Buying Options on Futures Contracts - A Guide to Uses and Risks

Buying Options on Futures
Contracts
A Guide to Uses and Risks
This information was published by the National Futures
Association www.nfa.futures.org

Table of Contents
 Introduction
 Part One: The Vocabulary of Options Trading
 Part Two: The Arithmetic of Option Premiums Intrinsic Value
 Time Value
 Part Three: The Mechanics of Buying and Writing Options
• Commission Charges Leverage
• The First Step: Calculate the Break-Even Price Factors Affecting the Choice of an
Option
• After You Buy an Option: What Then? Who Writes Options and Why
• Risk Caution
 Part Four: A Pre-Investment Checklist
 NFA Information and Resources
Disclaimer: There is a substantial risk of loss in trading commodity futures, options and off-exchange foreign currency products.
Past performance is not indicative of future results.

Buying Options on Futures Contracts: A
Guide to Uses and Risks
 National Futures Association is a Congressionally authorized self-
 regulatory organization of the United States futures industry. Its mission is to
provide innovative regulatory pro-grams and services that ensure futures
industry integrity, protect market participants and help NFA Members meet their
regulatory responsibilities.
 This booklet has been prepared as a part of NFA’s continuing public education
efforts to provide information about the futures industry to potential investors.
 Disclaimer: This brochure only discusses the most common type o f
commodity options traded in the U.S.—options on futures contracts traded
on a regulated exchange and exercisable at any time before they expire. If
you are considering trading options on the underlying commodity itself or
options that ca n only be exercised a t o r near their expiration date , ask
your broker for more information.

Introduction
 Although futures contracts have been traded on U.S. exchanges since 1865,
options on futures contracts were not introduced until 1982. Initially offered as
part of a government pilot program, their success eventually led to widespread
use of options on agricultural as well as financial futures contracts.
 Options on futures contracts can offer a wide and diverse range of potentially
attractive investment opportunities. However, options trading is a speculative
investment and should be treated as such. Even though the purchase of options
on futures contracts involves a limited risk (losses are limited to the costs of
purchasing the option), it is nonetheless possible to lose your entire
investment in a short period of time.
 And for investors who sell rather than buy options, there is no limit at all to the
size of potential losses. This booklet is designed to provide you with a basic
understanding of options on futures contracts— what they are, how they work
and the opportunities (and risks) involved in trading them.

 The booklet consists of four parts:
 Part One: The Vocabulary of Options Trading. Options investing has its own
language— words or terms you may be unfamiliar with or that have a special
meaning when used in connection with options.
 Part Two: The Arithmetic of Option
 Premiums. This section describes the major factors that influence option price
movements and the all-important relationship between option prices and
futures prices.
 Part Three: The Mechanic s of Buying and Writing Options. This section
outlines the basic steps involved in buying and writing options, as well as the
risks involved.
 Part Four: A Pre-Investment Checklist. This section lists additional steps you
should take before deciding whether to trade options on futures.
Disclaimer: There is a substantial risk of loss in trading commodity futures, options and off-exchange foreign currency products. Past
performance is not indicative of future results.

Part One: The Vocabulary of Options
Trading
 These are some of the major terms you should become familiar with, starting
with what is meant by an “option.”
 Option An investment vehicle which gives the option buyer the right— but
not the obligation— to buy or sell a particular futures contract at a stated price
at any time prior to a specified date. There are two separate and distinct types
of options: calls and puts.
 Call A call option conveys to the option buyer the right to purchase a
particular futures contract at a stated price at any time during the life of the
option.
 Put A put option conveys to the option buyer the right to sell a particular
futures contract at a stated price at any time during the life of the option.

 Strike Price Also known as the “exercise price,” this is the stated price at which the buyer
of a call has the right to purchase a specific futures contract or at which the buyer of a put
has the right to sell a specific futures contract.
 Underlying Contract - This is the specific futures contract that the option conveys the right to
buy (in the case of a call) or sell (in the case of a put).
 Option Buyer - The option buyer is the per- son who acquires the rights conveyed by the
option: the right to purchase the underlying futures contract if the option is a call or the right
to sell the underlying futures contract if the option is a put.
 Option Seller ( Writer) - The option seller (also known as the option writer or option grantor)
is the party that conveys the option rights to the option buyer.
 Premium The “price” an option buyer pays and an option writer receives is known as the
premium. Premiums are arrived at through open competition between buyers and sellers
according to the rules of the exchange where the options are traded. A basic knowledge of
the factors that influence option premiums is important for anyone considering options
trading. The premium cost can significantly affect whether you realize a profit or incur a loss.
See “The Arithmetic of Option Premiums” on page 10.

