Cboe Tightens FLEX Options Rules for ETF Traders
Published Date: 7/21/2026
Notice
Summary
Cboe Exchange updated its rules for FLEX options on certain ETFs, making it a bit tougher for new ETFs to qualify for cash settlement. This change mainly affects traders and investors using FLEX options, aiming to keep things fair and clear. The SEC approved this update quickly, so the new rules will kick in soon without extra costs for users.
Analyzed Economic Effects
3 provisions identified: 2 benefits, 0 costs, 1 mixed.
Tiered wind-down for ineligible ETFs
If an ETF fails to meet eligibility at a bi-annual review, Cboe will apply tiered rules: if no open interest in cash-settled FLEX ETF options existed during the prior six months, any new position must be physically settled and existing cash-settled positions may only be traded to close. If open interest did exist, opening new cash-settled positions is allowed for one year from the review date, after which new positions must be physically settled and remaining cash-settled positions may be traded only to close; eligibility is restored early if the ETF meets the criteria at either bi-annual review during that year.
Faster cash-settlement for new FLEX ETFs
If an ETF newly becomes FLEX-eligible, Cboe may allow cash-settled FLEX options on that ETF based on the previous one-month trading period if the ETF meets heightened thresholds of $600,000,000 average daily notional value and 5,616,000 shares ADV. These thresholds are 20% higher than the standard six-month thresholds of $500,000,000 and 4,680,000 shares, and this one-month lookback lets ETFs qualify between the Exchange's bi-annual reviews.
Removal of 50-ETF cap
Cboe removed the prior limit that cash settlement as a contract term could be applied to no more than 50 underlying ETFs; as of February 1, 2026, 60 ETFs qualified under the eligibility criteria. Any ETF that satisfies the established notional value and ADV requirements may now be eligible for cash-settled FLEX options.
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