Investor Alert:
CIRO is issuing a warning to Canadian investors regarding Canada Token Trade.
Effective Date: December 31, 2021
The long condor and short iron condor spreads are defined in subsections 5738(1) and 5740(1) of the IIROC Rules, respectively. Each of these spreads represent a position in four separate option series wherein, among other things, the interval between the strike prices is equal. We have determined that in order to meet this qualification it is only necessary that the interval between the 1st and 2nd strike prices be equal to the interval between the 3rd and 4th strike prices. In other words, the strike price intervals for the constituent spreads comprising the complex option spread must be equal, but the interval between the short options does not have to be equal. Examples of these acceptable structures are provided below in Table 1.
This interpretation is in keeping with our intention to require minimum margin that properly reflects the risk relating to these strategies, and is also in accordance with previous interpretations made by U.S. regulators, such as the CBOE, as indicated in Regulatory Circular RG07-43.
Table 1: Examples of acceptable structures for the long condor and short iron condor spreads.
Strategy |
Acceptable structure |
Acceptable structure |
Long condor spread |
Long Call (Put) Feb 50 Short Call (Put) Feb 55 Short Call (Put) Feb 60 Long Call (Put) Feb 65 |
Long Call (Put) Feb 50 Short Call (Put) Feb 55 Short Call (Put) Feb 65 Long Call (Put) Feb 70 |
Short iron condor spread |
Long Put Feb 50 Short Put Feb 55 Short Call Feb 60 Long Call Feb 65 |
Long Put Feb 50 Short Put Feb 55 Short Call Feb 65 Long Call Feb 70 |
IIROC Rules this Guidance Note relates to:
subsection 5738(1), and
subsection 5740(1).
This Guidance Note replaces MR0530 - Acceptable Structures for Long Condor Spread and Short Iron Condor Spread.
This Guidance Note was published under Notice 21-0190 - IIROC Rules, Form 1 and Guidance.