leg2 + Leg3 + Leg4 + Leg5 + Leg6 + Leg7 + Leg8
Leg Price Assignment
Calculate Fair Price of the Straddle Strip based on fair prices of the legs.
Calculate the difference between the Straddle Strip trade price and the calculated fair price of the spread.
Spread Trade Price = Fair Market Price; no remainder to distribute to the legs.
Any adjustment of the outright leg prices due to remainder will be assigned according to options combination leg pricing assignment rules.
Pricing Example – Equal Distribution
Straddle Strip trades at 348
Leg1 has Fair Market Price of = 39.5
Leg2 has Fair Market Price of = 38
Leg3 has Fair Market Price of = 43
Leg4 has Fair Market Price of = 40
Leg5 has Fair Market Price of = 47.5
Leg6 has Fair Market Price of = 42.5
Leg7 has Fair Market Price of = 49.5
Leg8 has Fair Market Price of = 44
Spread Fair Market Price = 39.5 + 38 + 43 + 40 + 47.5 + 42.5 + 49.5 + 44 = 344
Spread Trade Price - Fair Market Price = 348 – 344 = 4
There are 8 ticks to distribute.
The adjustment is applied evenly as follows:
Leg1 = 39.5 + .5 = 40
Leg2 = 38 + .5 = 38.5
Leg3 = 43 + .5 = 43.5
Leg4 = 40 + .5 = 40.5
Leg5 = 47.5 + .5 = 48
Leg6 = 42.5 + .5 = 43
Leg7 = 49.5 + .5 = 50
Leg8 = 44 + .5 = 44.5
Pricing Example – Unequal Distribution
Straddle Strip trades at 347.5
Leg1 has Fair Market Price of = 39.5
Leg2 has Fair Market Price of = 38
Leg3 has Fair Market Price of = 43
Leg4 has Fair Market Price of = 40
Leg5 has Fair Market Price of = 47.5
Leg6 has Fair Market Price of = 42.5
Leg7 has Fair Market Price of = 49.5
Leg8 has Fair Market Price of = 44
Spread Fair Market Price = 39.5 + 38 + 43 + 40 + 47.5 + 42.5 + 49.5 + 44 = 344
Spread Trade Price - Fair Market Price = 347.5 – 344 = 3.5
There are 7 ticks to distribute.
Leg Pricing Assignment rules applied – whole tick and remainder applied to leg1:
The adjustment is applied as follows:
Leg1 = 39.5 + 3.5 = 43
Leg2 = 38
Leg3 = 43
Leg4 = 40
Leg5 = 47.5
Leg6 = 42.5
Leg7 = 49.5
Leg8 = 44
AB Averaged Price Bundle
SecuritySubType=AB
The Averaged Price Bundle is a futures spread involving the simultaneous purchase (sale) of futures positions at the averaged price of the legs.
This strategy is available as a futures exchange-defined spread only.
Averaged Price Bundle spread has:
One product
Minimum of four legs
Maximum of 40 legs
Expiration of all the legs must be consecutive quarterly outright futures
Quantity/side ratio +1:+1:+1:+1:…+1
Example:
Instrument Symbol = SR3: AB
Leg1 prior settlement price = xxxx
Leg2 prior settlement price = xxxx
Leg3 prior settlement price = xxxx
Leg4 prior settlement price = xxxx
Pricing:
The Averaged Price Bundle spread trade price is = (Leg1+Leg2+…LegN) / total number of legs
Leg price assignment:
Prior day settlement price will be rounded up to .50 tick
The difference between the total spread trade price (multiplying the trade price by the number of legs) and the sum of the spread prior days rounded settlement price is calculated:
[(Trade price * number of legs) – (Sum of the legs’ prior days rounded settlement price)]
The average differential from step 2 is applied to each leg’s prior days rounded settlement price
Legs may be adjusted to equal spread trade price
Any adjustment of the outright leg prices due to remainder will be assigned according to the Averaged Price Bundle leg pricing assignment rules. The remainder will be applied in .50 increments starting with most deferred leg.
