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/NG options settlement time


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/NG options settlement time

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  #1 (permalink)
Fiu Cher
New York, NY
 
Posts: 8 since Jan 2018
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Hi,

Could you guys chime in on the following? For european option (/LN) the CME contract specs state the closing time to be 5pm. Talking to my broker, however, they mentioned the *settlement* time was 1.30pm.

I, however, don't see any mention of the settlement time on the spec page. Any hint on where I should be looking for those instead?

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  #2 (permalink)
 myrrdin 
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Fiu Cher View Post
Hi,

Could you guys chime in on the following? For european option (/LN) the CME contract specs state the closing time to be 5pm. Talking to my broker, however, they mentioned the *settlement* time was 1.30pm.

I, however, don't see any mention of the settlement time on the spec page. Any hint on where I should be looking for those instead?

There are different times that should not be mixed up:

There is a time when daily trading ends. After this time there is no fill until trading is started again on the next day.

There is a time when the "end of day" price is determined, usually the end of former pit hours. Often volume decreases significantly after this time.

There is a time when options expire at the expiry date.

Best regards, Myrrdin

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  #3 (permalink)
Fiu Cher
New York, NY
 
Posts: 8 since Jan 2018
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Understood, but where can I look up these times for various commodities? My challenge was the CME spec had no mention of special expiration date timing, unless I'm missing something obvious. Thanks!

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 SMCJB 
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On non-futures expiration dates, and for non-expiring contracts on expiration day, the settlement window is the 2 minutes 2:28-2:30 EPT. The Settlement window determines the official closing price of instruments. Note this price can be very different than the 'last' price which is the last trade upto 5pm.

On expiration date the settlement window (for the expiring contract) is a full 30 minutes from 2pm to 2:30pm EPT. Once the contract has expired (ie at 2:30pm) there are no more trades in that future or any of its derivatives.

The Natural Gas European Options ("LN"), are penultimate financial settlement. Penultimate means they settle/expire on the day before the futures. Financial Settlement means that their value at expiry is financially settled by comparing the futures settlement price versus the option strike price. Once the futures market has settled (ie 230pm EPT) the value of these options have been finalized. Hence after that time there are no more trades even though Globex and the futures continue to trade until 5pm.

You are correct that the CME website does not make this completely clear.

Note that ICE do this slightly differently. For example on expiration day you can trade their financially settled future right up until the system goes down at 6pm EPT which is 3.5 hours after the futures expired. Of course the market is (futures settlement - 1 tick) @ (futures settlement + 1 tick) with thousands on each side, since any trade is giving money away.

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Fiu Cher
New York, NY
 
Posts: 8 since Jan 2018
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Thank you for confirming I wasn't dumb

What threw me off was that /LN options continued being priced and moving around and at some point just disappeared in front of my eyes, just before 3pm eastern.

I do not hold open option positions till expiration, but this was an exception, short-term play, and I wanted to through all mechanics for the assignment. All good, my breakevens were +/- 130 ticks after all adjustments and the settlement price was .005 ITM. Thank you all for sharing!

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Last Updated on January 27, 2018


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