What is the difference between option on stock index and option on a stock index future? - index of .3gp
I understand this option. But what is the difference between options on futures on stock indexes and options on stocks in the index?
Thursday, January 28, 2010
Index Of .3gp What Is The Difference Between Option On Stock Index And Option On A Stock Index Future?
2 comments:
The difference is that an option on a stock index of the effective index as the underlying. Thus, for the S & P 500 (SPX) options on the CBOE, the most important instrument is traded, the current S & P 500, which cites a lot of television and newspapers. These options are cash settled.
In addition, an option on a stock index future is the current futures contract, that the underlying indices. Thus, for options on the S & P 500 futures (eg E-mini, ticker-ES), which is on the CME, listed the basic tools are the E-mini futures contract. These options will be settled in cash (quarterly options) or lying futures contract next (standard) functions. For example, the choice of September September futures and underlying cash settlement of options is forfeited to the relevant underlying futures contract. August-options have the same futures contract for September, when the underlying, but since the options expire on 1 August of last month, will be based in the futures contract in September.
This does not applyseems a very good thing, until it make a difference in timing, where you can have two options, the different underlying contracts, so that you are at the risk of further base. This risk is not in the options of the cash index, all maturities of the underlying.
There are also differences in the form of cash and options on index futures margin. Index options, which in the cash reg. T, while the options for the future SPAN margins.
Another difference, this rule applies if you pay taxes in the United States, is that futures and options futures have favorable tax treatment (40/60).
The difference is, its underlying assets. The first value is the index of stock prices and the value of the second is based on futures based on stock indices.
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