Pricing Example – Equal Distribution:
Averaged Price Bundle trades at 9705.0
Leg1 prior days rounded settlement price = 9706.5
Leg2 prior days rounded settlement price = 9705.5
Leg3 prior days rounded settlement price = 9703.5
Leg4 prior days rounded settlement price = 9702.5
Total spread trade price – sum of prior days rounded settlement price
38820.0000 – 38818.0000 = 2
Apply average differential to each leg:
Leg1 = 9707.0
Leg2 = 9706.0
Leg3 = 9704.0
Leg4 = 9703.0
Pricing Example – Unequal Distribution:
Averaged Price Bundle trades at 9700.0
Leg1 prior days rounded settlement price = 9706.0
Leg2 prior days rounded settlement price = 9705.5
Leg3 prior days rounded settlement price = 9703.5
Leg4 prior days rounded settlement price = 9702.5
Total spread trade price – sum of prior days rounded settlement price
38800.0 – 38817.5 = -17.5
Averaged Price Bundle remainder leg pricing assignment rules applied
Apply average differential to each leg
Apply remainder starting with most deferred leg
The legs are adjusted as follows:
Leg1 = 9702.0
Leg2 = 9701.0
Leg3 = 9699.0
Leg4 = 9698.0
BT South American Soybean - CBOT Soybean Inter-Commodity
SecuritySubType=BT
The BT spread is the simultaneous purchase (sale) of a South American Soybean FOB Santos Soybeans Financially Settled (Platts) futures contract and a CBOT Soybean futures.
Construction
The South American Soybean/CBOT Soybean Inter-Commodity futures spread has:
Two different products
Two legs
Leg1 is the buy leg
Leg2 is the sell leg
Quantity/side ratio of the legs is +1:-1
Buying a South American Soybean/CBOT Soybean Inter-Commodity spread buys leg1 and sells leg2
Selling a South American Soybean/CBOT Soybean Inter-Commodity spread sells leg1 and buys leg2
Example
Instrument Symbol = SASJ1-ZSJ1
Leg1 = +1 SASJ1
Leg2 = - 1 ZSJ1
Pricing
The South American Soybean/CBOT Soybean Inter-Commodity spread Trade Price is = (Leg1/36.74) - Leg2
Leg Price Assignment
Leg2 is the anchor and assigned the most recent available price from the outright market
Leg1 is calculated in metric tons:
Leg1 ((Traded Spread + CBOT Soybean Price) * 36.74))
To convert Leg1 from metric tons to bushels:
Take calculated leg1 price in metric tons and divide by 36.74
Leg Pricing Example
South American Soybean/CBOT Soybean Inter-Commodity spread trades at 15
Leg1 is calculated
Leg1 = ((15 + 1453.75) * 36.74))
Leg1 = 53961.875 metric ton
Leg1 = ((15 + 53961.875/36.74))
Leg1 = 1468.75 bushel
Leg2 = 1453.75
AE Fixed Price Ratio Inter-Commodity
SecuritySubType=AE
The AE spread is the simultaneous purchase(sale) of two contracts of different leg quantity ratios where the spread will trade at a fixed price ratio of 1:1.
Construction
The Fixed Price Ratio Inter-Commodity futures spread is a a Fixed Price Ratio spread involving the simultaneous purchase (sale) of two different products with either the same or different expirations of different pre-determined leg ratios (e.g. 8:1).
A Fixed Price Ratio Inter-Commodity futures spread has:
Two products
Two legs
Leg1 is the buy leg and must be the same expiration or different expiration as leg2
Leg2 is the sell leg and must be the same expiration or different expiration as leg1
Quantity/side ratios are predetermined and detailed in the outright leg quantities
Buying the Fixed Price Ratio Inter-Commodity futures spread buys leg1 and sells leg2
Selling the Fixed Price Ratio Inter-Commodity futures spread sells leg1 and buys leg2
Example
Instrument Symbol = NGM2-NNN2
Leg1 = +1 NGM2
Leg2 = -1 NNN2
Pricing
The Fixed Price Ratio Inter-Commodity Trade Price = Leg1 - Leg2
Leg Price Assignment:
Leg1 = is the anchor and assigned the most recent market price
Leg2 = is calculated
Leg1 is used as the anchor leg, then leg2 = leg1 price – Spread Price
If leg2 price is calculated outside the daily limits, leg2 will be adjusted to daily limit and leg1 is calculated.
The same leg price will be applied to all legs on the side with a ratio, e.g., for NG-NN at 8:1, all 8 NG legs will be priced at the same price.
Leg pricing examples:
A quantity side ratio of +8:-1 will be used in the below example.
