Flex Options
The Mechanics of Flex Options
Flex options, short for "flexible exchange options," are customizable derivatives contracts that allow investors to modify key contract specifications. Unlike standard options that trade on exchanges with preset terms, flex options enable traders to tailor:
- Expiration dates (any business day, not just standard expiration dates, up to 15 years in the future)
- Strike prices (can be set at any level, not just standard increments)
- Exercise style (American, European, Asian)
- Settlement type (cash or physical delivery)
These contracts are still cleared through the Options Clearing Corporation (OCC), providing the same level of counterparty risk protection as standard options.
Flex option open interest ("OI") is small but growing, from 3% of total OI in January 2023 to to 7% of total OI in January 2025.
At Unusual Whales we list all active Flex options.
How can I trade Flex Options?
The simple answer is you cannot. Investors who wish to trade Flex options must meet certain exchange requirements, which can be looked up at the CBOE and or Nasdaq for example. Once the investor is eligible they reach out to their broker who then submits a request for quote to the exchanges for the Flex option that the investor wishes to buy/sell.
Who trades Flex Options?
Due to the requirements it is mostly institutions trading Flex options, though certain Option ETFs take advantage of their flexible exercise style and settlement type. For instance an options income ETF for a basket of equities may wish to sell call options on the underlying stock using European exercise style instead of American to avoid early assignment.
Another example are institutional investors who want to roll their position into an expiry which does not exist yet:
On the 17th December 2024 someone traded 3,800 SM $25 calls 2025-01-17 as a multi leg trade. Upon clicking the multi leg symbol
What is Flex Options consolidation?
A standard options expiration cannot be further out than 2.5 years. Once a Flex option is within 2.5 years of a standard expiration, the Flex option becomes eligible for consolidation with the standard option expiry if and only if that expiry has the exact same specifications (strike, expiration, settlement). If so, the whole OI of the Flex option will be added to the standard option expiry, converting the Flex options to standard options and providing the buyer and seller a much more liquid market. This consolidation of Flex options with standard options can result in OI increases in the standard option without the chain having any volume.
Example Flex Option consolidation
Let's examine this consolidation of Flex options into the standard option expiry in the wild: the WULF 3.5P expiring 2025-03-21. The contract look-up tool is perfect for this kind of quick review, so let's start there:
https://unusualwhales.com/flow/option_chains?chain=WULF250321P00003500&days=1&mins=5&
Hovering your mouse on this icon provides you the exact numbers. In this case, we can see that the OI is going to increase by at least 800 when the Flex options are consolidated in:
In this case, we see 1087 of these contracts traded on the 30th. Without the Flex option consolidation notice, you might see the OI increase by more than the previous day's volume and think, “This is an error!” However, since the Unusual Whales tool has told us about the incoming Flex option consolidation, we know that this is NOT an error (or some nefarious operator). We know this is simply the result of the Flex options merging into the standard option expiration.
