System and method for real-time options trading over a global computer network

Abstract

The present invention relates to a method and system for electronically trading a financial instrument. The method includes entering a bid order for the financial instrument and placing the bid order in a bid queue associated with a buyer who maintains a list of sellers to sell the financial instrument to. Then, entering an ask order for the financial instrument and placing the ask order in an ask queue associated with a seller who maintains a list of buyers to buy the financial instrument from. Next, the present invention will match the bid order and the ask order and to execute a trade between the buyer and the seller. Lastly, the trade is executed if the bid order is not less than the ask order, and if the buyer is on the list of buyers and the seller is on the list of sellers.

What is claimed is:  
     
         1 . A method for electronically trading a financial instrument, comprising: 
 entering a bid order for the financial instrument and placing the bid order in a bid queue associated with a buyer who maintains a list of sellers to sell the financial instrument to;    entering an ask order for the financial instrument and placing the ask order in an ask queue associated with a seller who maintains a list of buyers to buy the financial instrument from;    matching the bid order and the ask order to execute a trade between the buyer and the seller; and    executing the trade if a price of the bid order is not less than a price of the ask order, and if the buyer is on the list of buyers and the seller is on the list of sellers.    
     
     
         2 . The method of  claim 1 , further comprising matching a next bid order in the bid queue and the ask order if the buyer is not on the list of buyers or the seller is not on the list of sellers.  
     
     
         3 . The method of  claim 1 , further comprising matching a next ask order in the ask queue and the bid order if the buyer is not on the list of buyers or the seller is not on the list of sellers.  
     
     
         4 . The method of  claim 1 , further comprising matching a next bid order in the bid queue and a next ask order in the ask queue if a price of the ask order is greater than a price of the bid order.  
     
     
         5 . The method of  claim 1 , further comprising electronically screening sellers and buyers such that only acceptable sellers are placed on the list of sellers and acceptable buyers are placed on the list of buyers.  
     
     
         6 . The method of  claim 1 , wherein neither the bid order nor the ask order is removed from the bid queue or the ask queue, respectively, if there is no match.  
     
     
         7 . The method of  claim 1 , further comprising activating a virtual button on a display screen to immediately cancel all bid orders or ask orders.  
     
     
         8 . A system for electronically trading a financial instrument, comprising: 
 a memory storage for storing machine-readable instructions; and    a processor programmable to execute the machine-readable instructions retrieved from the memory storage for a) entering a bid order for the financial instrument and placing the bid order in a bid queue associated with a buyer who maintains a list of sellers to sell the financial instrument to; b) entering an ask order for the financial instrument and placing the ask order in an ask queue associated with a seller who maintains a list of buyers to buy the financial instrument from; c) matching the bid order and the ask order to execute a trade between the buyer and the seller; and d) executing the trade if a price of the bid order is not less than a price of the ask order, and if the buyer is on the list of buyers and the seller is on the list of sellers.    
     
     
         9 . The system of  claim 8 , wherein a next bid order in the bid queue is matched with the ask order if the buyer is not on the list of buyers or the seller is not on the list of sellers.  
     
     
         10 . The system of  claim 8 , wherein a next ask order in the ask queue is matched with the bid order if the buyer is not on the list of buyers or the seller is not on the list of sellers.  
     
     
         11 . The system of  claim 8 , wherein a next bid order in the bid queue is matched with a next ask order in the ask queue if a price of the ask order is greater than a price of the bid order.  
     
     
         12 . The system of  claim 8 , wherein sellers and buyers are screened electronically such that only acceptable sellers are placed on the list of sellers and acceptable buyers are placed on the list of buyers.  
     
     
         13 . The system of  claim 8 , wherein neither the bid order nor the ask order is removed from the bid queue or the ask queue, respectively, if there is no match.  
     
     
         14 . The system of  claim 8 , wherein a virtual button is activated on a display screen to immediately cancel all bid orders or ask orders.  
     
     
         15 . A method for electronically trading options contracts and for hedging the options contracts with underlying contracts, comprising: 
 entering a buy order for options with a first hedge delta to represent a first number of underlying contracts;    entering a sell order for options with a second hedge delta to represent a second number of the underlying contracts;    matching the buy order and the sell order to execute a trade; and    executing the trade if the first hedge delta is equal to the second hedge delta.    
     
     
         16 . The method of  claim 15 , wherein the first hedge delta is a fractional number.  
     
     
         17 . The method of  claim 15 , wherein the second hedge delta is a fractional number.  
     
     
         18 . The method of  claim 15 , wherein the first number of underlying contracts is a fractional number.  
     
     
         19 . The method of  claim 15 , wherein the second number of underlying contracts is a fractional number.  
     
     
         20 . A system for electronically trading options contracts and for hedging the options contracts with futures contracts, comprising: 
 a memory storage for storing machine-readable instructions; and    a processor programmable to execute the machine-readable instructions retrieved from the memory storage for a) entering a buy order for options with a first hedge delta to represent a first number of underlying contracts; b) entering a sell order for options with a second hedge delta to represent a second number of the underlying contracts; c) matching the buy order and the sell order to execute a trade; and d) executing the trade if the first hedge delta is equal to the second hedge delta.    
     
     
         21 . The system of  claim 20 , wherein the first hedge delta is a fractional number.  
     
     
         22 . The system of  claim 20 , wherein the second hedge delta is a fractional number.  
     
     
         23 . The system of  claim 20 , wherein the first number of underlying contracts is a fractional number.  
     
     
         24 . The system of  claim 20 , wherein the second number of underlying contracts is a fractional number.