Question on settlement of Index Futs options

T

traderwald

Hi guys,

Question on settlement of Index Futs options:

What would be the net position on opt. last date for the below open positions:

ES: buy at 3100

Buy Put on ES: 3100

ES price on Close on Opt. last date: 3050.

What would be the net position after close: would it be net 0 position (i.e. closes both Fut and opt. ?) with the price of the put buy being the only expense ?

Or would it simply sell the put for profit while keeping the underlying as open ?

Thank you
 
ES Options are automatically exercised and the two will be netted out.

Depends if you want to be flat or be long at the next open. There is a substantial change in your risk level and margin requirement (5-10x at least) going from hedged to unhedged after the option expiration.

If you're looking for simplicity, you may be better off buying just a call @3100 which is the synthetic equivalent.
 
Last edited:
xandman said:
Depends if you want to be flat or be long at the next open. There is a substantial change in your risk level and margin requirement (5-10x at least) going from hedged to unhedged after the option expiration.
More...

Thank you for the reply above !

yup, I understand the margin requirement will change. However, on this point you made: "Depends if you want to be flat or be long at the next open" - it would not be up to the trader correct ? I mean the trade will be closed per the standard process and does not depend on whether one wants to be flat or long ?

As in, it would be as below ?

xandman said:
ES Options are automatically exercised and the two will be netted out.
More...

i.e. the position is net 0 ?
 
But why would there be capital and risk permission as the trade has underlying as the component. So would it not simply close the underlying to exercise the option ?
 
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