Traders, CME switch models… Bloomberg – Commodity Research Group

April 22, 2020 by Jim Colburn Leave a Comment

Alex Longley, Jack Farchi and Catherine Ngai, Bloomberg, write about market participants changing pricing models to account for negative oil prices, here…

“The bid-ask spread on $20 puts for June WTI was nearly $3 at various times on Tuesday, compared with just 15 cents last week. Several traders and brokers said that they were being quoted bid-ask spreads that were many times wider than normal.

CME Group Inc. said late Tuesday that the clearing house will switch the options pricing and valuation model to Bachelier — a model named after the famous French mathematician — to accommodate negative prices in the underlying futures and allow for listing of options contracts with negative strikes for a certain set of crude oil and energy products. The change is effective Wednesday and will remain in place until further notice.

Commodity Research Group (CRG), founded by veteran analyst Edward Meir, is an independent research consultancy specializing in base and precious metals, as well energy products. The Group provides research and general price analysis for these markets, along with advice to companies seeking to construct commodity hedging strategies.

Our associates bring decades of experience to the table, as they seek to help our clients understand the markets. CRG will distill the myriad of pricing variables mentioned above into coherent research that is to-the-point and tailored to a clients hedging or pricing needs. In addition, CRG is available for consulting assignments and speaking engagements. CRG does not manage money or trade for itself.

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