 Expiration - This is the last day on which an option can be either exercised or offset. See
definition of “Offset” on page 8. Be certain you know the exact expiration date of any
option you have purchased or written. Options often expire during the month prior to
the delivery month of the underlying futures contract. Once an option has expired, it no
longer conveys any rights. It cannot be either exercised or offset. In effect, the option
rights cease to exist.
 Quotations Premiums for exchange-traded options are reported daily in the business
pages of most major newspapers, as well as by a number of internet services. With an
understanding of terms previously defined— call, put, strike price and expiration
month— it is easy to determine the premium for a particular option. Take a look at the
following quotation for gold options: Gold (100 troy ounces; $ per troy ounce)

 The premium for a February gold call option with a strike price of $295 an ounce is
$4.30 an ounce. Therefore, for the 100 ounce option, the option buyer would pay a
premium of $430 and the option writer would receive a premium of $430.
 Exercise - An option can be exercised only by the buyer (holder) of the option at any
time up to the expiration date.
 If and when a call is exercised, the option buyer will acquire a long position in the
underlying futures contract at the option exercise price. The writer of the call to whom
the notice of exercise is assigned will acquire a short position in the underlying futures
contract at the option exercise price.
 If and when a put is exercised, the option buyer will acquire a short position in the
underlying futures contract at the option exercise price. The writer of the put to whom
the notice of exercise is assigned will acquire a long position in the underlying futures
contract at the option exercise price.
 Offset - An option that has been previously purchased or previously written can generally
be liquidated (offset) at any time prior to expiration by making an offsetting sale or
purchase.

 Most options investors choose to realize their profits or limit their losses through an
offsetting sale or purchase. When an option is liquidated, no position is acquired in the
underlying futures contract.
 In-the-money - An option is said to be “in the money” if it is worthwhile to exercise. A
call option is in-the-money if the option exercise price is below the underlying futures
price. A put option is in-the-money if the option exercise price is above the underlying
futures price.
 Example: The current market price of a particular gold futures contract is $300 an ounce.
A call is in-the-money if its exercise price is less than $300. A put is in-the-money if its
exercise price is more than $300.
 The amount that an option is currently in-the-money is referred to as the option’s
intrinsic value.
 At-the-money An option is said to be “at-the- money” if the underlying futures price
and the option’s exercise price are the same.
 Out-of-the-money - A call option whose exercise price is above the underlying futures
price is said to be “out-of-the-money.” Similarly, a put option is “out-of-the-money” if its
exercise price is below the underlying futures price. Neither option is currently
worthwhile to exercise, and has no intrinsic value.

Part Two: The Arithmetic of Option
Premiums
 At the time you purchase a particular option, its premium cost may be $1,000. A
month or so later, the same option may be worth only $800 or $700 or $600.
Or it could be worth $1,200 or $1,300 or $1,400. Since an option is something
that most people buy with the intention of eventually liquidating (hopefully at a
higher price), it’s important to have at least a basic understanding of the major
factors which influence the premium for a particular option at a particular
time. There are two, known as intrinsic value and time value. The premium is
the sum of these.
 Premium = Intrinsic Value + Time Value

 Intrinsic Value
 Intrinsic value is the amount of money, if any, that could currently be realized by
exercising the option at its strike price and liquidating the acquired futures position at
the present price of the futures contract.
 At a time when a U.S. Treasury bond futures contract is trading at a price of 120-00, a call
option conveying the right to purchase the futures contract at a below-the-market strike
price of 115-00 would have an intrinsic value of $5,000.
 As discussed on page 8, an option that currently has intrinsic value is said to be “in-the-
money”(by the amount of its intrinsic value). An option that does not currently have
intrinsic value is said to be “out-of-the-money.”
 At a time when a U.S. Treasury bond futures contract is trading at 120-00, a call option
with a strike price of 123-00 would be “out-of-the-money” by $3,000.
 Time Value
 Options also have time value. In fact, if a given option has no intrinsic value— because
it is currently “Out-of-the-money”— its premium will consist entirely of time value.

