What are the Available Futures Options

As with options as a whole, futures options also can be classified in terms of call and put options. In either case, the market value of the underlying commodity and the collection of the premium are the driving forces in futures options. Essentially, in the "equation" to assess the worth of a given futures option, the independent variable that will affect the outcome is the underlying asset, which is the futures contract itself.

The more valuable a commodity, the pricier the future is, and thus all the more valuable to the call option holder. Meanwhile, the less valuable the good, the cheaper the future and more valuable to put holders as they will be able to sell the option itself for more than they paid for it, especially for those who are eager to "buy low."

Noting this confluence of futures and options, it may be unclear as to how, or rather, where a futures option might be traded. Owing to their relevance to the subject of futures, though, futures options are bought and sold on major futures exchanges just as are straight futures contracts. Frequently, this will be a specific exchange predicated on the type of commodity involved, be it cotton, grain or sugar.

NEXT: What to Do If You Are In Danger of Repossession