According to the relationship between the strike price and the futures settlement price, options can be divided into real options, equal options and imaginary options. A liquidation option is an option contract whose execution price is equal to (or closest to) the settlement price of the underlying futures contract. When the settlement price of a futures contract is in the middle of the two strike prices, the higher price is generally taken as the strike price of an equal option. Real option refers to the option contract where the exercise price of call option (put option) is lower (higher) than that of put option; Virtual option refers to an option contract in which the exercise price of call option (put option) is higher (lower) than that of put option.
Generally speaking, the option contract only specifies the exercise price range, but does not specify the specific exercise price. Therefore, determining the spread has become an important part of the option contract and an important feature different from the futures contract. For the determination of price distance, different transactions have different basis and different ways.
Determine the price range according to the price level.
Low price range, small price range; The price range is high and the price gap is large. For example, ICE specifies the strike price range of raw sugar futures options: when the strike price is 0.005-0. 1000 USD/lb, the price range is 1/4 cents; When the purchase price is 0. 1000-0.2500 USD/lb, the price difference is 1/2 cents; When the execution price is 0.25 USD/lb, the price difference is 1 cent. Chicago Board of Trade stipulates the strike price range of soybean meal futures options: the strike price is below $200/short ton, and the strike price range is $5/short ton; The transaction price is above USD 200/short ton, and the final price range is USD 65,438+USD 00/short ton. In addition, both copper and aluminum futures options on the London Metal Exchange adopt this method.
The normal contract month and series contract month of options stipulate different exercise price ranges.
The monthly price gap between normal contracts is large, while the monthly price gap between series contracts is small. For example, according to the wheat futures option of the Chicago Board of Trade, the monthly final price range of normal contracts is 10 cents/bushel, and the monthly final price range of series contracts is 5 cents/bushel. In addition, corn and soybean futures options on the Chicago Board of Trade and Euribor futures options on the London International Financial Exchange also use this method to determine the final price gap.
Determine the exercise price distance according to the distance of the option.
Generally speaking, the active contract month is near the flat option, and the range of the finalized price is small. The contract transactions far away from flat options are not active, and the distance between transaction prices is large. For example, the New York Mercantile Exchange's light sweet crude oil futures options.
Determine the final price range according to the contract expiration distance.
Generally speaking, the short-term contract price gap is small and the long-term contract price gap is large. For example, live cattle and lean pigs on the Chicago Mercantile Exchange.
Same execution price distance
There are also futures options that do not distinguish between high and low knock pricing areas and execute the same knock pricing range. For example, the transaction pricing range of cotton futures on the Intercontinental Exchange (ICE) stipulates that the transaction pricing range of cotton futures option No.2 is 1 cent/pound. In addition, CBOT's soybean oil futures options, ICE's rapeseed futures options, the New York Mercantile Exchange's gold futures options, Eurobond futures options of European exchanges, and Eurodollar futures options of Chicago Mercantile Exchange, etc. , all execute the same final price range.
The execution spread of futures options contracts of major commodities in the world.
The strike price gap of major global financial futures options contracts.