Can someone please offer me a real world example of an options contract?

[sopodo]

Hey Guys,

I have read loads of information on options but I don't still understand how they work exactly. I am not talking about standard options on stocks. But futures on option contracts.

How do place one within your trading platform?

Please any help much appreicated

Many thanks in advance

 

[Martinghoul]

You need to understand what options, in general, are first.

 

[Mr. Charts]

You need to get yourself a good book and/or do some research on the appropriate exchanges.
You can't really expect anyone to answer such open ended questions.
It's like saying, "hey, so can someone tell me how to do family law".

 

[Hoggums]

I've never heard of a future on an option contract. I've heard of options on futures contracts.

 

[MrGecko]

A future on an option has a payout that is just like the underlying option but discounted, doesn't it? It's like an option that you get delivery of at some point in the future...

 

[Martinghoul]

Yeah, but because the option already implies a (possible) cashflow at some point in the future, there's little point of having futures on options? Things of this sort do exist in theory (they call 'em fwd vol; a specific example is a fwd option agreement, aka FOA), but only in OTC space and there's not a lot of them trading. I guess what I am trying to say is that there are fwds on vol, which are sorta fwds on options, but there are no futures on options, that's for sure.

 

[rosehound]

Let's face facts - options on stocks/futures/bonds etc are the least of your worries - work out the basics, then get onto the variations, which frankly do not make any difference other than to the pricing (which is obviously an important difference - guess what I mean is if you had no idea what the FTSE was I'd recommend you found out about shares, stock markets, economies before asking the difference between a FTSE cfd/future/spreadbet - irrelevant within the frame of reference)

 

[Chartsy]

options are a contract that gives the owner the right (not the obligation) to go long/short the underlying at a particular price-the strike/exercise price.
seriously just read investopedia or something

 

[A Dashing Blade]

options are a contract that gives the owner the right (not the obligation) to go long/short the underlying at a particular price-the strike/exercise price.
. . .

You forgot the "by a certain date" bit

 

[sopodo]

You need to understand what options, in general, are first.

Many thanks to everyone posting in this thread

I know what are options are...I don't really understand the answers I am getting in this thread. When I look on broker sites, they say we offer stocks, options, futures and futures on options. I believe and correct me if I am wrong. But you guys are saying that their is normal options as in option contracts on stocks. Then their is the ability to also take out option contracts but in the futures markets and those are which are known as futures on options or options on futures, am I right???

Any help much appreciated

Many thanks in advance

 

[Martinghoul]

There are: stocks, options on stocks, futures and options on futures (aka futures options). There are no "futures on options", as those would have little practical value. Options on futures and options on stocks are special cases of options. Options, fundamentally, work the same way, regardless of what the underlying is. Specifically, any option is characterized by its expiry date, strike and underlying.

Does this make sense?

 

[sopodo]

There are: stocks, options on stocks, futures and options on futures (aka futures options). There are no "futures on options", as those would have little practical value. Options on futures and options on stocks are special cases of options. Options, fundamentally, work the same way, regardless of what the underlying is. Specifically, any option is characterized by its expiry date, strike and underlying.

Does this make sense?

Many thanks for the reply,

I get it now, this makes total sense. Of course there cannot be futures on options. I can't believe I wrote that.

Okay, so my next question is, can trade options on futures on the emini s&p 500 futures and day trade or even scalp them? As you are going to close positions within the same day and not hold any positions overnight will you have to meet the strike price? If so would it be best to trade this way in the month of expiry, but of course you get time decay as you get closer to expiry and so the option wouldn't be worth as much, but scalping for tiny profits shouldn't make much difference.

What I like about options on futures is you still get big leverage, but you can't lose more than the option premium. Whereas in just futures you can wipe your account out and more.

Any help much appreciated

Many thanks in advance

 

[AlanInFinchley]

What I like about options on futures is you still get big leverage, but you can't lose more than the option premium.

Unless your options end up just in the money and are then auto-exercised by your broker.

See the thread entitled "Sleepless Weekend", and then imagine that it had been Goldman Sachs at $150 a share rather than Citigroup at $4 a share