Cboe Global Markets has announced it plans to launch its new FLEX micro options contracts on June 27.
Like standard customisable FLEX options, FLEX micro options will allow users to specify key contract terms. This includes terms such as exercise prices, exercise style and expiration date.
Though, with a contract multiplier of one, rather than the standard 100, these options will provide investors greater precision to hedge a portfolio based on notional value.
The Flex micro options will be available to trade on the S&P 500, Russell 200, Dow Jones Industrial Average, MSCI Emerging Markets and MSCI EAFE indices. The new contracts will be listed exclusively on the Cboe options exchange.
Cboe Global Markets hopes this new product will provide investors with a cost-effective way to gain broad exposure to five major stock indices and help them to executive hedging, asset allocation and income generation strategies.
In a statement the stock exchange operator said: “Some investors may currently trade options with a smaller contract multiplier in the unregulated over-the-counter market. With the new FLEX Micro options, Cboe will offer investors the opportunity to trade similar options on-exchange.”
Additionally, trading options with smaller contract multipliers on-exchange would deliver greater efficiency when opening and closing positions, increased transparency, and heighted contra-party creditworthiness with Options Clearing Corporation as an issuer and guarantor, Cboe Global Markets added.
Cboe Global Markets senior vice president and head of derivatives Arianne Adams said: “Investors have asked for more precise tools to hedge their total notional exposure and we’re pleased to meet this demand with FLEX Micros, the latest evolution in our index product suite.”
“Our new FLEX Micros offer all the benefits of standard FLEX options, with the added advantage of providing a nimbler tool to complement our larger contracts to allow for even greater precision for hedging a portfolio with smaller notional values.
“Investors can now forego the OTC market and experience the efficiency, liquidity, transparency and trust that trading in the exchange environment provides.”