Most futures options, such as index options, are settled in cash. They are also usually European options, which means that these options cannot be exercised in advance.
Focus: Futures options operate in a similar way to other securities (such as stocks), but they are often settled in cash and European style, that is to say, they are not exercised in advance. Futures options can be considered as a kind of. Second-order derivatives, traders need to pay attention to details. The key details of futures options are the contract specifications of option contracts and basic futures contracts.
Options in futures contracts are very similar to stock options, because they give the buyer the right to buy or sell the underlying assets, but have no obligation, and at the same time create a potential obligation for the seller of options, that is, if the buyer wants to obtain the underlying assets by exercising options, he must buy or sell the underlying assets. This means that the options of futures contracts or futures options are derivative securities. However, the pricing and contract specifications of these options do not necessarily increase the leverage ratio.
Therefore, the option of the S&P 500 index futures contract can be regarded as the second-order derivative of the S&P 500 index, because the futures itself is the derivative of the index. Therefore, because both options and futures contracts have expiration dates and their respective supply and demand conditions, more variables need to be considered. Time decay (also known as theta) has the same effect on option futures as other securities options, so traders must consider this dynamic.
For futures call options, the option holder will enter the long position of the contract and buy the underlying assets at the exercise price of the option. For put options, the option holder will enter the short position of the contract and sell the underlying assets at the exercise price of the option.