Options on fixed income exchange traded funds have launched on the  Eurex Exchange, to meet the demands of end investors. For firms who have  used these instruments under the 40 Act  regime in the US, these  provide a UCITS equivalent in Europe and they may lead to take up at  first.

In some cases these options might be an alternative to using credit  default swap index options for hedging or volatility strategies, in  others a way to reduce pressure on capital reserves under Solvency II  regulations by buying out-of-the-money puts, or for pension funds  selling out of the money calls to generate yield enhancement.

Lee Bartholomew, global head of derivatives product R&D for fixed  income and currencies at Eurex, and Ashley Curtis, head of FI  distribution for iShares EMEA at BlackRock outline the opportunities  these new instruments are creating for investors