Closing the Gap - Futures Edition

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Equity Futures Options Settlement

Closing the Gap - Futures Edition

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

For this segment of Closing the Gap: Futures Edition, Pete comes on with Tom and Tony to discuss equity index options on futures and their expiration cycle. They cover specifications, including expiration dates, size, and dollars per point.

Options on futures and options on equities have several important differences, including:

  • Expiration specifications
  • Quotation and size
  • Margin requirements and leverage capability

We see that depending on the expiration cycle, some futures options expire to cash, while others expire to the futures contract. For commodity futures, options will always expire before the future settles.

Pete points out the process and settlement of the /ES weekly, End-of-month(EOM), Quarterly, and Serial Options. Options settlement for futures contracts can be confusing, so it is important to be aware of settlement procedures.

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