 What’s “ time value?”
 It’s the sum of money option buyers are presently willing to pay (and option
sellers are willing to accept)— over and above any intrinsic value the option
may have— for the specific rights that a given option conveys. It reflects, in
effect, a consensus opinion as to the likelihood of the option’s increasing in
value prior to its expiration.
 The three principal factors that affect an option’s time value are:
 1. Time remaining until expiration. Time value declines as the option
approaches expiration. At expiration, it will no longer have any time value.
(This is why an option is said to be a wasting asset.)

 2. Relationship between the option strike price and the current price of the
underlying futures contract. The further an option is removed from being
worthwhile to exercise— the further “out-of-the-money” it is— the less time
value it is likely to have.
 3. Volatility - The more volatile a market is, the more likely it is that a price
change may eventually make the option worthwhile to exercise. Thus, the
option’s time value and therefore premium are generally higher in volatile
markets.

Part Three: The Mechanics of Buying
and Writing Options
 Commission Charges
Before you decide to buy and/or write (sell) options, you should understand the
other costs involved in the transaction— commissions and fees. Commission is the
amount of money, per option purchased or written, that is paid to the brokerage
firm for its services, including the execution of the order on the trading floor of the
exchange. The commission charge increases the cost of purchasing an option and
reduces the sum of money received from writing an option. In both cases, the
premium and the commission should be stated separately.
Each firm is free to set its own commission charges, but the charges must be fully
disclosed in a manner that is not misleading. In considering an option investment,
you should be aware that:

• Commission can be charged on a per-trade or a round-turn basis, covering both the
purchase and sale.
• Commission charges can differ significantly from one brokerage firm to another.
• Some firms have fixed commission charges (so much per option transaction) and
others charge a percentage of the option premium, usually subject to a certain
minimum charge.
• Commission charges based on a percentage of the premium can be substantial,
particularly if the option is one that has a high premium.
• Commission charges can have a major impact on your chances of making a profit. A
high commission charge reduces your potential profit and increases your potential
loss.
You should fully understand what a firm’s commission charges will be and
how they’re calculated. If the charges seem high— either on a dollar basis or as a
percentage of the option premium— you might want to seek comparison quotes from
one or two other firms. If a firm seeks to justify an unusually high commission charge
on the basis of its services or performance record, you might want to ask for a detailed
explanation or documentation in writing.

 Leverage
 Another concept you need to understand concerning options trading is the
concept of leverage. The premium paid for an option is only a small percentage
of the value of the assets covered by the underlying futures contract.
 Therefore, even a small change in the futures contract price can result in a
much larger percentage profit— or a much larger percentage loss— in relation
to the premium. Consider the following example:
 An investor pays $200 for a 100-ounce gold call option with a strike price of
$300 an ounce at a time when the gold futures price is $300 an ounce. If, at
expiration, the futures price has risen to $303 (an increase of only one
percent), the option value will increase by $300 (a gain of 150 percent on your
original investment of $200).
 But always remember that leverage is a two edged sword. In the above
example, unless the futures price at expiration had been above the option’s
$300 strike price, the option would have expired worthless, and the investor
would have lost 100 percent of his investment plus any commissions and fees.

 The First Step: Calculate the Break-Even Price
 Before purchasing any option, it’s essential to precisely determine what the
underlying futures price must be in order for the option to be profitable at
expiration. The calculation isn’t difficult. All you need to know to figure a given
option’s break-even price is the following:
•The option’s strike price;
•The premium cost; and
•Commission and other transaction costs.

 Determiningthebreak-evenprice for acall option
 Option strike price + (Option Commission Break-
 + premium + & transaction = even costs price)
 Example: It’s January and the 1,000 barrel April crude oil futures contract is
currently trading at around $12.50 a barrel. Expecting a potentially significant
increase in the futures price over the next several months, you decide to buy
an April crude oil call option with a strike price of $13. Assume the premium
for the option is 95¢ a barrel and that the commission and other transaction
costs are $50, which amounts to 5¢ a barrel.
 Before investing, you need to know how much the April crude oil futures price
must increase by expiration in order for the option to break even or yield a net
profit after expenses. The answer is that the futures price must increase to $14
for you to break even and to above $14 for you to realize any profit.

