Options On Futures
Options on futures contracts added a new dimension to trade futures. As futures, options provide price protection against adverse price movements. Modern options traded on the stock market began in April 1973, when the Chicago Mercantile exchange has created Chicago an options exchange (CBOE) with the sole purpose to trade options on a limited number of shares in listing new York stock exchange
Reasons for the use of Options On Futures
Options differ significantly from futures. If you use Options On Futures wisely, they can be of great value, especially for the preservation of the value of the portfolio with a fixed income.
(NYSE). Options on futures contracts were introduced on the CBOT in October 1982, when the stock exchange started trading options on futures U.S. Treasury obligations (Options on U.S. Treasury Bond futures).
In the financial markets of many consider options as "insurance" against adverse price movements, it ensures the necessary flexibility in order to benefit from the possible favorable price movements.
The reasons for the use of options on futures are reflected in the structure of the option contract.
Firstly, the option being bought, gives the buyer the right, but not the obligation, to buy or sell a specific quantity of a commodity at a certain price within a certain period of time. Compare: a futures contract requires that the buyer or the seller has fulfilled the obligations in accordance with the contract, if the open position is not repaid before maturity.
Secondly, the use of their right to exercise an option or not - entirely is the decision of the buyer of the option.
Third, the option buyer can lose no more than the initial amount of money invested in the purchase of (premium). This does not occur, but, for the buyer of the futures contract.
