Editing Futures contract (section)

==Options on futures==
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In many cases, ''[[Option (finance)|options]]'' are traded on futures, sometimes called simply "futures options". A [[put option|put]] is the option to sell a futures contract, and a [[call option|call]] is the option to buy a futures contract. For both, the option [[strike price]] is the specified futures price at which the futures is traded if the option is exercised. Futures are often used since they are [[delta one]] instruments. Calls and options on futures may be priced similarly to those on traded assets by using an extension of the [[Black-Scholes formula]], namely the [[Black model]]. For options on futures, where the premium is not due until unwound, the positions are commonly referred to as a fution, as they act like options, however, they settle like futures.

Investors can either take on the role of option seller (or "writer") or the option buyer. Option sellers are generally seen as taking on more risk because they are contractually obligated to take the opposite futures position if the buyer of the option exercises their right to the futures position specified in the option. The price of an option is determined by supply and demand principles and consists of the option premium, or the price paid to the option seller for offering the option and taking on risk.<ref name="CME">{{cite web|author=CME Group|author-link=CME Group|url=http://www.cmegroup.com/resources-for/files/G66_Options_on_Fut2001.pdf|title=CME Options on Futures: The Basics|access-date=8 February 2011|archive-url=https://web.archive.org/web/20111027134734/http://www.cmegroup.com/resources-for/files/G66_Options_on_Fut2001.pdf|archive-date=October 27, 2011|url-status=dead}}</ref>

Where as futures often matures on a quarterly or monthly basis, their options expires more frequent (i.e. daily). Examples are options on futures with the underlying in gold (XAU), index (Nasdaq, S&P 500) or commodities (oil, [[VIX]]). The stock exchanges and their clearing houses provide overviews of these products (CME,<ref>{{cite web |date=2022-04-25 |title=CME Equity Index Options on Futures Bloomberg Cheat Sheet |url=https://www.cmegroup.com/education/brochures-and-handbooks/cme-equity-index-options-on-futures-bloomberg-cheat-sheet.html |access-date=2024-04-13 |website=CME Group}}</ref> COMEX, NYMEX).