A Financial Advisor’s Primer on FLEX® Options

Historically, alternative investments have proven their value in portfolios, adding diversified return streams, enhancing income, and hedging risk. The widespread rollout of listed options strategies means that a variety of option types are now available to investors.

FLEX options are exactly what their name implies: flexible exchange options. Cboe Global Markets launched these options in 1993, and they now trade on many exchanges. FLEX options stand out by providing several benefits over standardized listed options.

Highly Customizable FLEX Options 

FLEX options allow for a high degree of contract customization and can be modified based on the investor’s specific needs, including the exercise price, style (American or European) and expiration date up to 15 years.

Investors can stipulate whether they want the ability to exercise the option before or at expiration. They also define how to measure premiums either in dollar amounts or a percentage of the stock.

Equity FLEX options measure premiums in either dollar amounts or stock percentages. Meanwhile, index FLEX options measure premiums as a dollar amount per contract, a percent of the underlying index’s level, or as determined by agreed-upon factors in related markets.

FLEX Options Offer Less Counterparty Risk and More Transparency

In addition to the high degree of contract customization, FLEX options offer almost no counterparty risk. This differs from over-the-counter (OTC) options, which are susceptible to default risks by the counterparty. Like standardized listed options, the Options Clearing Corporation (OCC) clears FLEX options trades.

FLEX options are available as index options or equity options and include puts or calls. While certain position sizes require reporting, no position limits exist. Index FLEX options only settle in cash, while equity FLEX options settle in shares if the put or call is exercised.

These options are highly appealing because of the transparency they provide. They also allow for cross-margining, thereby enhancing an individual’s risk management capabilities.

[caption id="attachment_563639" align="aligncenter" width="625"] Source: Cboe Global Markets[/caption]

CANQ Seeks to Optimize FLEX Options for Investors

The Calamos Alternative Nasdaq & Bond ETF (CANQ) utilizes FLEX options in its strategy. The fund launched in February 2024 and seeks uncapped upside within the Nasdaq-100® via FLEX options. Full upside participation makes CANQ different from Buffer strategies. Many income-generating buffer strategies cap their underlying equity upside potential due to their options overlays.

CANQ also seeks to provide monthly income above the risk-free rate for investors with its actively managed fixed-income portfolio, which complements the equity exposure by seeking to mitigate risk.

CANQ makes a strong complement to existing Nasdaq-100 allocations as well as within an income sleeve. The fund carries an expense ratio of 0.90%.

For more news, information, and analysis, visit the Alternatives Channel.


Before investing, carefully consider the fund's investment objectives, risks, charges and expenses. Please see the prospectus and summary prospectus containing this and other information which can be obtained by calling 1-866-363-9219. Read it carefully before investing.

An investment in the Fund(s) is subject to risks, and you could lose money on your investment in the Fund(s). There can be no assurance that the Fund(s) will achieve its investment objective. Your investment in the Fund(s) is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. The risks associated with an investment in the Fund(s) can increase during times of significant market volatility. The Fund(s) also has specific principal risks, which are described below. More detailed information regarding these risks can be found in the Fund's prospectus.

Risks of investing in the Calamos Alternative Nasdaq & Bond ETF include risks associated with:

Authorized Participant Concentration Risk — Only an Authorized Participant may engage in creation or redemption transactions directly with the Fund, and none of those Authorized Participants is obligated to engage in creation and/or redemption transactions.

Debt Securities Risk — Debt securities are subject to various risks, including interest rate risk, credit risk and default risk; Equity Securities Risk — The securities markets are volatile, and the market prices of the Fund’s securities may decline generally.

FLEX Options Risk — The Fund may invest in FLEX Options issued and guaranteed for settlement by The Options Clearing Corporation ("OCC"). FLEX Options are customized option contracts that trade on an exchange but provide investors with the ability to customize key contract terms like strike price, style and expiration date while achieving price discovery in competitive, transparent auctions markets and avoiding the counterparty exposure of over-the-counter options positions.

High Yield Risk — High yield securities and unrated securities of similar credit quality (commonly known as “junk bonds”) are subject to greater levels of credit and liquidity risks.

LEAPS Options Risk — The Fund’s investments in options contracts may include long-term equity anticipation securities known as LEAPS Options. LEAPS Options are long-term exchange-traded call options that allow holders the opportunity to participate in the underlying securities’ appreciation in excess of a specified strike price without receiving payments equivalent to any cash dividends declared on the underlying securities.

Liquidity Risk - FLEX Options — In the event that trading in the underlying FLEX Options is limited or absent, the value of the Fund's FLEX Options may decrease.

Liquidity Risk - LEAPS Options — In the event that trading in the underlying LEAPS Options is limited or absent, the value of the Fund's LEAPS Options may decrease.

Market Maker Risk — If the Fund has lower average daily trading volumes, it may rely on a small number of third-party market makers to provide a market for the purchase and sale of Fund Shares.

Market Risk—The risk that the securities markets will increase or decrease in value is considered market risk and applies to any security.

New Fund Risk — The Fund is a recently organized investment company with a limited operating history.

Non-Diversification Risk — The Fund is classified as “non-diversified” under the 1940 Act.

Options Risk—The Fund’s ability to close out its position as a purchaser or seller of an over-the-counter or exchange-listed put or call option is dependent, in part, upon the liquidity of the option market.

Other Investment Companies (including ETFs) Risk — The Fund may invest in the securities of other investment companies to the extent that such investments are consistent with the Fund’s investment objective and the policies are permissible under the 1940 Act.

Nasdaq® and Nasdaq-100, are registered trademarks of Nasdaq, Inc. (which with its affiliates is referred to as the “Corporations”) and are licensed for use by Calamos Advisors LLC.  The Fund has not been passed on by the Corporations as to their legality or suitability.  The Fund is not issued, endorsed, sold, or promoted by the Corporations.  The Corporations make no warranties and bear no liability with respect to the Fund(s).

Calamos Financial Services LLC, Distributor


Calamos Financial Services LLC
2020 Calamos Court | Naperville, IL 60563
866.363.9219 | www.calamos.com | caminfo@calamos.com
2024 Calamos Investments LLC. All Rights Reserved.
Calamos and Calamos Investments are registered trademarks of Calamos LLC.

Read more on ETFTrends.com.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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