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Futures Options: Universe Of Potential Profit

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  • Teselios Delia

    (Constantin Brancoveanu University of Pitesti, Romania)

Abstract

A approaching options on futures contracts in the present paper is argued, on one hand, by the great number of their directions for use (in financial speculation, in managing and risk control, etc.) and, on the other hand, by the fact that in Romania, nowadays, futures contracts and options represent the main categories of traded financial instruments. Because futures contract, as an underlying asset for options, it is often more liquid and involves more reduced transaction costs than cash product which corresponds to that futures contract, this paper presents a number of information regarding options on futures contracts, which offer a wide range of investment opportunities, being used to protect against adverse price moves in commodity, interest rate, foreign exchange and equity markets. There are presented two assessment models of these contracts, namely: an expansion of the Black_Scholes model published in 1976 by Fischer Black and the binomial model used especially for its flexibility. Likewise, there are presented a series of operations that can be performed using futures options and also arguments in favor of using these types of options.

Suggested Citation

  • Teselios Delia, 2013. "Futures Options: Universe Of Potential Profit," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 2, pages 309-313, April.
    • Handle: RePEc:cbu:jrnlec:y:2013:v:2:p:309-313
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    References listed on IDEAS

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    1. Hirsa, Ali & Neftci, Salih N., 2013. "An Introduction to the Mathematics of Financial Derivatives," Elsevier Monographs, Elsevier, edition 3, number 9780123846822.
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