Trading Futures Options

[slb3]

Hello All,

Recently I started focusing more of my trading in futures options rather then equity options alone. My futures trading strategy usually consists of credit spreads and/or long calls/puts. My question is can anyone explain the worst case scenario with letting a futures option credit spread expire ITM. I'm not in this situation but would like to know worst case. I'm assuming you incur the max loss between the spread and that is it. Am I missing anything? Thanks for you input.

slb3

 

[Zzzz1]

As with all options your worst case scenario with a long position is the entire loss of option premium. Nothing beyond that.

Hello All,

Recently I started focusing more of my trading in futures options rather then equity options alone. My futures trading strategy usually consists of credit spreads and/or long calls/puts. My question is can anyone explain the worst case scenario with letting a futures option credit spread expire ITM. I'm not in this situation but would like to know worst case. I'm assuming you incur the max loss between the spread and that is it. Am I missing anything? Thanks for you input.

slb3

 

[Robert Morse]

Hello All,

Recently I started focusing more of my trading in futures options rather then equity options alone. My futures trading strategy usually consists of credit spreads and/or long calls/puts. My question is can anyone explain the worst case scenario with letting a futures option credit spread expire ITM. I'm not in this situation but would like to know worst case. I'm assuming you incur the max loss between the spread and that is it. Am I missing anything? Thanks for you input.

slb3

Most options on futures settle for the future, is if one leg is in the money, you will have a futures positions the next day. If both are, you won't.

 

[water7]

simply check your expiration P/L graph

https://en.wikipedia.org/wiki/Credit_spread_(options)

 

[Zzzz1]

I think OP was talking about options on futures and not spreads constructed through the purchase and/or sale of options?

simply check your expiration P/L graph

https://en.wikipedia.org/wiki/Credit_spread_(options)

 

[water7]

"the worst case scenario with letting a futures option credit spread expire ITM"

you can check your maximum risk / loss before placing any trade on your options platform
doesnt matter what options you trade

 

[Robert Morse]

you can check your maximum risk / loss before placing any trade on your options platform
doesnt matter what options you trade

Only retail platforms that are owned by the clearing broker offer this. Broker neutral professional platforms don't do this.

 

[water7]

yes, i really wonder why..
there are some other good stand-alone options software but limited to stock/ index options

lots of demand + very few vendors = pricey platform

 

[gkishot]

Most options on futures settle for the future, is if one leg is in the money, you will have a futures positions the next day. If both are, you won't.

You mean that if futures option ends up in the money today, it will be always assigned after its settlement for the day?

 

[Robert Morse]

You mean that if futures option ends up in the money today, it will be always assigned after its settlement for the day?

I thought were discussing at expiration not daily settlement.