The Fixed Price Ratio Inter-Commodity trades at 0.00025
Leg1 = 2.574
Leg2 is calculated:
Leg1 - Spread Trade Price
2.574 - 0.00025
Leg2 = 2.57375
Resulting legs:
Leg1 Buy 8 lots of NGM2 at 2.574
Leg2 Sell 1 lot of NNN2 at 2.57375
Pricing Example Leg2 Calculated Outside of Daily Limits
The Fixed Price Ratio Inter-Commodity trades at 0.00025
Assuming leg2 daily low limit is 2.6
Leg1 = 2.574
Leg2 is calculated:
Leg1 - Spread Trade Price
2.574 - 0.00025
Leg2 = 2.57375
Since leg2 is less than low limit, reset leg2 to daily low limit 2.6
Leg1 is calculated
Leg2 + Spread Trade Price
2.6 + 0.00025 = 2.60025
Leg1 Buy 8 lots of NGM2 at 2.60025
Leg2 Sell 1 lot of NNN2 at 2.6
RV Curve Ratio
SecuritySubType=RV
The Curve Ratio (RV) spread trades at a yield differential. The yield books will be inverted as in a typical yield market and the Curve Ratio (RV) spread quoted prices will be in basis points, represented in decimal notation (-43.750) of the yield as quoted in percentages: -.43750%. Although the spread is traded at a yield differential and quoted prices in decimal notation, the outright legs are quoted in conventional prices; this will require a price-to-yield and yield-to-price conversion for leg price assignments.
Inverted Yield Book Example
Examples of an inverted yield book in a typical yield market are shown below.
Example: Inverted RV Curve Ratio Yield Book
In a typical yield market, the bid is higher than the ask.
Inverted Book in a Typical Yield Market | |||||
Level | UB10:30 | Bid | Ask | UB10:30 | |
|---|---|---|---|---|---|
Level | Price Type | Price | Price | Price Type | Level |
1 | Yield | -43.750 | -43.751 | Yield | 1 |
Leg Quantity Ratios
Curve Ratio (RV) spreads will support quantity ratios to keep approximate DV01 neutrality. The Curve Ratio (RV) spread leg ratios are static at the instrument level and dynamic at the product level based on spread construction. The ratios can be different for different spread instruments. The quantity ratio of legs is defined in the repeating group of the Curve Ratio (RV) spread MDP3 Security Definition (tag 35-MsgType=d) message in tags 623-LegRatioQty and tag 624-Side for the leg ratio.
Quantity ratios maybe re-assessed when a new underlying (leg) is listed due to a new auction.
If a new ratio is required, an additional spread will be listed.
Curve Ratio (RV) spread quantity ratios are integers in all cases, e.g. 10:7, 5:2.
Minimum order quantity is 1.
The quantity must be multiplied by the leg quantity ratios of the the spread (e.g. 2:10; quantity of 5 would be 10:50.).
Spread Construction
The Curve Ratio (RV) spread has:
2 products
2 legs
Maturity 1 shall be the shorter tenor
Maturity 2 shall be the longer tenor
Quantity/side ratio of +n:-n
Pricing Examples
The Curve Ratio (RV) spread is priced as the yield differential of two US Treasury Active tenors.
The RV Spread = Leg1 - Leg2
Example: Curve Ratio (RV) Spread Trade and Leg Price Assignments
RV Spread UB10:30 trades 5 at -43.750 (the decimal notation of the yield as quoted in percentages: -.43750%)
Leg1 = +1 UST 10YR Bond
Leg2 = -1 UST 30YR Bond
Leg Price Assignment
Leg2 is the anchor and assigned the most recent traded price of 114.375; therefore, this is automatically assigned.
Leg1 is calculated requiring a price to yield and yield to price conversion.
Example: calculations of yield to price and price to yield.
Leg1 = Spread Trade Price + PtY(Leg2 Price)
Trade Price of -43.750 conversion to percent for price conversion
-.43750% + PtY(114.375)
-.43750% + 1.7530838%
Convert Leg1 back to price:
Leg1 in calculated yield terms (YtP) = 1.3155838%
Leg1 yield to price (PtY) = 103.9695740
Leg Quantity Assignment
Leg1 quantity = Spread Trade Quantity * Leg1 Ratio
Leg1 Quantity = 5 * 2 = 10
Leg2 quantity = Spread Trade Quantity * Leg2 Ratio
Leg2 Quanity = 5 * 10 = 50
TB Gasoil Crack
SecuritySubType=TB
The Gasoil Crack spread is the differential spread involving the simultaneous purchase (sale) of a distilled product (e.g., Low Sulphur Gasoil) with a corresponding sale (purchase) of the raw product from which it was produced (e.g., Crude Oil). The Gasoil Crack spread will trade at a reduced tick (1) and is priced in terms of the raw product which necessitates a mathematical conversion of the distilled product's price.
