difference between index options and future options

omcate · May 28, 2006

Quote from Aardvark:

This may be a dumb question since I'm not familiar with futures trading but can you then "short" futures or options on futures? would not that involve borrowing?

Futures, options, options on futures, etc, are agreements or contracts. Hence, shorting does not involve borrowing. However, you do need a counterparty, who agrees to deal with you, and assumes the corresponding risks.

Does an insurance company need to borrow an insurance policy from someone else, before selling you one?

Aardvark · May 28, 2006

Quote from omcate:

Futures, options, options on futures, etc, are agreements or contracts. Hence, shorting does not involve borrowing. However, you do need a counterparty, who agrees to deal with you, and assumes the corresponding risks.

Does an insurance company need to borrow an insurance policy from someone else, before selling you one?

omcate thank you for the reply but I'm not sure who/what you mean by a counterparty .... Ex. I want to do a put spread on an option on ES..am I not long/short?

cnms2 · May 28, 2006

When you get long, somebody else (one or more counterparties) must get short. It is a zero-sum game.

Quote from Aardvark:

omcate thank you for the reply but I'm not sure who/what you mean by a counterparty .... Ex. I want to do a put spread on an option on ES..am I not long/short?

Aardvark · May 28, 2006

the point I was trying to get to is that in a spread (defined risk) I am short which at IB you cannot be in an IRA...no? My understanding is that at IB you cannot sell premium (uncovered by stock) which would include selling futures? I'm afraid I don't know enough to even ask an intelligent question

cnms2 · May 28, 2006

But you're so cute ...

Quote from Aardvark:

the point I was trying to get to is that in a spread (defined risk) I am short which at IB you cannot be in an IRA...no? My understanding is that at IB you cannot sell premium (uncovered by stock) which would include selling futures? I'm afraid I don't know enough to even ask an intelligent question

Aardvark · May 28, 2006

smarty pants

...edit i have to admit I AM kinda cute!

ids · May 30, 2006

Aardvark,
You can take any futures and futures options side or spread on IRA or a regular account. You do not own/borrow anything been long or short. You are just entering an obligation contract. Of course, the Clearing House as a counterparty of all deals does require a guarantee that you will be able to fulfill your contract. On behalf of the Clearing House, your broker imposes performance bond requirements on your portfolio. There are no restrictions except your money. It is a bit simplified picture of course.

Aardvark · May 30, 2006

Quote from ids:

Aardvark,
You can take any futures and futures options side or spread on IRA or a regular account. You do not own/borrow anything been long or short. You are just entering an obligation contract. Of course, the Clearing House as a counterparty of all deals does require a guarantee that you will be able to fulfill your contract. On behalf of the Clearing House, your broker imposes performance bond requirements on your portfolio. There are no restrictions except your money. It is a bit simplified picture of course.

Thanks for the reply ...it helps a lot