DEFINITION of 'Serial Option'

A short-term option on a futures contract in which the underlying expires in a forward month. In a serial option, the option expires before the underlying comes to maturity. Exercising the option places the holder in a position of the nearby month futures contract. Usually, the underlying futures will expire in the following month.

BREAKING DOWN 'Serial Option'

Serial options are created for months without an expiring futures contract. For example, if there is no gold futures contract in March, a trader might be able to purchase a March serial option. Assuming there is an April futures contract, exercising the March option will put the trader in a long position for the April contract.

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