Options on Futures

Hey,

Just a quick question.

1 stock option = 100 shares of the particular stock.

so what does 1 futures option = ??

Thank you.

 

Huh? Is this a serious question?

 

Umm... yes

 

1 futures option is an option on 1 futures contract.

 

So margin wise, futures options has not advantage over underlying futures contract. Other benefits of using options still apply.

Regards

 

You could say that. Except when you are short a naked option. When you are naked stock option, your margin will be 50% of the strike value (i.e. Selling 1 $5 call will give you a margin of $250 [100 x $5 * 50%). This is Reg T margin.

With options on futures contract, they use SPAM margin or Portfolio Margin. The margin is determined based on how far or close the strike is to the underlying, so your margin will change everyday, your stock option won't.

I hope that made sense. If this is misinformation, please correct me.

Thanks.

-Daytrader85

 

Here's a short primer on trading futures options:

Link

The combine the complexity of options with the leverage of futures, so they are not something I would venture into trading with extensive knowledge, experience and capital.

Good trading

 

Here is another link to a more comprehensive site:

Link

Good trading

 

Haha oops. I meant to say SPAN margin.