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Closing the Gap - Futures EditionOptions on Futures | Jan 29, 2016
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    Closing the Gap - Futures EditionOptions on FuturesJan 29, 2016

    Options on futures can be confusing, so Beef joins Tom and Tony to help explain options on futures.

    Generally speaking, equity, ETF and index options carry a multiplier of 100. This is because each equity option controls 100 shares of stock. Options on futures each control one futures contract, but some of the options are quoted differently, and have varying minimum tick sizes.

    A good way to think about the premium we collect from shorting futures options is as a point value of the underlying. Beef presents a series of examples of options on different futures, concentrating on S&P 500 futures (/ES), Crude Oil Futures (/CL), Euro Futures (/6E) and the 30-year U.S. Treasury Bonds (/ZB). Bonds (/ZB) are perhaps the most complicated because the futures trade in points that are equal to 32 ticks, while the options on /ZB trade in points that are equal to 64 ticks.

    Beef presented a table listing the daily ranges for several common futures products. The daily ranges were calculated using one standard deviation of the daily moves. The table listed the dollar amount of each scalping range in points, and the scalping range in ticks. See our segment from our scalping series from for a more detailed explanation of the scalping range.

    Watch this segment of “Closing the Gap-Futures Edition” with Tom Sosnoff, Tony Battista and Mike Hart (Beef) from our research team to learn all about options on futures.

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