Short-term option trading system

• US 7,856,395 B2
• Filed: 11/30/2004
• Issued: 12/21/2010
• Est. Priority Date: 08/10/2004
• Status: Active Grant

• Current Assignee: Micro TICK LLC
• Original Assignee: Micro TICK LLC
• Inventors: Norman, David James, Jackson, Mark Daniel
• Primary Examiner(s): Havan; Thu-Thao
• Assistant Examiner(s): Niquette; Robert R
• Application Number:
  US10/999,806
• Publication Number:
  US 20060036531A1
• Time in Patent Office: 2,212 Days
• Field of Search: 705 35- 45
• US Class Current: 705/37
• CPC Class Codes: G06Q 20/042 characterized in that the payment protocol involves at least one cheque
• CPC Class Codes: G06Q 20/10 specially adapted for electronic funds transfer [EFT] systems; specially adapted for home banking systems
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis
• CPC Class Codes: G06Q 40/08 Insurance

Abstract

Option contracts are traded by valuing an option that has at least one of a) strike price or b) expiration time unknown at the time the option is valued. The previously unknown values of the option are assigned at the time or after the time the trade is completed. An implied underlying price stream is generated from the option prices through the use of feedback between market participants and the marketplace. The resulting system is useful in trading option contracts of short time duration.

Claims

1. A method of trading a standardized option contract comprising a buyer and seller trading the option contract on a processor, and the processor determining a basis for the option contract using either a) a time duration and a reference time determined by the processor or b) a floating strike price and a reference price determined by the processor as a parameter of the option contract acceptable to both the buyer and the seller where a floating strike price is assigned based on an arbitrary reference price stream generated through the use of feedback between market participants and an independent neutral third party by providing a price stream independent neutral third party, the independent neutral third party comprises a feedback mechanism between market makers for the standardized options and a marketplace that is listing short-term the standardized options by the marketplace creating an arbitrary reference price that market participants agree will be a reference price for all options traded on the marketplace, where the arbitrary reference price is adjusted in response to option contract prices market makers set, and all traded options have a strike price based either directly on this arbitrary reference price or using an algorithm, mathematical formula, or method derived from using this arbitrary reference price.

2. The method of claim 1 where the price stream implied underlying price operates by (a) providing an arbitrary reference price to market participants, (b) allowing market participants to quote call and put option contracts based on an arbitrary reference price, (c) deriving an indicated call price and an indicated put price from one or more prices the market participants quote, and (d) adjusting the arbitrary reference price based on at least one indicated call and put price.

3. The method of claim 2 where the arbitrary reference price is (a) adjusted up if an indicated call price is greater than an indicated put price, (b) adjusted down if the indicated call price is less than the indicated put price, or (c) not adjusted if the indicated call price is equal to the indicated put price.

4. The method of claim 1 wherein in trading the short term option contract, the trade contract is recorded on the processor, and the option contract is based on conditions where at least one of the following contract parameters is unspecified at the time the trade is initiated:

a) strike price, b) expiration time, or c) contract size; and

after the trade is initiated by at least one party, the processor adding at least one of the unspecified conditions into the contract.