Printer Friendly


 CHICAGO, Nov. 4 /PRNewswire/ -- The Chicago Board Options Exchange (CBOE) tomorrow (Nov. 5) will list options on interest rates based on the yield-to-maturity of the most recent issues of 5- and 10-year Treasury notes and 30-year Treasury bonds.
 The options on the 5-year rate (ticker symbol: FVX), 10-year rate (TNX) and 30-year rate (TYX) will trade alongside CBOE's options on the short-term rate (IRX). The IRX, which began trading in June 1989, is based on the annualized discount rate on the most recently auctioned 13-week Treasury bill.
 Options on interest rates are cash-settled, eliminating the need to own or deliver Treasury securities upon exercise; and are European-style exercise.
 Trading hours will be 7:20 a.m to 2 p.m. Chicago time.
 Attached: Interest Rate Options Fact Sheet
 Whether you invest in stocks, mutual funds, real estate or fixed- income instruments, there are few factors that affect your investments more than interest rates.
 For an investor, fluctuations in interest rates represent both opportunity and risk. Opportunity because you can capitalize on your outlook on these rates; risk because interest rate moves can adversely affect the value of your investments.
 Now, with our new array of options on Interest Rates, an investor has a tool to help control interest rate exposure and take advantage of new investment opportunities, using the leverage and versatility of options. These options give investors an opportunity to profit from their views on the direction of interest rates, on the future shape of the yield curve and on the difference between short and long-term rates.
 Options on Interest Rates are options on the yield of U.S. Treasury securities. Available to meet the investor's needs are options on both short-term rates and long-term rates. The following contracts are available at CBOE for trading:
 -- IRX - Options based on the discount rate of the most recently
 auctioned 13-week Treasury bill.
 -- FVX - Options based on the yield-to-maturity of the most
 recently auctioned 5-year Treasury note.
 -- TNX - Options based on the yield-to-maturity of the most
 recently auctioned 10-year Treasury note.
 -- TYX - Options based on the yield-to-maturity of the most
 recently auctioned 30-year Treasury bond.
 For an aggressive or a conservative investor, options on Interest Rates from the Chicago Board Options Exchange allow individuals to create a position which meets their interest rate expectations. If a rise in interest rates is expected (a decline in the value of a bond), an investor would consider buying calls. If a decline in interest rates is expected (an increase in the value of a bond), an investor would consider buying puts.
 If a rise in interest rates
 is expected: Buy Calls
 Sell a Put Spread
 If a decline in interest rates
 is expected: Buy Puts
 Sell a Call Spread
 If an investor would like to hedge
 a bond portfolio: Buy Calls
 These are just some of the strategies available. There is also a choice of expirations and strikes to create exactly the position needed to fulfill interest rate expectations.
 YIELD DESCRIPTION: The term "spot yield" refers to the annualized discount rate and the yield-to-maturity on the most recently issued Treasury bills, notes and bonds, respectively, with a designated maturity (rounded to the nearest basis point). For example, the 30-year spot yield means the yield-to-maturity of the most recently issued 30-year Treasury bond. On any given day, however, the 30-year spot yield will refer to the yield-to-maturity of the 30-year Treasury bond with the longest remaining time to maturity. On the other hand, the 13-week spot yield means the annualized discount rate on the most recently auctioned 13-week T-bill.
 UNDERLYING: 10 x the spot yield value.
 EXPIRATION: Three near-term months plus three additional months from the March quarterly cycle.
 CONTRACT SIZE: $100 multiplied by the underlying value.
 TICKER SYMBOLS: Short-term: LEAPS(R)(Dec. `95): Settlement
 13-week Yield IRX VXB SSX
 5-yr Yield FVX VXV FVS
 10-yr Yield TNX VNX TNS
 30-yr Yield TYX VYY TYS
 PREMIUM QUOTATIONS: Stated in points and fractions; one point equals $100. Minimum price change for series trading below $3 is 1/16 ($6.25) and for all other series 1/8 ($12.50).
 STRIKE (EXERCISE) PRICE: Strike prices are set at 2-1/2 point intervals. A 1-point interval represents 10 basis points.
 RETAIL AUTOMATIC EXECUTION SYSTEM (RAES): Available for short term option orders of 10 contracts or less in all series which closed at $10 or under the previous day.
 EXERCISE STYLE: EUROPEAN. Options may be exercised at expiration only.
 SETTLEMENT: All options are cash-settled. Settlement prices are based on the spot yield on the last trading day as reported by the Federal Reserve Bank of New York. (In most cases, the last trading day will be the third Friday of the expiration month.)
 POSITION LIMITS: 25,000 contracts on either side of the market. A hedge exemption is available to qualified customers and money managers. In no event may exempted positions exceed 75,000 contracts for a single customer or exceed 125,000 contracts for a single money manager holding interest rate option positions in an aggregate account.
 TRADING SYSTEM: Designated Primary Market Maker.
 TRADING HOURS: 7:20 a.m. to 2 p.m. (central time).
 This publication discusses exchange-traded options issued by the Options Clearing Corporation. No statement in this publication is to be construed as a recommendation to purchase or sell a security, or to provide investment advice. Options on Interest Rates involve risk and are not suitable for all investors. Prior to buying or selling options, a person must receive a copy of Characteristics and Risks of Standardized Options. Copies of the document may be obtained from your broker or from the Chicago Board Options Exchange, 400 S. LaSalle St., Chicago, Ill. 60605.
 -0- 11/4/93
 /CONTACT: Stan A. Lata, 312-786-7392, or Bonnie Greenberg, 312-786-7393, both of CBOE/

CO: The Chicago Board Options Exchange ST: Illinois IN: FIN SU:

LD -- NY122 -- 0987 11/04/93 17:42 EST
COPYRIGHT 1993 PR Newswire Association LLC
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:PR Newswire
Date:Nov 4, 1993

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters