The Chicago Mercantile Exchange (CME) offers one of the world’s largest FX markets. With its size and popularity, the exchange offers a broad range of products across multiple asset classes including interest rates, commodities, metals, equity indexes, and others.
Currently, the newly launched USD/CNH Options on 3 April 2023 are expected to retain their popularity and such forms of options are offered by CME Group as well as HKEX. Additionally, its counterpart, the USD/CNH futures are traded through many exchanges and a brief outlook about this FX pair can be found here.
With the newly launched product, this article will cover the benefits of trading CME USD/CNH Options and the contract specifications of the monthly options, as well as the weekly Friday option.
Why Trade in USD CNH Options from CME?
For CME, the expansion of its product diversity continues to be a priority. To remain attractive to traders around the world, the USD/CNH options aim to manage risks, satisfy investor appetites and allow for strategies including hedging, arbitrage, and the like.
Other than CME’s launch of the new options, the exchange also boasts several benefits for trading
1) Liquidity of up to $80b in daily notional OI, capital, and credit efficiencies,
2) Safe clearing trades through CME clearing through mitigation of counterparty credit risk,
3) and transparency of prices and quotes.
What Are The Factors That Affect The FX Market?
Options on futures give the option to call or put a product depending on the forecasted price of the currencies. Yet, a variety of problems can affect the pricing of currencies.
A list of the factors includes:
Financial Markets
Financial markets dictate an aspect of currency as they serve as a certain benchmark of the country’s financial stability. For example, in 2023, the recent collapse of the banks of Silicon Valley such as Signature Bank 及 First Republic Bank (FRC) has resulted in increased risks of a recession. CNN also quotes a speech from Yellen (American economist) to the senate committee stating “that could turn this into a source of significant downside economist risk.”.
– For the USA, the Federal Open Markets Committee (FOMC) sets US monetary policy and key interest rate changes. These changes directly affect the value of the US dollar and are reviewed throughout the year.
Indexes and GDP estimates
The producer price Index is a measure of the average change over time in the selling prices of domestic producers. In general, when PPI increases, it indicates that the prices of goods and services produced domestically are rising, which can lead to inflation. If this inflation is significant enough, it can lead to an increase in interest rates by the central bank, which can strengthen the currency.
Similarly, GDP measures the total value of goods and services produced in a country over a certain period of time, a strong economic performance generally indicates stronger currency as well.
Launch of Monthly Options on USD/RMB and Weekly Friday Options on USD/RMB
CME Monthly Options on U.S. Dollar/Offshore Chinese Renminbi (USD/RMB) Futures
The contract follows a European style where it is auto-exercised against CME Group FX Fixing price: no contrary instructions allowed.
The Monthly Options on USD/RMB Futures have the following specifications:
The monthly options on USD/RMB Futures follow a contract size of one futures contract for 100,000 U.S Dollars, with a minimum price fluctuation of .0005 CNH per USD = 50 CNH. (CME Globex) OR 0.00025 CNH per USD = 25 CNH for premiums below 0.0025.
Contract Months are:
Quarterly Contracts (Mar, Jun, Sep, Dec) listed for 4 consecutive quarters, and serial contracts listed for 8 months.
Trading Hours are:
CME Globex Pre-Open: Sunday 4:00p.m – 5:00 pm Central Time (CT)/ Monday-Thursday 4:45pm- 5:00pm CT
CME Globex: Sunday 5:00pm – Friday – 4:00 p.m CT with a daily maintenance period from 4:00 pm – 5:00pm CT
CME Clearport: Sunday 5:00pm – Friday 5:45pm CT with no reporting Monday-Thursday from 5:45pm – 6:00pm. CT
CME Weekly Friday Options on U.S. Dollar/Offshore Chinese Renminbi (USD/RMB) Futures
The Weekly Friday Options on USD/RMB Futures have the following specifications:
The weekly friday options on USD/RMB Futures follow a contract size of one futures contract for 100,000 U.S Dollars, with a minimum price fluctuation of .0005 CNH per USD = 50 CNH. (CME Globex) OR 0.00025 CNH per USD = 25 CNH for premiums below 0.0025.
Contract Months are:
Four Weekly Friday contracts listed at a time.
Trading Hours are:
CME Globex Pre-Open: Sunday 4:00p.m – 5:00 pm Central Time (CT)/ Monday-Thursday 4:45pm- 5:00pm CT
CME Globex: Sunday 5:00pm – Friday – 4:00 p.m CT with a daily maintenance period from 4:00 pm – 5:00pm CT
CME Clearport: Sunday 5:00pm – Friday 5:45pm CT with no reporting Monday-Thursday from 5:45pm – 6:00pm. CT
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