For this segment of Closing the Gap: Futures Edition, Pete comes on with Tom and Tony to discuss equity index options on futures and theircycle. 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 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.