With Guarantee

Flexible Options

• The product

  Flexible options are traded in organized OTC environments – based on rules and non-standard features – and may be defined at the parties’ discretion.

  Since these options are not standard contracts, they allow for flexible parameters to be negotiated between the parties. These options may also have specific features, such as price limits and knock-in/knock-out barriers.

  B3 provides the registration of flexible options with and without CCP.

• Technical description

  Contract size	Freely established between the parties and registered on the asset unit related to the respective option.
  Fixing date	Freely established between the parties.
  Expiration and settlement day	Freely established between the parties.
  Settlement procedure	With CCP: settlement is cleared through the Clearinghouse. Without CCP: settlement is done directly by the parties.
  Product features	Barriers, Limits, and Rebate
  Fix against corporate events	In flexible Options of ETF and BDR, correction against corporate events (Ex: Interest, dividend, etc.) is foreseen so that the contracts will be automatically readjusted by changing the exercise price, limiter, barriers, unit premium and rebate. More details about calculation can be seen in the formula book of Flexible Options with CCP.
  Margin requirement	With CCP: only the seller (writer) is required to deposit the collateral margin, since it is the only one with default risk. Without CCP: no collateral margin deposit is required.
  Warranty provision	The buyer (holder) pays for the right to purchase ‘call’ options or sell ‘put’ options. In turn, the seller (writer) is required to sell ‘call’ options or buy ‘put’ options, if the holder exercises such rights.
  Expiration period	Freely established between the parties.
  Settlement price	Freely established between the parties.
  Exercise price	Freely established between the parties.
  Trade premium	Premium paid by the holder to the writer as payment for acquired rights. The parties may establish the premium payment date in any business day between the first business day following the operation date and the business day following the expiration date. If the parties do not establish such date, the premium payment date shall be automatically established as the business day following the operation date.

• Benefits
  • Possibility of limiting the potential for loss. Limits and barriers allow the parties to determine the maximum loss incurred by the writer in the operation;
  • Price protection against unwanted asset fluctuations to which the client is exposed, since future purchase or sale listings are guaranteed, depending on the type of operation; and
  • Mitigation of credit risks for operations with CCP, since B3 guarantees such operations.