DEFINITION of 'Options On Futures'
An option on a futures contract gives the holder the right to enter into a specified futures contract. If the option is exercised, the initial holder of the option would enter into the long side of the contract and would buy the underlying asset at the futures price. A short option on a futures contract lets an investor enter into a futures contract as the short who would be required to sell the underlying asset on the future date at the specified price.
INVESTOPEDIA EXPLAINS 'Options On Futures'
Essentially, the futures specified in the option contract allows someone to enter into the specified futures contract when the option expires.
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Managed Futures
An alternative investment strategy in which professional portfolio ... 
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The ratio comparing the change in the price of the underlying ... 
Gamma
The rate of change for delta with respect to the underlying asset's ... 
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A measure of the rate of decline in the value of an option due ... 
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RELATED FAQS

Why would a company issue a rights offering?
Companies most commonly issue a rights offering to raise additional capital. A company may need extra capital to meet its ... Read Full Answer >> 
What is the difference between share purchase rights and options?
There is a big difference between share purchase rights and options. With share purchase rights, the holder may or may not ... Read Full Answer >> 
How do I calculate a forward rate in Excel?
You need to have the zerocoupon yield curve information to calculate forward rates, even in Microsoft Excel. Once the spot ... Read Full Answer >> 
What is the difference between an optionadjusted spread and a Zspread in reference ...
Unlike the Zspread calculation, the optionadjusted spread takes into account how the embedded option in a bond can change ... Read Full Answer >> 
In what ways can a sinking fund affect bond returns?
The effective yield of a bond sinking fund to an investor should not be considered similar to a bond nonsinking fund. Both ... Read Full Answer >> 
Can delta be used to calculate price volatility of an option?
The delta of an option is a component of the BlackScholes option pricing formula, which provides the implied volatility ... Read Full Answer >>
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