| Description |
FLEXible Exchange Index Options
(FLEX) are Exchange-traded options on underlying indexes that offer the opportunity to
customize key contract terms, including expiration date, exercise style, exercise price
and method for determining exercise settlement value. FLEX index options have distinct
position and exercise limits and minimum size requirements as indicated below. Like all
exchange-traded options, FLEX index options are issued, cleared and guaranteed by The
Options Clearing Corporation (OCC). |
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| Underlying
Indexes |
FLEX options are
currently traded on these indexes: |
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The EUROTOP 100
Index (EUR) |
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The Hong Kong Option
Index (HKO) |
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The Institutional
Index (XII) |
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The Japan Index
(JPN) |
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The Major Market
Index (XMI) |
|
The Morgan Stanley
High-Technology 35 Index (MSH) |
|
The Standard &
Poor's MidCap 400 Index (MID) |
|
| Customized
Contract Terms |
Expiration Date:
May be any business day up to five years from trade date, except FLEX index
option expiration cannot fall on a "third-Friday" expiration day or on the two
business days immediately preceding or following that day. For example, if the
third Friday in September in any year were to fall on 9/17, FLEX index options could not
expire on 9/15, 9/16, 9/17, 9/20 or 9/21. |
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Exercise Style:
American, European, or Capped (European). |
|
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Exercise (Strike)
Price: May be based on an index level, a percentage of or numerical deviation from a
closing or intraday index level, or any other reasonable method for deriving an index
level, rounded to the nearest 1/10th of an index point (e.g., 350.3). |
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Determination of
Exercise Settlement Value: |
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- opening settlement based on opening prices of an
index's component stocks on the expiration date;
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- closing settlement based on the closing level of
an index on the expiration date;
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- average of an index's opening and closing
settlement values on the expiration date;
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- average of the high and low values of an index on
the expiration date; or
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- average of an index's opening settlement value,
closing settlement value, and high and low values on the expiration date.
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Note:
American-style FLEX index options exercised prior to an expiration date are settled based
on the closing level of the underlying index on the exercise date. HKO and JPN may only
settle based on closing levels. |
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| Minimum Size |
For opening
transactions in a new FLEX series: $10 million underlying (notional) value. For opening or
closing transactions in an existing FLEX index series: $1 million underlying (notional)
value (or less in a closing transaction when the remaining value of the account is less
than $1 million, provided the trade is for the account's entire remaining value in that
series). The underlying value dollar
amount also can be expressed in terms total contracts, rounded to the nearest whole
integer, by dividing the dollar amount by the aggregate index value (i.e., index value x
100). |
|
| Last Trading Day |
For FLEX index options
based on opening settlement, the business day immediately preceding the expiration date;
for all other FLEX index options, the expiration date. |
|
| Trading Unit |
One FLEX index option
contract is equal to the index value multiplied by $100. |
|
| Option Premium
Quotations |
May be expressed:
- as a percentage of the value of the underlying
index;
- as a specific dollar amount per contract;
- contingent on specified factors in other related
markets, e.g., the futures market.
Note: Premiums are rounded to the nearest
cent ($0.01). |
|
| Method of Trading |
Specialist-conducted
auction market among FLEX-qualified members, market makers and floor brokers. Trading in
FLEX index options is initiated upon submission of a valid Request for Quote (RFQ) by a
submitting member. |
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| Dissemination of
Prices and Quotes |
RFQs and transactions
(including execution price and size) are disseminated as Administrative Text Messages
(ATMs) over the Options Price Reporting Authority (OPRA) and are received on quotation
terminals of OPRA vendors who display FLEX index options data. |
|
| Position Limits |
200,000 contracts on
the same side of the market on each index. FLEX index options are not aggregated with
conventional index option contracts. For MSH, the limit is 60,000 on each side of the
market. |
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| Minimum Customer
Margin |
With one exception,
FLEX index options are subject to the same customer margin rules governing traditional
broad-market index options. Initial and maintenance margin is 100% of the current premium
plus 15% of the current notional contract value, reduced by any out-of-the-money amount to
a minimum of premium plus 10% of the current notional contract value. Margin is available
for spread, straddle and combination positions that pair FLEX/FLEX and FLEX/conventional
options. Exception: Where the
"legs" in these positions do not have the same exercise settlement value terms,
margin will be available only until the opening of trading two business days prior to the
expiration date, after which options with differing settlement terms will require separate
margining. |
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| Trading Hours |
10 a.m. to 4:15 p.m.,
New York time. |
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| "Standard & Poor's" and "Standard &
Poor's MidCap 400 Index" are trademarks of The McGraw-Hill Companies, Inc. and have
been licensed for use by the American Stock Exchange, Inc.
|
