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Key Takeaways
- An RFQ asks liquidity providers to price a specific option or package at a set size.
- A FLEX RFQ for custom contract terms, a complex order auction for listed packages and a solicitation mechanism for an order paired with a solicited counterparty each follow their own exchange procedure.
- Resting complex orders and auction responses both provide package liquidity.
- Compare the executable net price with the displayed complex market and the derived single-leg market.
- In the example, a $1.95 credit improves a 500-spread sale by $12,500 versus the $1.70 displayed bid.
What is a request for quote (RFQ)?
A request for quote (RFQ) is an invitation for liquidity providers to price a specific option or multi-leg package at a set size. For a package, the request defines the contracts, buy and sell sides, ratios and quantity, and the competing responses give the trader executable prices to compare with the displayed market.
Complex orders also trade against resting package orders. Cboe’s Complex Order Book supports resting complex liquidity, while its Complex Order Auction collects competing responses for eligible orders. Compare that package market with the derived market calculated from individual option quotes.
FLEX options support customized contract terms and a request-and-response workflow. FLEX RFQs, complex auctions and solicitation mechanisms each follow their own procedure, so ask your broker which ones it routes to for the product you trade.
Formula
Net debit per strategy unit = Σ(buy-leg premium × ratio) − Σ(sell-leg premium × ratio); cash amount = absolute net price × strategy units × contract multiplier- Use the order’s buy and sell sides and include every leg ratio.
- A positive net price is a debit paid; a negative net price is a credit received.
- For the standard equity-option package in the example, the multiplier is 100.
RFQ price improvement example
A trader submits 500 standard iron-condor strategy units with a minimum $1.70 net credit. The derived market from the option quotes is $1.70 bid and $2.30 ask. The eligible order enters a complex auction for competing package responses.
- Displayed synthetic market: $1.70 bid by $2.30 ask, a $0.60 wide net spread
- Best response received during the auction: $1.95 bid for all 500 spreads
- Credit received: $1.95 × 500 × 100 = $97,500
- Credit at the displayed bid: $1.70 × 500 × 100 = $85,000
- Price improvement versus the displayed bid: $12,500
The package fills at a $1.95 net credit, with all four legs in the ratios on the ticket. The $97,500 gross credit exceeds execution at the $1.70 displayed bid by $12,500.
All four legs execute in the ratios on the ticket. Individual leg prices combine to the net package price. Include commissions and fees when measuring the final cash result.
How to prepare an RFQ order
Price the strategy, select the quantity and set the maximum debit or minimum credit. Include each leg ratio when calculating the package price. Compare the displayed complex market, the derived single-leg market and the proposed limit.
Under Cboe’s published complex-order process, eligible marketable and near-marketable customer orders initiate a 100-millisecond auction. The best responses fill first, and any quantity left over trades or rests under the exchange’s allocation rules.
How RFQ executions appear in options flow
Package executions report the component option series. Group related prints using timestamps, contract ratios and trade conditions, then calculate the full debit or credit.
Use options flow to inspect the related contracts. Rebuild the complete structure in the options profit calculator to compare its entry cash, expiration payoff and price scenarios.
Limitations of RFQs
- Plan for silence. Responders choose whether to quote, as the third one in the chart stands aside, so an auction ends with no fill when nobody meets your net limit.
- Measure improvement against the right benchmark. The $12,500 in the example is measured against the $1.70 displayed bid, so state the reference before you compare fills.
- Confirm the route before you size. FLEX RFQs, complex auctions and solicitation mechanisms each follow their own procedure, and the broker, product and venue decide which you can use.
- Send the request when you are ready to trade at your limit. It reveals the package and its size to the participants who receive it.
- Count fees and regroup the legs. The $97,500 gross credit is before commissions and fees, and options flow reports the package as four component prints, so match them by timestamp and ratio to read the trade.
Bottom line
An RFQ makes liquidity providers compete for a large or multi-leg order, as when 500 iron condors go to auction against a $1.70 bid and a $2.30 ask. Define every leg, ratio, and size, set the net limit before responses arrive, and grade the fill against the derived market after fees.
Clear answers
Frequently Asked Questions
Sources and Further Reading
- Cboe: Enhanced FLEX Functionality on Cboe Platforms and Data
- Cboe: Reduction of the Open Outcry FLEX RFQ Response Period
- Cboe: U.S. Options Complex Orders
- Cboe: U.S. Options Crossing Orders
- Cboe: FLEX Options
How entries are sourced, calculated and updated: editorial methodology.