Cboe FLEX options volume reaches record in third quarter as defined-outcome demand grows

Traders Union
All News
Financial Institutions
Cboe FLEX options record volume

Highlights

Cboe reports record FLEX options open interest, rising from below 10 million (2017-2022) to about 71 million in Q3 2026, driven mainly by single-stock contracts.
European-style FLEX options have surged to over 90 percent of activity since 2021, propelled by demand from defined-outcome ETFs that require European-style exercise.
A pending SEC rule could permit cash-settled FLEX options for 169 single stocks by H1 2026, with hedge funds, proprietary trading firms, and pension funds as expected users.

Record activity and product evolution

As reported by Cboe, citing Cboe Global Markets, FLEX options are posting record activity more than 30 years after their launch as a customizable portfolio management tool. The exchange operator says the contracts let users tailor exercise prices, styles and expiration dates on major indices while combining over-the-counter style flexibility with central clearing that helps reduce counterparty risk.

Cboe says that structure is making FLEX options a bigger driver of overall options trading as investors seek more precise exposures. The company links the surge to rising use of defined-outcome ETFs, which rely heavily on European-style exercise so options packages remain intact through the full outcome period.

Trading patterns have also shifted decisively toward European-style contracts. After American-style FLEX options accounted for about half or more of activity in 2017 and 2018, European-style contracts represent well over 90 percent of activity since 2021, according to the company.

Open interest has climbed sharply alongside that change. It stays below 10 million contracts for most of 2017 through 2022, rises to roughly 38 million in the third quarter of 2025, and nearly doubles to about 71 million in the third quarter of 2026, with single-stock FLEX options accounting for roughly two-thirds of the total growth.

Rule changes and technology shape next phase

Single-stock FLEX options continue to dominate open interest, but those contracts are currently settled through share delivery. Cboe says issuers are awaiting a pending SEC filing that would permit cash-settled FLEX options on certain individual stocks meeting liquidity thresholds, with matching position and exercise limits.

The company says 169 single stocks meet those thresholds in the first half of 2026, compared with 39 ETFs in 2023, underscoring the potential scope for single-stock cash settlement. Cboe expects hedge funds, proprietary trading firms and pension funds that already use over-the-counter cash-settled single-stock options to be among the main users if the rule change is approved.

Cboe also says automation is becoming essential as quarterly roll days bring hundreds of option packages into the market over a short period. Liquidity providers are increasingly building systems that can receive requests, translate them into tradable formats, validate them and return quotes to brokers without the manual steps that would otherwise slow the process.

The company adds that further technology upgrades, including enhancements to FIX Protocol, are needed for defined-outcome strategies to scale further. Unlike standard options orders that fix contract terms and negotiate price, buffer and other defined-outcome strategies often work with a fixed budget and variable strike or cap, requiring messaging standards that better support that structure.

In our earlier article on the Philippine Social Security System’s equity portfolio performance, we covered how the state pension fund framed recent mark-to-market declines as unrealized losses that only become actual losses if positions are sold below cost. SSS emphasized that long-term, diversified holdings have generated substantial realized gains and steady dividend income, and that its investment process focuses on fundamentally strong, non-speculative assets while monitoring risk and income targets.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.