What are “FLEX options”?

FLEX options (short for Flexible Exchange Options) are a special type of options contract, created by the Cboe BZX Exchange, that allow large investors, like ETF managers, to customize key features such as: 

• The strike price (the price at which the option can be exercised),
• The expiration date,
• And the style of exercise (when and how the option can be used). 

FLEX options are: 

• Traded on exchanges, not over-the-counter, so they benefit from clearinghouse protections (reducing counterparty risk), 

• Designed for institutional use, meaning they may not be accessible to retail investors directly, 
• Used in products like buffered ETFs to create precise payoff structures that wouldn’t be possible using only standard listed options. 

For example, ARK’s Defined Innovation Exposure Term (DIET) ETFs use FLEX options to: 

• Build a buffer by buying a long put 

• Set a hurdle and generate funding by selling a call (the ETF receives the premium from the buyer of the call) 

• Add upside participation with a long out-of-the-money call 

The premiums collected from selling call options are used to help finance the purchase of protective puts and other option positions. These customizations allow the ETFs to offer clear, pre-defined outcomes for the 12-month investment period.