The Gasoil Crack Spread has:
2 different products belonging to the same product group (e.g. energy)
2 legs
Both legs must be of the same expirations
Leg1 (buy leg) must be the distilled product
Leg2 (sell leg) must be the raw product
Quantity/side ratios of the legs is +4:-3
Buying a Gasoil Crack spread buys Leg1, sells Leg2
Selling a Gasoil Crack spread sells Leg1, buys Leg2
Example
Instrument Symbol = 7FV2-BZV2
Leg1 = +4 7FV2
Leg2 = -3 BZV2
Pricing of the Gasoil Crack spread is at a fixed price ratio and does not consider the outright leg quantity ratios. The spread can trade at a negative or zero price. The spread also trades at a reduced tick.
Spread Pricing
The Gasoil Crack spread Trade Price is = (Leg1 / 7.45) – Leg2 * 1
The Gasoil Crack spread is priced in terms of the raw product (e.g., Crude Oil) which necessitates a mathematical conversion of the distilled product’s (e.g., Low Sulphur Gasoil) price:
For Gasoil: 1 metric ton = 7.45 barrels
Leg Price Assignment Example
Leg2 = the anchor leg is calculated starting with the Leg2 fair market price
Leg2 + Trade Price
Round to nearest 20-point increment
Rounded (Leg2 + Trade Price) – Trade Price = Finalized rounded Leg2 price
Leg1 = calculated using a mathematical conversion and rounded to the nearest 1 cent
Leg1 = Rounded (Leg2 + Trade Price) * 7.45
The same leg price will be applied to all legs on each side with a ratio, e.g., for 7F-BZ at 4:3, all 4 7F legs will be priced at the same price and all 3 BZ legs will be priced at the same price.
Leg Pricing Example
A quantity side ratio of +4:-3 is used in the example below.
The Gasoil Crack spread trades at 1121
Leg2 has Fair Market Price of = 7778
7778 + 1121 = 8899
Rounded to nearest 20-point increment = 8900
8900 – 1121 = 7779
Leg1 is calculated using a mathematical conversion and rounded to the nearest 1 cent
8900 * 7.45 = 66305
Resulting legs:
Leg1 = Buy 4 lots of 7FV2 at 66305
Leg2 = Sell 3 lot of BZV2 at 7779
TG HOGO Inter-Commodity Ratio Futures
SecuritySubType=TG
The HOGO spread is the differential spread involving the simultaneous purchase (sale) a energy product (i.e., Heating Oil) with a corresponding sale (purchase) of a related energy product (i.e., Gas Oil).
A HOGO spread has:
Two different products belonging to the same product group (e.g., energy)
Two legs
Both legs must be of the same expirations
Leg1 is the buy leg
Leg2 is the sell leg
Quantity/side ratios of the legs is +3:-4
Buying the HOGO spread buys leg1 and sells leg2
Selling the HOGO spread sells leg1 and buys leg2
Example
Instrument Symbol = HOZ3-7FZ3
Leg1 = +3 HOZ3
Leg2 = -4 7FZ3
Pricing
The HOGO spread Trade Price is = Leg1 * 1 - Leg 2 * 1/3.129
Leg Price Assignment:
Leg1 = is the anchor and assigned Fair Market Price
Calculate Leg1 - Trade Price
Round to nearest 1000 - point increment
Calculate Leg1 final price
Rounded (Leg1 - Trade Price) + Trade Price
Leg2 = is calculated and rounded to the nearest 1 cent
Convert from metric tons to gallons
Leg2 = Rounded (Leg1 - Trade Price) * 3.129
The same leg price will be applied to all legs on the side with a ratio, e.g., for HO-7F at 3:4, all 3 HO legs will be priced at the same price; and all 4 7F legs will be priced at the same price.
Leg Pricing Examples:
A quantity side ratio of +3:-4 will be used in the below example.
The HOGO spread trades at 2583
Leg1 has Fair Market Price of = 25210
25210 - 2583 = 22627
Rounded to nearest 1000 - point increment = 23000
Leg1 = 23000 + 2583 = 25583
Leg2 is calculated rounded to the nearest 1 cent
23000 * 3.129 = 71967
Resulting legs:
Leg1 Buy 3 lots of HOZ3 at 25583
Leg2 Sell 4 lot of 7FZ3 at 71967
RB Butterfly
SecuritySubType=RB
The RB Butterfly is a 3-leg spread at a fixed ratio.
The RB Butterfly spreads are constructed using three separate US Active tenors.
