What are CME "flex options"?

[heech]

Hi,

Just noticed this while looking at lean hog:

http://www.cmegroup.com/trading/commodities/files/AC-185_PorkFC.pdf

In talking about month listings for options, it talks about:

<i>Eight months of Feb, Apr, May, Jun, Jul, Aug, Oct, Dec and
Flex® Options*.</i>

What are Flex Options?

 

[eusdaiki]

from http://financial-dictionary.thefreedictionary.com/FLEX+Options


FLEX Options
Exchange traded equity or index options, where the investor can specify within certain limits, the terms of the options, such as exercise price Expiration date, exercise type, and settlement calculation.

 

[nazzdack]

Quote from eusdaiki:
FLEX Options.....where the investor can specify......

Getting an "appointment " to offset the position can be nasty.

 

[heech]

Quote from nazzdack:

Getting an "appointment " to offset the position can be nasty.

Not really sure what that means!

Dug through some docs, saw that there's essentially a RFQ process, and what sounds like a custom opencry thing...

Is this really meaningful for a retail investor? I think I saw 10 lots being a minimum. So say I wanted to trade 10 lots, just for the equivalent of a serial option (because lean hog doesn't offer them)... am I going to get a reasonable ask/bid spread + premium, comparable to what's usually going in the pits?

Or this is all a game for the big hedging guys?

 

[eusdaiki]

The problem with non-standarized financial products, is that liquidity is hard to come by...

I've never traded these FLEX options... but I'm guessing their liquidity, compared to standarized options, is as dry as liquidity on Foward contracts, compared to futures...

 

[heech]

Quote from eusdaiki:

The problem with non-standarized financial products, is that liquidity is hard to come by...

I've never traded these FLEX options... but I'm guessing their liquidity, compared to standarized options, is as dry as liquidity on Foward contracts, compared to futures...

Good point. There's no (easy, out of the box) way for whoever to hedge their risk with other options/months/strikes. The spread will probably be nasty.

 

[nazzdack]

Quote from heech:
-----Not really sure what that means!
-----Is this really meaningful for a retail investor?
-----serial option
-----am I going to get a reasonable ask/bid spread + premium, comparable to what's usually going in the pits?
-----Or this is all a game for the big hedging guys?

-Similar to what EUSDAIKI said, liquidity can be limited.
-No
-Leave the "serials" alone. Stay in the active months.
-"Reasonable" is relative. Stay with the pit.
-Not really. The capability exists for doing "customized" trades but offsetting the trade can be nastier than the initiation of the trade because the party on the other side of a "large" trade will know that you want to get out when you request a quote AND also they may be the only party interested in trading with you. That condition gives them opportunity to "cut" you badly on your exit.