ICE Tips
User Defined Strategies (UDS)
November 10, 2010
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User Defined Strategies (UDS)
ICE is pleased to announce the launch of UDS for the following ICE Futures Europe markets:
• Brent
• WTI
• GasOil
• ECX (ERU, CER, EUA)
ICE also offers UDS on the following ICE Futures U.S. markets:
• Cotton No 2
• Coffee
• Cocoa
• Sugar No 11
• Russell Index
• Dollar Index
• FCOJ
ICE also offers UDS on the following ICE Futures Canada markets:
• Canadian Oilseeds
• Canadian Grains
UDS allows participants to define option strategies on the exchange platform. Option strategies are
defined leg by leg with up to 9 option legs and two futures hedge legs. When a UDS instrument is
created, it is created from the “buyers” perspective which means a bid in the UDS instrument will
result in a trade exactly as the legs are defined. An offer in a UDS instrument will result in a trade that is
opposite of the UDS defined legs. Option UDS instruments that are not hedged (i.e. have no futures legs)
will imply with the outright option markets as well as the outright markets will imply with a resting UDS
order.
Click HERE to read more about UDS and Request for Quote (RFQ)
User Defined Strategies (UDS) Trading Example: Call Spread
A participant creates a Feb 11 19.00/19.25 call spread. WebICE will understand certain common
strategies (Call Spread, Put Spread, Straddle, Strangle, Fence, Butterfly, and Covered Call/Put) and
display accordingly on the screen.
To view the individual legs, right click on the UDS and select Show Description.
ICE – ICE Tips – User Defined Strategies (UDS) - November 10, 2010
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A Bid in this call spread will indicate the participant is buying the 19.00 Call and Selling the 19.25 Call. An
Offer in this call spread will indicate the participant is selling the 19.00 Call and Buying the 19.25 Call.
Assume a participant places a bid in this call spread of 0.50. This bid is hit by another participant. The
resulting trade will occur for the buyer.
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User Defined Strategies (UDS) Trading Example: Custom Strategy
UDS allows participants to create any combination of buy/sell option strategies. This example shows a
custom strategy with multiple legs.
A participant creates a customer strategy with following leg definitions.
Buy Feb11 17.75 Call with a ratio of 1.
Sell Feb 11 18.00 Call with a ratio of 1.
Sell Feb 11 18.50 Call with a ratio of 2.
Buy Mar 11 Future at 17.95 with a 50% Delta.
A Bid in this strategy will indicate the participant is Buying the Feb11 17.75 Call, Selling the Feb11 18.00
Call, Selling two Feb11 18.50 and Buying the Hedge at a delta of 50% for 17.95. An Offer in this strategy
will indicate the participant is Selling the Feb11 17.75 Call, Buying the Feb11 18.00 call, Buying two
Feb11 18.50 and Selling the Hedge at a delta of 50% for 17.95.
The premium price in this particular example could be a negative number (i.e. -2.05) which indicates a
credit is received by the “buyer” of this strategy. Assume a participant places a bid of -2.05 for 10 lots in
this UDS. The screen will show the bid on the screen with a credit.
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A second participant hits the bid. The participant who entered the bid will see the following Deal
Confirmation screen indicating the legs that were bought and sold, as well as the definition of the UDS.
***Click HERE to view full release notes***
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