Options on futures are similar to options on stocks, but with one major exception…Futures are the underlying instrument off which the options are priced unlike equity options which have the stock as its underlying. Depending on the expiration cycle, some futures options expire to cash, while others expire to the underlying futures contract.

Futures options will expire into cash when the options and futures expire in the same month.

Futures Options

If the options and the future expire in different months, the options settle to the future. But, if a MAR Call expires ITM, it settles to cash.

We need to keep in mind that when we trade futures options, the option prices track the future, not the cash index. Though, there is a mathematical relationship between the future and the index with the exception of the VIX.

Some options on futures are highly liquid and very tradable, but others are not as liquid, it depends on the underlying future.

Therefore, we need to be aware of which futures have liquid options and which do not. The following futures have tradable options: Additionally, the smaller capital requirement involved is an advantage of trading options on futures as opposed to options on individual equities.

If an investor does not have enough capital for a portfolio margin account, options on futures are actually a less expensive way of trading large indices such as the SPX, especially if the investor is interested in selling naked short positions.

To reset your password, please enter the same email address you use to log in to tastytrade in the field below. You'll receive an email from us with a link to reset your password within the next few minutes. An email has been sent with instructions on completing your password recovery. Register today to unlock exclusive access to our groundbreaking research and to receive our daily market insight emails.

Follow along as our experts navigate the markets, provide actionable trading insights, and teach you how to trade. Applicable portions of the Terms of use on tastytrade. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person.

Trading securities can involve high risk and the loss of any funds invested. Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance.

Please read Characteristics and Risks of Standardized Options before deciding to invest in options. Trades for 7 days. Join Now Sign In Help Open A Tastyworks. Home Watch Live Shows Learn Blog Open A Tastyworks Brokerage Account. About Us Company Info Contact Us Legal Stuff. Helpful Info Help Glossary Cherry Bomb Daily Recaps.

Personalities Tom Sosnoff Liz Dierking Tony Battista Jenny Andrews Vonetta Logan Pete Mulmat.

Our Apps tastytrade Mobile Bob The Trader Where's Bob? Personalities Tom Sosnoff Tony Battista Vonetta Logan.

Equity Futures Options Settlement

Our Sites tastytrade Blog. More Bob the Trader Get tasty Store. See All Key Concepts. Futures Options Videos watched. Join now Register today to unlock exclusive access to our groundbreaking research and to receive our daily market insight emails.

Join TastyTrade Free Sign up to get our best stuff delivered to you daily and save videos you want to watch later.