question on FOP (futures options)

Discussion in 'Options' started by polee2000, Sep 27, 2005.

  1. is it cash settled assuming the option I hold is ITM.
  2. Options on futures settle in the underlying future contract and on expiration day where the future contract also expires the same day as that option (i.e., Dec option and Dec E-mini), then the settlement is based on the underlying of the future.

  3. i have couple ER2 FOPs that are going to expire in OCT deep in the money and covered by the underlying long future position. when should I expect the long position to disappear from my account so I can hedge accordingly. (like I would have the position till EOD friday ? or thursday is the last day ? or it would disappear from my account anytime during friday)
    I know I have couple options
    1. roll my option over via calendar spread, but I doubt that will happen since ER2 FOP is not liquid at all espcially for ITM 5%
    2. buy and sell offseting contracts of future and FOP to offset the assignment (best option I think).
    3. buy the option and sell the new ones (I dont want my faced to get ripped off again by the MMs)

    I am not doing options on RUT nor IWM for the margin reason
  4. ktm


    You "have" them? Have what? Sold calls?

    You say they are "covered by the underlying long future" which implies a short call. If this is the case at a 1:1 ratio, both will disappear over the expiration weekend.

  5. thanks, yeah its a covered position.
  6. ktm


    Both your Dec ER2 futures contracts and the Oct Calls will trade until 4:15 Friday the 21st, then both will disappear that weekend.
  7. if it is itm and i was long on the options, and if i want to exersise it now as oppose to re selling them, i can do that any time it is itm right ?

    i am confused.

    isn't futures traded in american style option when one can exercise it if it is itm >?
  8. I noticed that the ES options spreads have dramatically decreased past 2 weeks. Last time I looked at it was 6 months ago. Now idue to Span margins it seems as good to trade vs. SPY options which are a nickel wide. HEre is how I came to the conclusion.

    SPy $125*100 shares=$12500
    ES = 1230*50 per pt.=$61500
    61500/12500=5 times.

    ATM spread of SPY =.05 = $5
    ES Oct 1130 C is 13/13.5 =2 ticks wide = $25

    $25/5=$5 Conclusion: spread costs is roughly the same.Commission cost fav to ES since you have to only put on a 1 lot spread vs. a 5 lot on the SPY to get the same volatility/delta exposure.

    Am I way off?? Thanks
  9. ktm


    Liquidity has picked up. It is common for lots of 100 and 200 or more to go off throughout the day and you now also see more than 1000 on each side at times. Dime ticks would be the next logical step.
  10. If my analysis is pretty close, why would then, anyone trade spy options or even spx options for that matter. Advantages of e mini over equities have been discussed at length here , I would guess the same argument goes for spy options vs. emini options.ease of hesging, SPan,etc.
    #10     Sep 30, 2005