CATASTROPHIC OPTION CALL SPREADS

CATASTROPHIC OPTION CALL SPREADS

For quotes on National, Midwestern or other markets, call the CBT trading floor during trading hours 8:30 a.m.- 12:30 p.m. (Chicago time) at (312) 341-3342/3 or (312) 435-3674 for general questions.

A CAT spread is similar to a layer of reinsurance. The strike prices or attachment points are associated with loss ratios that underlie the futures contract. For example, a 50/70 call spread represents a layer of risk between the loss ratios of 50 percent to 70 percent. The loss ratio is based on a premium of $6.4 billion for a particular contract.The CAT contract trades in points and tenths of a point. Each point has a

dollar value of $250; each tenth, $25. Quotes will appear in bid/ask format. A single price indicates that a trade occurred. Volume indicates the number of trades that occurred during the day. Open interest is the number of positions that have not yet been offset.