Cboe Exchange, Inc. has proposed a rule change to amend how it calculates the "current market value" for certain options, specifically Exchange-Traded Fund (ETF) options, to determine the necessary margin requirements. Currently, the closing trade prices for these options are used at 4:15 p.m. Eastern time. The proposal suggests using quotes from 15 minutes before the close of trading, aligning the valuation time with related index options for better consistency in market evaluations. This change aims to reduce potential risks and price distortions for market participants involved in both ETF and related index options trading.
Simple Explanation
Cboe Exchange wants to change how they figure out how much money must be set aside, called "margin," for trading certain options. Instead of using the final price when the market closes, they want to use a price from a little earlier to make things fairer and safer.