 The option will exactly break even at expiration if the futures price is $290.80 an
ounce. For each $1 an ounce the futures price is below $290.80 it will yield a
profit of $100.
 If the futures price at expiration is above $290.80, there will be a loss. But in no
case can the loss exceed $420— the sum of the
 premium ($370) plus commission and other transaction costs ($50).
 Factors Affecting the Choice of an Option
 If you expect a price increase, you’ll want to consider the purchase of a call
option. If you
 expect a price decline, you’ll want to consider the purchase of a put option.
However, in addition to price expectations, there are two other factors that
affect the choice of option:
• The length of the option; and
• The option strike price

 The length of the option
 One of the attractive features of options is that they allow time for your price
expectations to be realized. The more time you allow, the greater the likelihood the
option will eventually become profitable. This could influence your decision about
whether to buy, for example, an option on a March futures con- contract or an option
on a June futures contract.
 Bear in mind that the length of an option
 (such as whether it has three months to expiration or six months) is an important
variable affecting the cost of the option. A longer option commands a higher
premium.
 The option strike price
 The relationship between the strike price of an option and the current price of the
underlying futures contract is, along with the length of the option, a major factor
affecting the option premium. At any given time, there may be trading in options
with a half dozen or more strike prices— some of them below the current price of
the underlying futures contract and some of them above.

 A call option with a low strike price will have a higher premium cost than a call
option with a high strike price because it will more likely and more quickly become
worthwhile to exercise. For example, the right to buy a crude oil futures contract at
$11 a barrel is more valuable than the right to buy a crude oil futures contract at
$12 a barrel.
 Conversely, a put option with a high exercise price will have a higher premium cost
than a put option with a low exercise price. For example, the right to sell a crude
oil futures contract at $12 a barrel is more valuable than the right to sell a crude
oil futures contract at $11 a barrel.
 While the choice of a call option or put option will be dictated by your price
expectations, and your choice of expiration month by when you look for the
expected price change to occur, the choice of strike price is some- what more
complex. That’s because the strike price will influence not only the option’s
premium cost but also how the value of the option, once purchased, is likely to
respond to subsequent changes in the underlying futures contract price. Specifically,
options that are out-of-the-money do not normally respond to changes in the
underlying futures price the same as options that are at-the-money or in-the-
money.

 Generally speaking, premiums for out-of-the- money options do not reflect, on a
dollar for dollar basis, changes in the underlying futures price. The change in option
value is usually less. Indeed, a change in the underlying futures price could have
little effect, or even no effect at all, on the value of the option.
 This could be the case if, for instance, the option remains deeply out-of-the-money
after the price change or if expiration is near.
 If you purchase an out-of-the-money option, bear in mind that no matter how much
the futures price moves in your favor, the option will still expire worthless, and you
will lose your entire investment unless the option is in-the-money at the time of
expiration. To realize a profit, it must be in-the-money by some amount greater
than the option’s purchase costs. This is why it’s crucial to calculate an option’s
break-even price before you buy it.
 Example: At a time when the March crude oil futures price is $11 a barrel, an
investor expecting a substantial price increase buys a March call option with a strike
price of $12.50. By expiration, as expected, there has been a substantial price
increase to $12.50. But since the option is still not worthwhile to exercise, it expires
worthless and the investor has lost his total investment.

 After You Buy an Option, What Then?
 At any time prior to the expiration of an option, you can:
• Offset the option.
• Continue to hold the option.
• Exercise the option.
 Offsetting the option
 Liquidating an option in the same marketplace where it was bought is the most
frequent method of realizing option profits. Liquidating an option prior to its
expiration for whatever value it may still have is also a way to reduce your loss (by
recovering a portion of your investment) in case the futures price hasn’t per-
formed as you expected it would, or if the price outlook has changed.
 In active markets, there are usually other investors who are willing to pay for the
rights your option conveys. How much they are willing to pay (it may be more or
less than you paid) will depend on (1) the current futures price in relation to the
option’s strike price, (2) the length of time still remaining until expiration of the
option and (3) market volatility.

