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| Originating department: | Commercial Services |
| Company Circular No: | LCH.Clearnet Ltd Circular No 2771 |
| Service Circular No: | LCH EnClear No 327 |
| Date: | 26 January 2011 |
| To: | All LCH.Clearnet EnClear Clearing Members |
Changes to strike prices for the CTO Options within the OTC clearing service for freight
Members are advised that as of Thursday 27 January 2011, the tradable strike prices for the Cash Settled Premium Paid Option CTO will be available in increments of $250 per day.
Currently CTO option strikes are available in increments of $500 with sixty strikes available above and below the “at the money” strike price. The number of strikes available above and below will remain unchanged. Strike prices for PTO, STO and HTO contracts will remain unchanged also.
Full contract specifications are available on our website www.lchclearnet.com under the FFA section.
If you have any questions, please do not hesitate to contact Holly Shaw on +44 20 7426 7027 or [email protected].
Isabella Kurek-Smith
Director, Head of Energy and Freight Markets
Commercial Services
CTO contract specification
| Description | Cash settled Premium Paid Option on the following Dry Timecharter Basket Route: CTO (Capesize TC Avg 4 routes) These contracts, if “in the money” expire into their underlying freight forward contracts with a traded price equal to the Strike Price (see below) |
| Lot size | 1 day |
| Currency | US Dollars |
| Pricing | US & per day |
| Minimum tick | US $1 per day |
| Option type | Options are European style and will be automatically exercised on the expiry day if they are “in the money”. If an option is “out of the money” it will expire automatically. It is not permitted to exercise the option on any other day or in any other circumstances. No manual exercise is permitted. |
| Option Premium | The Premium is paid at the time of purchase. |
| Last trading day | At 17:00 hours UK time on last business day of each month within the contract series. Exception – December contracts will expire on the 24th December, or previous business day, where the 24th December is a non working day. |
| Expiry | 17:00 hours UK time on the last trading day. Automatic exercise settings are pre-set to exercise contracts which are one minimum price fluctuation or greater "in-the-money" when compared to the relevant reference price. Members are not permitted to override automatic exercise settings or manually enter exercise instructions for this contract. The reference price will be a price in US dollars, cents and hundredths of a cent ($0.0001), per day equal to the final settlement price for the underlying freight forward contracts. For these purposes “final settlement price” means the final settlement price on the expiry day of the underlying freight forward contracts. |
| Contract series | Front 1 or 2 months (remaining from expired front quarter) Front 4 Quarters, Front 3 Calendar Years. |
| Strike price | CTO - Sixty strike prices in increments of $250 per day both above and below the “at-the-money” strike price in all contract series.
Where the “at the money” strike price of the underlying commodity moves, additional strikes will be added each business day. |
| Business days | UK business days |