A Financial Advisor’s Primer on FLEX® Options

Historically, alternative investments have proven their value in portfolios, adding diversified return streams, enhancing income, and hedging risk. The widespread rollout of listed options strategies means that a variety of option types are now available to investors.

FLEX options are exactly what their name implies: flexible exchange options. Cboe Global Markets launched these options in 1993, and they now trade on many exchanges. FLEX options stand out by providing several benefits over standardized listed options.

Highly Customizable FLEX Options

FLEX options allow for a high degree of contract customization and can be modified based on the investor’s specific needs, including the exercise price, style (American or European) and expiration date up to 15 years.

Investors can stipulate whether they want the ability to exercise the option before or at expiration. They also define how to measure premiums either in dollar amounts or a percentage of the stock.

Equity FLEX options measure premiums in either dollar amounts or stock percentages. Meanwhile, index FLEX options measure premiums as a dollar amount per contract, a percent of the underlying index’s level, or as determined by agreed-upon factors in related markets.