ETF Futures And Options

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DEFINITION of 'ETF Futures And Options'

A variety of derivative products based on exchange-traded funds. ETF futures are contracts that represent an agreement to buy (or sell) the underlying ETF shares at an agreed-upon price on or before a specified date in the future. ETF options, on the other hand, are contracts that give the holder the right, but not the obligation, to buy (or sell) the underlying ETF shares at an agreed-upon price on or before a specified date in the future. These products are typically used when you adopt a bullish or bearish outlook on the economy or an industry as a whole, over individual stocks.

BREAKING DOWN 'ETF Futures And Options'

On March 1, 2011, the CME Group issued a report indicating a delisting of futures on ETFs, specifically, the Nasdaq-100 Tracking Stock, Standard & Poor's Depositary Receipts and iShares Russell 2000 will be delisted following their March 2011 expirations. On March 26, 2012, CBOE Crude Oil ETF Volatility Index security futures (OV) began trading and options on the OVX Index began trading the next month, on April 10, 2012.

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RELATED FAQS
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    Traders roll over futures contracts to switch from the front month contract that is close to expiration to another contract ... Read Full Answer >>
  2. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  3. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  4. How does a forward contract differ from a call option?

    Forward contracts and call options are different financial instruments that allow two parties to purchase or sell assets ... Read Full Answer >>
  5. What is the difference between passive and active asset management?

    Asset management utilizes two main investment strategies that can be used to generate returns: active asset management and ... Read Full Answer >>
  6. Why do companies enter into futures contracts?

    Different types of companies may enter into futures contracts for different purposes. The most common reason is to hedge ... Read Full Answer >>

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