Trading Options on Futures

Options on futures, or futures options, are one of the most versatile risk management products offered by CME, the world's leading and most diverse derivatives marketplace. The basic concepts, price behavior and terminology are much the same as listed equity options, as are a majority of the most frequently used strategies. There is one major contract difference: the underlying instrument. With futures options, a call buyer obtains the right to buy, or go long, its specific underlying futures contract, with a put buyer gaining the right to sell, or go short, the underlying future.

Options on futures offer market participants a unique set of risk management and investment opportunities and are available across all major asset classes such as interest rates, equity indexes, foreign exchange, energy, agricultural commodities and metals. A wide range of standardized contracts can be used to speculate on bullish or bearish outlooks on price trend or to hedge against adverse price moves in any underlying market, and in volatile or stable environments.

CME has, and will continue to introduce new option products targeted to serve ever changing investor needs or interests. Serial options, for months without an expiring futures contract, were created for some of the earliest options. E-mini futures and options, or contracts with reduced contract values, were introduced to make them more affordable to investors and traders. A family of short-term option contracts, among them Short-dated options, weekly options and daily options, offer more targeted trading opportunities around economic releases and other market events. The result is an increased flexibility for managing existing option positions, and for targeted investment opportunities with lower upfront costs.

Replacing a traditional open outcry trading environment is Globex, CME’s electronic trading platform. It has fast become the premier derivatives marketplace, providing global connectivity to a broad array of products across all asset classes. The combined benefits of virtually 24-hour global access, growing volume, tighter spreads and broad transparent markets help to promote increasingly deep and diverse liquidity, a benefit to all market participants.