 Net profit or loss, after allowance for commission charges and other transaction
costs, will be the difference between the premium you paid to buy the option
and the premium you receive when you liquidate the option.
 Example: In anticipation of rising sugar prices, you bought a call option on a sugar
futures contract. The premium cost was $950 and the commission and
transaction costs were $50. Sugar prices have subsequently risen and the option
now commands a premium of $1,250. By liquidating the option at this price,
your net gain is $250. That’s the selling price of $1,250 minus the $950
premium paid for the option minus $50 in commission and transaction costs.
 Premium paid for option Premium received when option $ 950
is liquidated $ 1 ,2 5 0
Increase in premium $ 300
 Less transaction costs $ 5 0
 Net profit $ 250

 You should be aware, however, that there is no guarantee that there will actually
be an active market for the option at the time you decide you want to liquidate. If
an option is too far removed from being worthwhile to exercise or if there is too
little time remaining until expiration, there may not be a market for the option at
any price.
 Assuming, though, that there’s still an active market, the price you get when you
liquidate will depend on the option’s premium at that time. Premiums are arrived at
through open competition between buyers and sellers according to the rules of an
exchange.
 Continuing to hold the option
 The second alternative you have after you buy an option is to hold an option right
up to the final date for exercising or liquidating it. This means that even if the price
change you’ve anticipated doesn’t occur as soon as you expected— or even if the
price initially moves in the opposite direction— you can continue to hold the
option if you still believe the market will prove you right. If you are wrong, you will
have lost the opportunity to limit your losses through offset. On the other hand,
the most you can lose by continuing to hold the option is the sum of the premium
and transaction costs. This is why it is sometimes said that option buyers have the
advantage of staying power.

 You should be aware, however, options decline in value as they approach expiration.
(See “Time Value” on page 10.)
 Exercising the option
 You can also exercise the option at any time prior to the expiration of the option.
It does not have to be held until expiration. It is essential to understand, however,
that exercising an option on a futures contract means that you will acquire either a
long or short position in the underlying futures contract— a long futures position if
you exercise a call and a short futures position if you exercise a put.
 Example: You’ve bought a call option with a strike price of 70¢ a pound on a 40,000
pound live cattle futures contract. The futures price has risen to 75¢ a pound.
Were you to exercise the option, you would acquire a long cattle futures position
at 70¢ with a “paper gain” of 5¢ a pound ($2,000). And if the futures price were to
continue to climb, so would your gain.
 But there are both costs and significant risks involved in acquiring a position in the
futures market. For one thing, the broker will require a margin deposit to provide
protection against possible fluctuations in the futures price. And if the futures price
moves adversely to your position, you could be called upon— perhaps even within
hours— to make additional margin deposits.

 There is no upper limit to the extent of these margin calls.
 Secondly, unlike an option which has limited risk, a futures position has potentially
unlimited risk. The further the futures price moves against your position, the larger
your loss.
 Even if you were to exercise an option with the intention of promptly liquidating the
futures position acquired through exercise, there’s the risk that the futures price which
existed at the moment may no longer be available by the time you are able to
liquidate the futures position. Futures prices can and often do change rapidly.
 For all these reasons, only a small percentage of option buyers elect to realize option
trading profits by exercising an option. Most choose the alternative of having the broker
offset— i.e., liquidate— the option at its currently quoted premium value.
 Who Writes Options and Why
 Up to now, this booklet has discussed only the buying of options. But it stands to reason
that when someone buys an option, someone else sells it. In any given transaction, the
seller may be someone who previously bought an option and is now liquidating it. Or
the seller may be an individual who is participating in the type of investment activity
known as option writing.

 The attraction of option writing to some investors is the opportunity to receive the
premium that the option buyer pays. An option buyer anticipates that a change in
the option’s underlying futures price at some point in time prior to expiration will
make the option worthwhile to exercise. An option writer, on the other hand,
anticipates that such a price change won’t occur— in which event the option will
expire worthless and he will retain the entire amount of the option premium that
was received for writing the option.
 Example: At a time when the March U.S. Treasury Bond futures price is 125-00, an
investor expecting stable or lower futures prices (meaning stable or higher interest
rates) earns a premium of $400 by writing a call option with a strike price of 129. If
the futures price at expiration is below 129-00, the call will expire worthless and the
option writer will retain the entire $400 premium. His profit will be that amount
less the transaction costs.
 While option writing can be a profitable activity, it is also an extremely high risk
activity. In fact, an option writer has an unlimited risk. Except for the premium
received for writing the option, the writer of an option stands to lose any amount
the option is in-the-money at the time of expiration (unless he has liquidated his
option position in the meantime by making an offsetting purchase).

