CBOE interest rate products

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The Chicago Board Options Exchange offered four interest rate options products representing short-, medium- and long-term rates on:

  • 13-Week Treasury bills (IRX)
  • 5-Year Treasury notes (FVX)
  • 10-Year Treasury notes (TNX)
  • 30-Year Treasury bonds (TYX)

These products have been delisted.

Strategies with interest rate options

In general, when yield-based options are purchased, a call buyer and a put buyer have opposite expectations about interest rate movements. A call buyer anticipates interest rates will go up, increasing the value of the call position. A put buyer anticipates that rates will go down, increasing the value of the put position. A yield-based call option buyer will profit if, by expiration, the underlying interest rate rises above the strike price, plus the premium paid for the call. Alternatively, a yield-based put options buyer will profit if, by expiration, the interest rate has declined below the strike price, less the premium paid. As with all options transactions, taxes and commissions must be taken into account .


References