Plenty of people trade them. The advantage is the ability to construct a defined risk profile. Say you feel crude oil is too high but don't want to short the futures because of war worries. You could buy puts on the futures or sell a call spread,etc. Make sure you understand the pricing and expiration cycles before you get involved though, as they are not intuitive.
I am familiar with stock options but not future options. Where is a good source for information about the main differences between them?
You can find options on S&P100 (OEX) and S&P500 (SPX). They are quite liquid, especially OEX options. See www.cboe.com for good information !
Settlement is different, for instance. Index options usually are cash settled. Options on futures usually are settled as the corresponding futures contract (i.e. one day after expiration you might find a futures contract in your account). And yes - they may trade on different exchanges (just to confuse newbies ) ... Example: Options on Index S&P500 --- > www.cboe.com/micro/spx/index.asp Options on Future S&P500 ---> www.cme.com/products/index/products_index_sp500.cfm
1. Are options on futures more leveraged than OEX options? 2. What is the multiplier for ES options? If the quote says 8.5 is it: 8.5 * $50?? thanks
The OEX was cut in half several years ago ( not the multiplier, the price of the actual index!!), so it's $ value is close to ES. OEX is 100 times the index, ES 50 times index, with the OEX trading at about half of ES's value. OEX is much more liquid. In your ES example, yeah the bid of 8.5 would probably have an offer in that strike of 12.00!!