Spreads and Combinations Available on CME Globex
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.
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
Expiration order is the same as the Butterfly, however the equal expiration differential rule is waived
- 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
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.
Not all CME Group futures spread markets follow the convention where Buying the Spread indicates Buying the front expiry and selling the back expiry. The following markets use the logic for calendar spreads where Buying the Spread sells the front expiry month and buys the back expiry month:
- CME FX
- Equity
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
This spread can trade at zero and at a negative price. In addition, the pricing mechanics explained below correspond to CME Globex match engine price assignment. Member firms can designate a default way to handle price assignment to these legs in Clearing. As a result, it is possible to have different leg prices assigned by Clearing that will not match the prices obtained from CME Globex. This process that allows leg price adjustment on traded calendar spreads is commonly referred to as SLEDS (Single Line Entry of Differential Spreads).
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
If the recalculated price is outside the daily limit the price will stand. Customers can receive a non-settled price for the recalculated 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).
While the contract symbol convention for this spread lists the deferred leg second, buying this spread represents purchase of the second leg and sale of the first leg. This is different from other Calendar Spreads listed on CME Globex.
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
This Calendar Spread may have a smaller minimum tick than the outright futures legs or the same tick for both as the legs. This spread can trade at zero and at a negative price. In addition, the pricing mechanics explained below correspond to CME Globex match engine price assignment. Member firms can designate a default way to handle price assignment to these legs in Clearing. As a result, it is possible to have different leg prices assigned by Clearing that will not match the prices obtained from CME Globex. This process that allows leg price adjustment on traded calendar spreads is commonly referred to as SLEDS (Single Line Entry of Differential Spreads).
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
If the recalculated price is outside the daily limit the price will stand. Customers can receive a non-settled price for the recalculated leg.
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
This spread can trade at zero and at a negative price. In addition, the pricing mechanics explained below correspond to how the Globex Matching Engine assigns prices.
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
If the recalculated price is outside the daily limit the price will stand. Customers can receive a non-settled price for the recalculated leg.
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
This Calendar may have a smaller minimum tick than the outright futures legs or the same tick for both as the legs. This spread can trade at zero and at a negative price. In addition, the pricing mechanics explained below correspond to how the Globex Matching Engine assigns prices. It is common for member firms to designate a default way of handling price assignment to these legs in Clearing. As a result, it is common to have different leg prices assigned by Clearing that will not match the prices obtained from Globex. This process that allows leg price adjustment on traded calendar spreads is commonly referred to at CME as “SLEDS”.
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
If the recalculated price is outside the daily limit the price will stand. Customers can receive a non-settled price for the recalculated 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
This spread can trade at zero and at a negative price.
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
This spread can trade at zero and at a negative price.
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
This spread can trade at zero and at a negative price. In addition, the pricing mechanics explained below correspond to how the CME Globex match engine assigns prices. Member firms can designate a default method to handle price assignment to these legs in Clearing. As a result, it is possible to have different leg prices assigned by Clearing that will not match the prices obtained from CME Globex. This process that allows leg price adjustment on traded calendar spreads is commonly referred to as SLEDS (Single Line Entry of Differential Spreads).
Pricing
- The Reduced Tick Calendar Spread Trade Price is = Leg1 – Leg2
All prices below are in a fractional pricing format.
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
If the recalculated price is outside the daily limit the price will stand. Customers can receive a non-settled price for the recalculated 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
This spread cannot trade at zero and at a negative price.
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.
Spread types Average Price Strip (SA) and Futures Strip (FS) are not supported in the same market.
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
- Determine anchor strip leg
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.
Important!
Average Priced Strips trade as the average price of all components, and leg assignment to those components will be the price assigned to the Average Priced Strip.
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)
This spread can trade at zero and at a negative price.
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
This spread can trade at zero and at a negative price.
Pricing
- The Interest Rate Inter-Commodity Spread Trade Price is = Leg1 – Leg2
All prices below are in a fractional pricing format.
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
If the recalculated price is outside the daily limit the price will stand. Customers can receive a non-settled price for the recalculated 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).
Currently, IV spread type only supports US Treasury Futures. The IV spread will trade at a fixed price or as a ratio spread with implications.
- IV - Spread to Spread trades at a fixed price; leg quantity ratios (e.g. 5:2) are not considered.
- IV - Spread trading with Implied In and Out; leg quantity ratios (e.g. 5:2) are taken into consideration during leg pricing.
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
This spread can trade at zero and at a negative price.
Spread to Spread Trade Pricing
The spread trades at a fixed priced where the leg quantity ratios are not considered.
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 trade pricing takes the leg quantity ratios into consideration.
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.
This spread type, also known as the Soybean Crush.
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
This spread can trade at zero and at a negative price.
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
This spread can trade at a negative price.
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
This spread can trade at zero and at a negative price.
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
This spread can trade at zero and at a negative price. The spread trade tick is smaller than outright legs.
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
This spread can trade at zero and at a negative price. In addition, the pricing mechanics explained below correspond to how CME Globex assigns prices. Member firms commonly designate a default way of handling price assignment to these legs in Clearing. As a result, it is not unusual to have different leg prices assigned by Clearing that will not match the prices obtained from CME Globex. This process allowing leg price adjustment on traded calendar spreads is referred to as “SLEDS” (Single Line Entry Differential).
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
If the recalculated price is outside the daily limit the price will stand. Customers can receive a non-settled price for the recalculated 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
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
If necessary, CME Globex will adjust Com1 leg prices to equal the spread price.
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
- For a Call Diagonal
- 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 Call Vertical
- For a Put Vertical
- Leg1 must be at a higher strike
- Leg2 must be at a lower strike
- For a Put Vertical
- 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