Method and apparatus for automated opening of options exchange

DETAILED DESCRIPTION The present invention is a computer-implemented method and system that provides an automated simultaneous opening of trading on an options exchange.
The present invention permits flexibility in the degree to which public order supply and demand imbalances across a series impose variations in opening implied volatilities, while at the same time providing for optimal assignment of market makers to offset the residual imbalances.
As used herein, the term "opening" also includes "reopening.
" Accordingly, the present invention can be used to reopen trading on an options exchange after it halts trading during the trading day.
The present invention can also be used to facilitate trading when a customer requests a call market in one or more option series, i.
e.
, a demand call.
The present invention determines the opening prices for each option series so that all option series can be opened simultaneously on the option exchange.
The present invention allows all option series to be opened simultaneously at a price that: I.
corresponds reasonably well to a single value of implied volatility (or in the more general case, to a linked set of implied volatilities that correspond to a predetermined implied volatility skew vs.
strike price relationship); II.
optimizes volume (or weighted measures of volume) across all series; and III.
enables options market makers to balance the variations in supply and demand of public orders in each series at prices that provide an incentive to the market makers.
The first feature (I) avoids gross inconsistencies in implied volatility at the opening, while still allowing some latitude for variations in market demand.
The second feature (II) meets the general purpose of an option exchange, i.
e.
, to maximize the mutual satisfaction among all participants to the greatest degree possible.
The third feature (III) provides an improvement over current methods for the assignment of market makers to the required positions in the opening.
Each market maker comes to the opening with his or her own current position (as specified by delta and gamma) and his or her desired target position after the opening (as specified by delta and gamma)