their options? As an options seller, you want
to consider how much premium you’ll collect, so get to know the point values.
Say you want to trade options on the June
/ES. If the at-the-money (ATM) call options
are trading at $96.50, the multiplier is $50
per point. So, the dollar amount of premium
in this case would be $50 x 96.50 = $4,825.
For even more complexity, there are
Treasury bonds. Bond futures trade in
32nds (1/32), and bond options trade in
64ths (1/64). How does that impact their
pricing? Let’s take a look.
Say the March /ZB contracts are trading
at 152' 23 or 152 points and 23/32 of a point.
Now look at the option chain. Say the ATM
call options are priced at 2'45 or two points
and 45/64 of a point. Multiply 2 and 45/64
by the point value, or $1,000, and you get
$2,703 (45/64 = 0.703125 + 2 points = 2.703 x
1000 = $2,703).
In spite of contract specification differences, the mechanics of trading equity
options and futures options are roughly
the same. You still want to make profits and
reduce risks. But you may need to modify
When trading futures options, you’re
trading a derivative of a derivative, and that
means higher leverage, or more risk exposure. It’s a kind of double whammy. So as an
options seller, if you sell out-of-the-money
(O TM) calls, consider the
contract multipliers to determine your premiums.
Also consider how much or
little potential profit or risk
you take on when you trade
TAKING THE PLUNGE
Unlike equity options, futures options can
introduce a few mysterious twists and
turns. But don’t let the differences put you
off. With education and experience, you can
get more comfortable over time, and you
don’t need to know the specs of all futures
contracts—just the ones you want to trade.
To smooth the way, consider keeping a
cheat sheet with multipliers, tick values,
and point values handy. Above all, get inside
the markets you want to trade and before
you know it, all those odd prices will be as
familiar as a gallon of gas.
Jayanthi Gopalakrishnan is not a representative of TD Ameritrade, Inc. The material, views,
and opinions expressed in this article are soley those of the author and may not be reflective
of those held by TD Ameritrade, Inc.
Futures and futures option trading is speculative and is not suitable for all investors. Please
read the Risk Disclosure for Futures and Options prior to trading futures products. Futures
accounts are not protected by the Securities Investor Protection Corporation (SIPC). Futures
and futures options trading services provided by TD Ameritrade Futures & Forex LLC. Trading
privileges subject to review and approval. Not all clients will qualify.
For more information on the risks of trading and futures, please see page 37, #1 & 3.
FIGURE 2: Futures and their options expiring on the same day. In the case of indices, the
futures contracts and their corresponding options expire on the same day. Source: thinkorswim® from
TD Ameritrade. For illustrative purposes only.
FIGURE 3: Contract specs of some futures contracts. Notice how these futures all have
different one-point values? You’ve gotta know these specs if you wanna trade their options.
For illustrative purposes only.
FIGURE 1: Futures options expirations. December contracts could expire in November, and
the futures contracts and their corresponding options most likely won’t expire on the same day.
Source: thinkorswim® from TD Ameritrade. For illustrative purposes only.
37 days till
37 days till
$50 x index
100 troy ounces
$0.01 per barrel