CME Making Gold Options More Tradeable

Thu, Oct 1, 2009 | Jared Woodard

Options Education

CME Group published the following product update today:

Effective Sunday, October 11, 2009 (trade date Monday, October 12), the following changes to the listing rules for COMEX Gold options will occur:

The strike price interval will be set to $5.00 (CME Globex strike price increment=5) increments for all trading months on all venues regardless of the level of the underlying futures prices. Currently, the strike price interval is dependent on futures price levels as follows: $5.00 (5) if futures prices are under $500; $10.00 (10) if futures prices are between $500 and $1,000; and $25.00 (25) for futures prices above $1,000.

In addition, the strike price listing will be expanded from ATM ± six to ATM ± 20 strike prices.

This is good news. When gold futures made their most recent foray above $1000 in early September, traders who wanted to enter nimble options positions were stuck with call strikes at 1025, 1050, etc. Applying a $5 increment makes sense, and should make options on COMEX gold futures more attractive. I wonder whether this decision was made in response to the increasing popularity of options on GLD, the SPDR gold ETF.

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Jared Woodard specializes in trading volatility as an asset class. With over a decade of experience trading options and other volatility products ... Read More

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