The IFM team can tailor OTC products to meet a wide range of risk profiles and market views. Products range from simple swaps to customized and “exotic” options to structured products. Below is an overview of the four principal product types we trade.
Lookalike Options and Swaps. Also known as Plain Vanilla Options or Swaps, these are IFM’s most basic OTC product. Lookalike options offer similar optionality features as their exchange-traded equivalents regarding strike, expiration date, and premium.
Customizable Options offer similar benefits as Lookalikes, with the addition of customizable expiration date, strike, or futures reference contracts. This flexibility can enable a hedge that more closely aligns with the user’s risk profile and strategy, however it does limit the customized option’s optionality from being fungible with the exchange.
Asian, Digital and Barrier options. Asian options determine payout by figuring the average of the underlying price over a pre-set period of time. Digital options (a.k.a Binary or All-Or-Nothing options) pay the owner a fixed amount if the market settles at a predetermined level. Conversely, if it does not settle at that level, the owner receives nothing. Barrier options are either activated (knocked-in) or deactivated (knocked-out) when the market reaches a pre-determined “top” or “bottom” range.
Structured Products enable a customer to “accumulate” a short swap above the current market or a long swap below the current market so long as the market stays within a specified range. This range is agreed upon by the broker and customer, and its limitations are typically marked by a predetermined accumulation level on one end and a barrier level on the other end.
More detailed information on each of these product types can be found on their individual subpages, available via the navigation at left.