CME Group Inc, an international derivatives marketplace, has announced today that it has launched a new feature: An FX Options Volatility Converter tool.
Providing Greater Guidance To Traders
This new service stands as the first-ever tool in order to price the listed FX options liquidity of the CME Group, doing so in over-the-counter (OTC) terms. This comes during a time where participants in the market are readily seeking for ways to lower their trade costs and increase their efficiency. This feature would help forex traders, letting them make informed decisions across markets, easily monitor the price relationships, as well as to ensure the best execution for their various trading strategies.
The listed markets of CME Group stands as having the largest central limit order book when it comes to FX options in general. This tool creates a volatility grid by tenor and deltas, allowing traders to make comparisons. It does this by using the extensive array of price data, which already functions like OTC Options, and aligns them in expiration time, style, as well as underlying price convergence.
Acting Much Like OTC, Says Houston
Paul Houston stands as the Global Head of FX Products and Managing Director of FX Group, and gave a public statement about the matter. He highlighted how the company’s new FX Options Vol Converter calculates and subsequently converts fixed strike data, premieres, formats, and rules of CME’s listed FX options. From there, the tool concerts it into an OTC-equivalent volatility surface, with the standard deltas, tenors, and quote conventions of OTC.
This, Houston said, creates a comparable pricing across all the major options pairs. With this new tool, Houston highlighted that traders can now act on market opportunities quickly, making use of a drilldown showing reference premium price, the product code, delta, volatility, as well as futures value. Through doing so, traders are easily capable of identifying the opportunities they have in trading with this product.
Improving The Trader’s Lot
With the extensive liquidity within its FX markets, traders will be capable of using this tool in order to gain profits and better determine where to risk their funds. With any luck, similar tools will be spread across all derivatives exchanges the world has to offer
Last month, CME had also announced the launch of new Micro E-Mini options, with Micro E-Mini Nasdaq-100 and Micro E-Mini S&P 500 futures contracts. These E-Mini futures stands as 10% of the size of the standard E-Mini options, with a cycle of five Friday weekly options, two quarterly options, and three end-of-month options contracts.
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