An option is a contract through which one party grants to another the right, but not the obligation, to buy or sell an asset at a specified price, called the strike, by a defined date in the future, called the expiration. Traders choose between call options and put options, which allow them to buy or sell the underlying asset, while the seller must fulfill the obligation, if exercised.
A contract that gives its purchaser the ability to buy the underlying asset at the strike price prior to expiration; call option buyers profit from price increases.
A contract that gives its purchaser the ability to sell the underlying asset at the strike price prior to expiration; put option buyers profit from price declines.
The price at which the underlying asset may be purchased or sold for any option.
The date, or expiration, is a predetermined date and time when the option settles to the underlying asset or cash. Small Exchange® options settle to the underlying futures contract, which is then cash-settled .
The amount of the underlying market the option contract controls; most equity options are on 100 shares while options on futures tend to hold 1 futures contract.
Options allow their buyers and sellers to profit from movement in the underlying asset. As opposed to the simple buy or sell order in a given market, call options can profit from upside movement in the underlying relative to the strike price, while put options can profit from downside movement in the same manner.
This option type allows holders to exercise their rights at any time prior to the expiration date. Small Exchange options are American style and can be exercised by giving notices of the exercise to the Options Clearing Corporation during Exchange market hours, prior to the day of the options expiration. Option exercise will result in a position in the underlying futures contract.
An option that has a strike price that is lower (in the case of a call option) or higher (in the case of a put option) than the price of the underlying futures contract for that option. Small Exchange option contracts that are +1 in-the-money will be automatically exercised at expiration.
An option that has a strike price that is higher (in the case of a call option) or lower (in the case of a put option) than the price of the underlying futures contract for that option.
A call or put option which has a strike price that is the same as the price of the underlying futures contract.
Options can be traded on many stocks, futures, and indexes, allowing you to trade the underlying market in a different way.
Options on futures operate very similarly to stock options, but the two types differ in the underlying asset they represent. Options on futures offer the same unique opportunities but on a futures contract as opposed to shares of stock. They are particularly intriguing given that the futures that they follow can track hard-to-reach assets like commodities and cryptocurrencies. With options on futures, you can access countless call and put strikes on everything from crude oil to Bitcoin with ease and low costs.