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Asking CME group to add strike prices to an option?
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Asking CME group to add strike prices to an option?

  #1 (permalink)
Trading Apprentice
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Asking CME group to add strike prices to an option?

Silver options at CME Group expiring in December 2019 currently only go up to $29.50 strike price. I wanted one at $50 strike price, and CME Group told me via email that they could add new strikes if I asked for them via the phone.

Has anyone here gone through this process? I'm kind of a beginner and don't want to make a fool of myself on the phone, so I thought I'd check in here first and get educated on what this process consists of.

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trading654 View Post
Silver options at CME Group expiring in December 2019 currently only go up to $29.50 strike price. I wanted one at $50 strike price, and CME Group told me via email that they could add new strikes if I asked for them via the phone.

Has anyone here gone through this process? I'm kind of a beginner and don't want to make a fool of myself on the phone, so I thought I'd check in here first and get educated on what this process consists of.

@ron99 or @decarleytrading can probably answer.

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trading654 View Post
Silver options at CME Group expiring in December 2019 currently only go up to $29.50 strike price. I wanted one at $50 strike price, and CME Group told me via email that they could add new strikes if I asked for them via the phone.

Has anyone here gone through this process? I'm kind of a beginner and don't want to make a fool of myself on the phone, so I thought I'd check in here first and get educated on what this process consists of.

http://www.cmegroup.com/trading/metals/precious/silver_quotes_globex_options.html?optionExpiration=Z9#strikeRange=ALL

CME does list them, you just have to click ALL on strike range as oppose to Active, or At The Money.

All settlements in Options are based on the options pricing model, not a last trade.
This means in real life, your premium could be much higher if you buy or way lower if you go naked (collect premium that is, not around the house) especially on such time premiums.

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Silver options have a serious liquidity problem.

The exchange will list an option/strike if you ask, but that doesn't mean a market maker will touch it for a reasonable price. If you look at the option chain for the December 2019 options, there isn't any open interest or trading volume in any of the strikes. So the fact that the exchange lists them and assigns settlement prices each day is more of an exercise (as Matt mentioned), rather than a realistic trading opportunity. Even the front month silver options are thin, which creates extremely wide bid/ask spreads. You would probably have to pay 30 to 40% above fair value to get filled on a 2019 silver option. Then, even if you were able to get in you probably couldn't get out when you wanted to at a fair price. In a nutshell, you are better off trying to stick with the closer months and just rolling them out if necessary. I prefer using the mini metals futures as a buy and hold strategy, over buying over-priced silver options.

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decarleytrading View Post
The exchange will list an option/strike if you ask, but that doesn't mean a market maker will touch it for a reasonable price. If you look at the option chain for the December 2019 options, there isn't any open interest or trading volume in any of the strikes. So the fact that the exchange lists them and assigns settlement prices each day is more of an exercise (as Matt mentioned), rather than a realistic trading opportunity. Even the front month silver options are thin, which creates extremely wide bid/ask spreads. You would probably have to pay 30 to 40% above fair value to get filled on a 2019 silver option. Then, even if you were able to get in you probably couldn't get out when you wanted to at a fair price. In a nutshell, you are better off trying to stick with the closer months and just rolling them out if necessary. I prefer using the mini metals futures as a buy and hold strategy, over buying over-priced silver options.

I hope this helps

Thanks for your reply.

I want to play a game like this: I'm prepared to put up a little money at the risk of losing it all, but if silver skyrockets I want to win massively. If you go here:

cmegroup.com/trading/metals/precious/silver_quotes_globex_options.html?optionProductId=193#optionProductId=193&strikeRange=ALL

and choose December 2017 and strike range All, you'll see they have a strike of $50. I can buy such an option for around $600 today it seems. If the silver price goes to $100, I stand to make $250,000. So that's like a 400x return.

Of course it's unlikely to happen, but that's the game I want to play. Put up some initial money and stop worrying about it. I just want the exposure. (The thing is that I was looking for December 2019 instead of December 2017 just to be able to play the game longer. But those don't go up to strike $50, hence my question.)

You mentioned futures. But how would I play such a game with futures? With futures, if I lose the $600 I'm willing to risk because silver goes down I must stop playing. But with options, I can continue playing until the expiry date. In addition, I imagine the risk/reward is completely different, given the cheapness of far-out-of-the-money options.

Hopefully now you guys know my objectives and the kind of game I want to play. Your further thoughts, elaborations, and recommendations would be appreciated. Thanks.

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Lottery tickets

The purchase of deep out of the money call options in silver is what I like to call a "lottery ticket" strategy. The odds of success are slim to none, but the risk is limited and relatively low. There is absolutely nothing wrong with that type of a play; there is always a time and place for lottery tickets and I agree with you that long-dated silver calls are probably a good idea. Even if silver never reaches $50 per ounce, if we see an explosive rally the options could gain in value quickly.

Just keep in mind that the price the CME reports as the settlement price isn't always a realistic price. Liquidity in silver options is sparse, so you an expect to pay quite a bit more than the settlement price to get filled.

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  #8 (permalink)
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decarleytrading View Post
The purchase of deep out of the money call options in silver is what I like to call a "lottery ticket" strategy. The odds of success are slim to none, but the risk is limited and relatively low. There is absolutely nothing wrong with that type of a play; there is always a time and place for lottery tickets and I agree with you that long-dated silver calls are probably a good idea. Even if silver never reaches $50 per ounce, if we see an explosive rally the options could gain in value quickly.

Just keep in mind that the price the CME reports as the settlement price isn't always a realistic price. Liquidity in silver options is sparse, so you an expect to pay quite a bit more than the settlement price to get filled.

Are you able to call CME and get those additional strikes for December 2019 (and the other 2019 and 2018 expiries for that matter) listed such that I can start placing buy orders for them through my Interactive Brokers account, and if so, how much would such a service cost? A part of me feels like CME would appreciate such a request more coming from someone like you instead of some average Joe out there.

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