can u exercise an option on a future

Discussion in 'Options' started by qwert, Dec 1, 2010.

  1. qwert


    can u exercise an option on a future and receive a future contract. with wheat options, i think the dec future expires before the jan future option. so r futures contracts created when the jan futures options r exercised? just like to know because there isnt any volume on futures options deep in the money.

    what if i bought a google option and didnt have enough money to purchase a 100 shares to exercise the option?
  2. Futures options can be cash settled or underlying settled. Depends on the contract. For wheat, see cme's website. Look under exercise
  3. 1) Yes
    2) Yes. The option contract is replaced by a futures contract.
    3) Your brokerage firm will offset the option unless you deposit sufficient money in your account to puchase the shares at the strike price, plus commissions and other fees. :cool:
  4. You can short the stock, if it's shortable, and then exercise your call option.
  5. If you don't have enough margin to buy 100 stocks, it's unlikely you have margin for shorting 100
  6. MTE


    As others have already pointed out, yes, you can exercise an option into a futures contract. Options are always exercised into the next available futures contract, so for example, if there is a Dec futures contract and a Mar contract then Dec options would be exercised into Dec futures, while Jan, Feb and Mar options would be exercised into Mar futures contract.

    If you exercise an option and you don't have enough money to meet the margin requirement for the position then you would be issued a margin call and you would have to either put in more money or close out the position. However, be careful, some brokers issue a margin call and then give you a day or two to comply, while others may start automatically liquidating your positions the instant you get a margin call without giving you a chance to respond.
  7. qwert


    thanks for the replies. any plain worded books on futures trading worth reading taking about basics of futures trading