As long as he was buying and not selling couldn't they just value them at $0 from the time he bought them?
It was definitely not as simple as you think. I know a lot about THIS particular transaction. Most times you see a large flex on hit the tape (especially long dated), it's just someone flipping a large OTC trade to exchange. Helps a lot with capital usage and CP risk.
I was a floor official on the Amex back before 2009. I was asked to make a ruling based on exchange rules when there were conflicts or complaint. Many of them were from Flex Trades. There is very little price discovery. I would avoid these for a retail trader. Giving up too much to get in and out.
What's a typical spread, percentage wise? I'm not too worried about getting out. I intend to hold through the expiration date, so the worst case scenario is I just exercise the calls and sell the underlying immediately and maybe lose a little bit of time value (I am not a US citizen, so no adverse tax consequences due to my particular situation). So as long as I buy the calls at a fair price, I think I would be ok and guys I don't trade these contracts, I'm a long term investor, I typically hold things for at least a year. BTW, I don't use leverage, never have. Does anybody have access to Flex quotation system? It would be great if I can get couple of quotes before getting serious about moving my account from IB. Thanks
System? Dude, people repeatedly tell you here it's bespoke and you don't believe them. Sure, I can get you a quote if you want.
LOL. In order to print a flex, you need someone to make a market on your RFQ, regardless of avaliblity of CBOE system. Is someone from CBOE gonna make you a market on 5y 90% VRX call? PS. I am surprised it's so hard to understand.
I think you may be conflating "electronic market" with there actually being a market. Electronic market just means that two parties can trade electronically if they so choose. An actual market means there are willing buyers and sellers. If you read the description for single stock futures you'll find a very similar description. There are hundreds of single stock futures listed and open for electronic trading. You'll even see some open volume in some. You'd be hard pressed to conduct a single trade in 95% of them. These are for listed products which are easy to lay off risk and/or hedge for a market maker with standard expirations and terms. There are an almost infinite variety of FLEX options that could be constructed and the LEAP type products you're talking about are something that a MM can't easily hedge. So why would you expect to be able to transact there when you can't transact a SSF to save your life?
Sorry guys, I should have said brokers use CFLEX for RFQ. It typically takes 5 to 10 mins just to get a quote from MMs. CFLEX is just a platform used to request RFQ. Of course, there are no market for a non existent option.