3 Products
3 Legs
Leg1 - Must be shortest tenor
Leg2 - Must be the middle tenor compared to legs 1 and 3
Leg3 - Must be the longer tenor
Quantity/side ratio of X:-Y:+Z
Buying a RB Butterfly buys Leg1(X), sells Leg2(Y), buys Leg3(Z)
Selling a RB Butterfly sells Leg1(X), buys Leg2(Y), sells Leg3(Z)
The RB Butterfly spreads are priced as the yield differential in basis points of three US Treasury Active Active tenors. The minimum price increment is 1/10th of one basis point.
The RB Butterfly spreads = Leg1 – (2 * Leg2) + Leg3
Example: Leg Price Assignment
Leg2 and Leg3 are the anchor and assigned the most recent traded price; therefore, this is automatically assigned.
Leg1 is calculated requiring a price to yield and yield to price conversion.
Spread price (in Yield) + 2 * PtY(Leg2 Price) - PtY(Leg3 Price)
Trade price in basis points converted to percent for price conversion
Trade price converted to decimal for yield to price conversion
Convert calculated Leg1 yield into price
Final leg1 price rounded to the same decimal precision of Leg1
RB Butterfly 3Y/5Y/7Y 2:8:5 trades 10 at 300 (the basis point notation of the yield as quoted in percentages: 3%). A ratio of 2:8:5 is being used as the leg price example.
Contract details:
Contract Type | Long Name | Ratio |
|---|---|---|
Spread | 3Y/5Y/7Y 2:8:5 | 2:8:5 |
Leg1 | 3 YEAR | 2 |
Leg2 | 5 YEAR | 8 |
Leg3 | 7 YEAR | 5 |
Leg2 = 99.0078125
Leg3 = 99.453125
Leg1 is calculated requiring a price to yield and yield to price conversion.
Example: Leg1 calculations:
Leg1 = Spread Trade Price + 2 * PtY(Leg2 Price) - PtY(Leg3 Price)
Trade Price of 300 converted to 3% percent for price conversion
3% + 2 * PtY(99.0078125) - PtY(99.453125)
3% + 2 * (3.4187995200941588)-(3.3284821616988167)
Trade Price of 3% converted to decimal for yield to price conversion
3.00 + 6.837599040188-3.3284821616988167
= 6.509116878489
Convert the calculated leg1 PtY back to YtP:
Leg1 = YtP(91.3209739126597500) (rounded to 91.32097391)
Example: Leg Quantity and Price Assignment
Execution Report Type | Quantity and Price |
|---|---|
Spread Fill | 10@300 (trade price) |
Leg1 Fill | 20@91.32097391 (calculated price) |
Leg2 Fill | 80@99.0078125 (anchor price) |
Leg3 Fill | 50@99.453125 (anchor price) |
Balanced Strip Butterfly
SecuritySubType=BB
The Balanced Strip Butterfly spread is identified by FIX tag 762-SecuritySubType=BB in the MDP3 security definition message; and strategyType=BB in the CME Reference Data API.
The Balanced Strip Butterfly spread will represent a differential spread composed of three legs having equidistant expirations—the near and deferred expirations of a Balanced Strip Butterfly on one side of the spread and twice the quantity of the middle expirations of a pack on the other side (1:2:1). The Balanced Strip Butterfly is aka a "spread of spreads".
A Balanced Strip Butterfly has:
One Product
Three legs
Quantity/side ratio of the legs is +1:-2:+1
Expiration of all legs must be different and symmetric
Legs must be either FS Strip Spread, SB Balanced Strip Spread, AB Average Priced Bundle or SA Strip
Buying a Balanced Strip Butterfly buys leg1, sells 2 * leg2, buys leg3
Selling a Balanced Strip Butterfly sells leg1, buys 2 * leg2, sells leg3
Example
The below example is for illustrative purposes only--using the Average Priced Bundle Packs as the butterfly legs.
Instrument Symbol = SR3:BB U3-U4-U5
Leg1 = SR3:AB 01Y U3
Leg2 = SR3:AB 01Y U4
Leg3 = SR3:AB 01Y U5
Pricing
The Balanced Strip Butterfly Trade Price is the differential of the strip legs = Leg1 - 2*Leg2 + Leg3
Leg Price Assignment
Leg1 and Leg2 are the anchor strip legs and assigned the most recent price
Leg3 is calculated:
Spread Trade Price - Leg1 + 2*Leg2
Pricing Example
The Balanced Strip Butterfly trades at -36
Leg1 = 9466
Leg2 = 9557
Leg3 = -36 - 9466 + 19114
Leg3= 9612
How was your Client Systems Wiki Experience? Submit Feedback
Copyright © 2024 CME Group Inc. All rights reserved.