Derivatives trading methods that use a variable order price
AssigneeChicago Mercantile Exchange Inc.
InventorsScott Johnston, John Falck, Charlie Troxel, JR., James W. Farrell, Shanthi Thiruthuvadoss, Arjuna Ariathurai, David Salvadori
Life of this patent
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Abstract
Methods and systems for an exchange to handle variable derivative product order prices are disclosed. The price of a derivative product order (bid or offer) is updated based on changes in the price of a related underlying product. Price determination variable(s), such as delta and gamma, are used to determine the price of the order. The exchange may periodically recalculate the price without requiring the trader to transmit additional information to the exchange.
Claims18
A method of dynamically determining a price for an order for a derivative product at an exchange, comprising:
- (a) receiving from a trader at an exchange a variable priced order for a derivative product, where the variable priced order comprises an original order price and a formula for updating the order price as a function of a change in an underlying product price and the formula includes values for a delta variable and a gamma variable;
- and
- (b) in response to a change in the underlying product price, utilizing the formula at the exchange to update the variable priced order price without further input from the trader.
A computer-readable medium containing computer-executable instructions for causing an exchange computer device to perform the steps comprising:
- (a) receiving from a trader at an exchange a variable priced order for a derivative product, where the variable priced order comprises an original order price and a formula for updating the order price as a function of a change in an underlying product price and the formula includes values for a delta variable and a gamma variable;
- and
- (b) in response to a change in the underlying product price, utilizing the formula at the exchange to update the variable priced order price without further input from the trader.
A method of determining a price for a product having an associated underlying product, comprising:
- (a) receiving at an exchange an order for the product, the order having an order price and a formula for updating the order price according to changes in a price for the underlying product, the formula being based on values for a delta variable and a gamma variable;
- and
- (b) in response to a change in the underlying product price, updating the order price according to the received formula.
Dependencies are inferred from the claim text.