UK software company ORE has announced the launch of a new options product for its OTC options platform. The company will begin offering WTI crude oil options for brokers and banks so they can, in turn, offer their clients access to one of the most volatile assets in recent months.
While professional investors have had access to trading on the WTI Crude Oil futures and options market on exchanges, up until now retail investors have only had access to spot and futures trades.
Options provide a new dynamic to trading, as they provide retail traders with the ability to trade oil volatility and to choose direction without risking being stopped-out.
Forex Magnates reporters have reached out to the company for more information about the offering and found that the solution is quite scalable. ORE provides a front-end solution, delivered either through WebGUI or MT4, an options price engine and a risk management solution.
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Options pricing is calculated using the pricing engine depending on a variety of factors including volatility, interest rates, etc. Clients of ORE can choose whether to use the company’s pricing engine, delivered by the firm’s quant team, or instead opt for a different source to deliver pricing data.
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ORE’s pricing is streamed to the front-end solution which is completely tradable. In contrast to the exchange-traded options, on the over-the-counter version of the instrument end-users can choose any strike or any expiry date on a given option.
Oil options are traditionally served on an exchange with just one expiry rate on each futures contract, the same day the contract expires. In ORE’s solution, the expiry rate is once again determined by the trader, who can choose any date before the contract expires.
Liquidity management decisions are left entirely to the brokerages – they can make a market, offset the risk to another counterparty or do both. ORE provides a risk management module for the options solution, leaving the brokerage with the choice of whether to internalize risk or outsource it.
The risk management module provides the cumulative exposure of all the clients to the market.
The solution has already been adopted by TradeNext and Easy Forex to deliver foreign exchange options to their clients.
The company’s head of sales, Zoe Fiddes, commented to Forex Magnates, “We’ve had demand from our clients to add oil options in light of recent elevated volatility on that market. Volumes on exchange traded options are huge, and the OTC market has the potential to replicate that.”
The company is already delivering FX, metals and oil options through ORE’s Web-platform solution optionsReasy, its Options Bridge on MT4 and its API solutions.