Methods and systems for creating and trading strips of financial products
Abstract
The present invention includes a method comprising receiving a first electronic BUY STRIP order; receiving a second electronic SELL STRIP order; matching the first STRIP order with the second STRIP order, wherein the first STRIP order is a contra order to the second STRIP order; executing the matched first and second STRIP orders; generating a first plurality of tradable component financial product trades based on the executed first STRIP order; generating a second plurality of tradable component financial product trades based on the executed second STRIP order; matching the first plurality of tradable component financial product trades with the second plurality of tradable component financial product trades, wherein the first plurality of tradable component financial product trades are contra trades to the second plurality of tradable component financial product trades; and executing the matched first and second plurality of tradable component financial product trades.
Claims
exact text as granted — not AI-modifiedWhat is claimed is:
1 . A computer-implemented method for trading STRIP orders, comprising the following steps:
receiving, by an exchange computer, a first electronic STRIP order, wherein the first electronic STRIP order is a BUY order; receiving, by the exchange computer, a second electronic STRIP order, wherein the second electronic STRIP order is a SELL order; matching, by the exchange computer, the first STRIP order with the second STRIP order, wherein the first STRIP order is a contra order to the second STRIP order; executing, by the exchange computer, the matched first and second STRIP orders; generating, by the exchange computer, a first plurality of tradable component financial product trades based on the executed first STRIP order; generating, by the exchange computer, a second plurality of tradable component financial product trades based on the executed second STRIP order; matching, by the exchange computer the first plurality of tradable component financial product trades with the second plurality of tradable component financial product trades, wherein the first plurality of tradable component financial product trades are contra trades to the second plurality of tradable component financial product trades; and executing, by the exchange computer, the matched first and second plurality of tradable component financial product trades.
2 . The computer-implemented method of claim 1 , wherein the first plurality of tradable component financial product trades and the second plurality of tradable component financial product trades comprise at least one of the following: securities orders, options orders, or futures orders.
3 . The computer-implemented method of claim 1 , wherein the first electronic STRIP order and the second electronic STRIP order are Variance STRIP orders.
4 . The computer-implemented method of claim 3 , wherein the first and second plurality of tradable component financial product trades are trades for options on a financial index.
5 . The computer-implemented method of claim 3 , wherein a composition of the first and second plurality of tradable component financial product trades is calculated, in part, using the formula:
C
i
=
2
T
[
Δ
K
i
/
K
i
2
]
RT
×
[
vega
notional
/
2
×
σ
]
×
100
wherein,
σ 2 is the Variance (volatility-squared); VIX=σ×100;
T is the Time to expiration;
K i is the Strike price of i th option;
ΔK i is the Interval between strike prices;
R is the Risk-free interest rate to expiration; and
Q(K i ) is the Price of option with strike K i .
6 . The computer-implemented method of claim 1 , wherein the exchange computer comprises a plurality of computers.Join the waitlist — get patent alerts
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