(In)Feasibility of Early Assignment on Futures Options

Discussion in 'Options' started by OddTrader, Sep 3, 2010.

  1. Please excuse my silly questions below:


    For the EUR/USD options on futures, there are Oct2010, Nov2010 and Dec2010 contracts.

    However for the EUR/USD futures, only Sep2010 and Dec2010 contracts are available.

    Supposing as a seller I now have a short Oct2010 Call options position DITM, is it possible I can get an early assignment for this options contract, as the owner of this Call options really want to excercise it?

    If yes, since he cannot get any Oct2010 futures which is not available, then what futures contract (Is it Dec2010?) the owner should get instead, and why?

    Furthermore, how could it be possible that we can trade an Oct2010 options contract which is based on a non-existent Oct2010 futures contract?
  2. This works the same way as options on Eurodollar futures, i.e. serial monthly expiries on quarterly contracts. So for the Oct10 and Nov10 expiries the underlying is the Dec10 futures contract.

    As to the feasibility of early exercise, that's a (somewhat) more complicated question.
  3. Thanks for your helpful feedback.

    Do you think I (hypothetically) would get short the same Dec10 futures (at the strike price then marked to market) in case for early assignment?
  4. There's no question that, whatever happens to your short calls, be it early/normal exercise or worthless expiry, you will either go short Dec10 futures or nothing.
  5. Thanks! Much appreciated.