My Lord, it's turning into a gambler's paradise! "CME Event Contracts will be listed for a single business day and expire that day. They will be cash-settled, normal premium-style options on the daily settlement price of the principal contract month (the “lead month”) of an active underlying future, with a fixed payout of $20 if the contract finishes in-the-money. There will be ten contracts at launch – three based on COMEX products (gold, silver, copper), two based on NYMEX (crude oil and natural gas), four based on CME products (S&P, Nasdaq, Russell, and Euro FX), and one based on CBOT (the Dow.) All will trade at prices from 0.25 up to 20.00, with a minimum price fluctuation of 0.25..." https://www.cmegroup.com/content/dam/cmegroup/notices/clearing/2022/08/Chadv22-311.pdf
Would you mind expanding on that? I mean, sure, there's going to be a lot of foolish money going after what they see as cheap bets - probably piling into the call side for all they're worth - but I'm wondering if you're seeing anything more than that.
Presumably equity-style rather than futures-style. https://www.cmegroup.com/education/...a-primer-on-margining-styles-for-options.html
I got as far as this in understanding... "Initial margin requirement has two components: the risk component and the equity component.." And I got all excited! Finally I was going to learn about why the hell there is an initial and then maintenance component of futures! Then it all came home to roost...This was really about options, and I got lost when seeing tables like this... BWS, I was thinking to myself, "Thank you, if I was a woman I'd have sex with you for making a dream of mine come true, which is to understand why straight futures have an initial component." But then it all went options. *cry*. But thanks for that lead! I'd still have sex with you if I was a woman, because you are funny and keen! You options folks are batshit crazy. The lot of you!
Question is how to price and hedge them...which should be complex enough so that gamblers don't know whether they hit a good price or a bad one. The special thing about these is the fact that they only have a range of 20/0.25 = 80 ticks which should play into the hands of the HFT/queue priority crowd. It's not that hard to figure out which prices you want to occupy right from the open to get a free trade
Not even if you grew tits on your back, buddy. You're still OK by me, though. Yeah, but that's not the only reason you like us! We'll get you doing something safe and directional yet. Mark my words - there are vertical spreads in your future.