Options on ETFs operate the same as individual equity options. They offer the efficiency of ETFs with the flexibility of options and allow investors to:
FLexible EXchange (FLEX) options combine the benefits of customization with the advantages of listing and are available on all option products listed on NYSE American Options. Both Equity FLEX and Index FLEX options allow investors to customize key contract terms, including expiration date, exercise style, and exercise price, and to take advantage of expanded position limits.
FLEX Trades are permissible on options not listed on NYSE American Options but require certification with the OCC on the day before the FLEX trade is executed. Cut-off time to submit for certification is 11:00 am on the day before the anticipated trade. Therefore, all requests to trade FLEX options on non-NYSE American Options must be submitted before 11:00am on the day before the expected trade date.
Equity FLEX options are designed to extend investor access to customized derivative products. With Equity FLEX options, investors are able to set key contract terms like exercise prices, exercise styles, and expiration dates, and to trade in size, with no position or exercise limits.
Equity FLEX options are traded on all listed options, including but not limited to, Stock Options, American Depository Receipts, and exchange traded funds.
A minimum of 150 contracts or $1 million notional value (i.e., strike price=$100 then notional value=$10,000/contract which would require a minimum of 100 contracts) is required to open a new Equity Flex Option Series.
Index FLEX options are designed to extend investor access to customized derivative products. With Index FLEX options, investors have the ability to set key contract terms like exercise prices, exercise styles, and expiration dates.
Long-term Equity AnticiPation Securities (LEAPS) are put and call options that have expirations of up to three years from the time of their initial listing. LEAPS, which have a unique ticker symbol, meld into their conventional shorter-term options within one year of their expirations.
At NYSE American Options, Equity LEAPS are traded on certain common stocks, American Depositary Receipts, exchange traded funds and HOLDRS, and Index LEAPS are traded on broad-based, industry sector and international indexes.
Equity FLEX options are designed to extend investor access to customized derivative products. With Equity FLEX options, investors are able to set key contract terms like exercise prices, exercise styles, and expiration dates, and to trade in size, with no position or exercise limits.
Equity FLEX options are traded on all listed options, including but not limited to, Stock Options, American Depository Receipts, and exchange traded funds.
A minimum of 150 contracts or $1 million notional value (i.e., strike price=$100 then notional value=$10,000/contract which would require a minimum of 100 contracts) is required to open a new Equity Flex Option Series.
Index LEAPS are long-term options generally based on a reduced value of an underlying broad-based, industry sector or international index and have expirations of up to three years. With the exception of their longer-term expiration, Index LEAPS work in the same manner as all other broad-market index options with exercises only permitted on the last business day prior to expiration (European style) and settlement with the payment of cash, not the delivery of securities.
Index LEAPS series are introduced based upon exercise cycles. Two initial strike (exercise) prices are set bracketing the LEAPS' index value. New strike prices are introduced when the value of the index underlying the LEAPS moves 10 to 15 percent.
Flexible Exchange (FLEX) options are customized equity or index contracts that allow investors to tailor contract terms and enjoy expanded position limits for exchange-listed equity and index options. Like over-the-counter options, FLEX option strategies can be tailored according to target trading objectives.
FLEX options combine the benefits of contract customization with the advantages of listing and can provide investors with:
At NYSE Arca Options, Index-FLEX options are traded on any index upon which options trade.
In addition to FLEX options, NYSE Arca Options trades Long-term Equity AnticiPation Securities (LEAPS), long-dated options that have expirations of up to three years from the time of their listing.
Equity-LEAPS allow investors to benefit from the upward, or downward, movement of a stock without making an outright purchase. At NYSE Arca Options, Equity-LEAPS are traded on selected common stocks, ADRs, ETFs and HOLDRS that have expirations of up to three years.
Series are introduced based on expiration cycles. Initial exercise prices are set at approximately 25% above and 20% below the underlying stock’s price at the time of the options’ listing.
At NYSE Arca Options, Index-LEAPS are traded on broad-based, industry sector and international indices. With the exception of their longer term expiration, they work in the same way as other index options: exercise is permitted only on the last business day before expiration and settlement is with the payment of cash.
Equity options, which are the most common type of equity derivative, give an investor the right but not the obligation to buy or sell a call or put at a set strike price prior to the contract’s expiry date.
Index options make it possible for investors to seek either profit or protection from price movements in a market as a whole or in broad segments of a particular market.
Options on ETFs allow investors to gain exposure to the performance of an index, hedge against a decline in assets, enhance portfolio returns, and/or profit from the rise or fall of a leveraged ETF.