New 0 DTE FOP from the CME? Aren't these just Binary options?

Overnight

Overnight

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
 
MrMuppet said:
sweet...that's gonna be a juicy market
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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.
 
BlueWaterSailor said:
Presumably equity-style rather than futures-style.

https://www.cmegroup.com/education/...a-primer-on-margining-styles-for-options.html
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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...

bwsoptioncrazy.JPG


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!
 
BlueWaterSailor said:
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.
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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
 
Overnight said:
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."
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Not even if you grew tits on your back, buddy. You're still OK by me, though. :D

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!
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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.
 
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