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US 2015/0149340 A1Published application
Tandem Options Contracts Providing Fixed Binary Payout
AssigneeChicago Mercantile Exchange Inc.
InventorsDavid Bixby, Edward Gogol, John Labuszewski, Charles Piszczor, John Nyhoff, Heidi Centola
Life of this patent
Estimating the term…
Abstract
Systems and methods are described where two call options (or two put options) on futures may be bundled, traded, and processed in tandem accordingly. The two options may form a tandem option that may be constructed with strike/exercise prices that are scaled to be one minimum price increment or tick apart in the underlying futures market. The tandem option product provides a payout at expiration that is binary in nature—it will either be zero or a fixed monetary amount.
Claims20
A method comprising:
- a. receiving, by a processor of an exchange computer system, an order for a tandem option, wherein the order comprises parameters comprising at least a specified strike price and a specified position of one of:
- a long position and a short position;
- b. generating, by the processor, the tandem option comprising:
- i. a first options contract with the long position on a specified underlying financial instrument with a first strike price and a specified expiration date, and
- ii. second options contract with the short position on the specified underlying financial instrument with a second strike price and the specified expiration date;
- wherein the specified expiration date is a fixed date that coincides with a final settlement date of the specified underlying financial instrument;
- and
- wherein one of the first strike price and the second strike price is equal to the specified strike price, and the other strike price is the specified strike price minus a preset minimum price increment of the specified underlying financial instrument;
- c. storing, by the processor, the tandem option in computer memory;
- and
- d. upon occurrence of the specified expiration date, causing, by the processor, a binary payout consisting of one of:
- zero, and the preset minimum price increment scaled by a preset multiplier.
9 more elements
An exchange computer system comprising:
- at least one processor;
- and
- at least one memory storing computer-executable instructions, that when executed by the at least one processor, cause the system to:
- a. receive, by an order processor module of the exchange computer system, an order for an exchange-traded tandem option, wherein the order comprises parameters comprising at least a specified underlying financial instrument, a specified expiration date, a specified strike price, and a specified position;
- b. generate the exchange-traded tandem option comprising:
- i. a first options contract with the long position on the specified underlying financial instrument with a first strike price and the specified expiration date, and
- ii. second options contract with the short position on the specified underlying financial instrument with a second strike price and the specified expiration date;
- wherein the specified expiration date coincides with a final settlement date of the specified underlying financial instrument;
- and
- wherein one of the first strike price and the second strike price is equal to the specified strike price, and the other strike price is a function of the specified strike price and a preset minimum price increment of the specified underlying financial instrument;
- c. send the exchange-traded tandem option to a match engine module of the exchange computer system configured to match the tandem option;
- d. store, by the processor, the exchange-traded tandem option in computer memory;
- and
- e. upon occurrence of the specified expiration date, cause, by the processor, a binary payout consisting of one of:
- zero, and the preset minimum price increment scaled by a preset multiplier.
12 more elements
A non-transitory computer memory storing computer-executable instructions that, when executed by a processor, cause an apparatus to:
- a. receive an order for a tandem option, wherein the order comprises parameters comprising at least a specified underlying financial instrument, a specified expiration date, a specified strike price, and a specified position;
- b. generate the tandem option comprising:
- i. a first options contract with the long position on the specified underlying financial instrument with a first strike price and the specified expiration date, and
- ii. second options contract with the short position on the specified underlying financial instrument with a second strike price and the specified expiration date;
- wherein the specified expiration date coincides with a final settlement date of the specified underlying financial instrument;
- and
- wherein the first strike price is set to the specified strike price, and the second strike price is set to the specified strike price minus a preset minimum price increment of the specified underlying financial instrument;
- c. match the tandem option with an existing order;
- d. store the tandem option in the computer memory;
- and
- e. upon occurrence of the specified expiration date, cause a binary payout consisting of one of:
- zero, and the preset minimum price increment scaled by a preset multiplier.
9 more elements
Dependencies are inferred from the claim text.