 In the previous example, an investor earned a premium of $400 by writing a U.S.
Treasury Bond call option with a strike price of 129. If, by expiration, the futures
price has climbed above the option strike price by more than the $400
premium received, the investor will incur a loss. For instance, if the futures price
at expiration has risen to 131-00, the loss will be $1,600. That’s the $2,000
the option is in- the-money less the $400 premium received for writing the
option.
 As you can see from this example, option writers as well as option buyers need
to calculate a break-even price. For the writer of a call, the break-even price is
the option strike price plus the net premium received after transaction costs.
For the writer of a put, the break-even price is the option strike price minus
the premium received after transaction costs.
 An option writer’s potential profit is limited to the amount of the premium less
transaction costs. The option writer’s potential losses are unlimited. And an
option writer may need to deposit funds necessary to cover losses as often as
daily.

 Risk Caution
 Option writing as an investment is absolutely inappropriate for anyone who
does not fully understand the nature and the extent of the risks involved and
who cannot afford the possibility of a potentially unlimited loss. It is also
possible in a market where prices are changing rapidly that an option writer
may have no ability to control the extent of his losses. Option writers should be
sure to read and thoroughly understand the Risk Disclosure Statement that is
provided to them.

Part Four: A Pre-Investment Checklist
 Take the time to check out any firm or individual that you don’t know through previous
experience or reputation. All firms and persons offering options on U. S. futures
contracts are required by law to be registered with the Commodity Futures Trading
Commission (CFTC) and to be Members of National Futures Association (NFA). You can
do this quickly, easily and without cost by accessing NFA’s Background Affiliation Status
Information Center (BASIC), located at NFA’s web site (www.nfa.futures.org). BASIC will
provide you with the firm and/or individual’s registration status as well as any disciplinary
actions taken by NFA, the CFTC or any U.S. exchanges. This same information is also
available by calling NFA toll-free at 800-621-3570.
 Understand what a firm’s commission charges will be and how they’re calculated. If the
charges seem high— either on a dollar basis or as a percentage of the option premium—
you might want to seek comparison quotes from one or two other firms. If a firm seeks to
justify an unusually high commission charge on the basis of its services or performance
record, you might want to ask for a detailed explanation or documentation in writing.

 Calculate exactly the break-even price for any option you are considering
buying or writing. You should know the specific futures price above or below
which the option, at expiration, will be profitable.
 Read and fully understand the required Risk Disclosure Statement before
making any commitment to purchase or write an option.
 Learn enough about the commodity you would be investing in to have a
reasonable expectation that the necessary price change will occur prior to the
expiration of the option. Be certain you understand the risks inherent in
acquiring a futures position through the exercise of an option.
 Don’t purchase an option unless you understand that you could lose your entire
investment. Don’t write an option unless you understand that option writing
involves potentially unlimited losses. And don’t make any investment
commitment unless the money you could potentially lose can legitimately
regarded as risk capital.

 Don’t make any investment on the basis of high-pressure sales tactics.
Reputable firms don’t operate that way. It’s far better to miss out on an
investment opportunity than to be rushed into a decision you may later regret.
 And don’t make an investment that is presented to you as a sure thing. They
don’t exist!
 Always seek the advice of other persons such as a knowledgeable financial
advisor, attorney or accountant before making any major investment decision.

NFA Information and Resources
 Information Center:
 800.621.3570
 World Wide Web:
 http://www.nfa.futures.org
 NFA’s web site offers information regarding the Association’s history and
organizational structure. NFA Members also will find the current issues of the
Member newsletter and Activity Report, Notices to Members and rule
interpretations. The investing public can download publications to help them
understand the commodity futures industry as well as their rights and
responsibilities as market participants. All visitors to NFA’s web site can ask
questions, make comments and order publications via e-mail.

 BASIC:
 http://www.nfa.futures.org/basic /about.asp Anyone with access to the Internet
is able to perform online background checks on the firms and individuals
involved in the futures industry by using NFA’s Background Affiliation Status
Information Center (BASIC). NFA, the CFTC and the U.S. futures exchanges have
supplied BASIC with information on CFTC registration, NFA membership, futures-
related disciplinary history and non-disciplinary activities such as CFTC
reparations and NFA arbitration.

Organizations and Agencies Referenced
 Commodity Futures Trading Commission
 Three Lafayette Centre 1155 21st Street, N.W.
 Washington, DC 20581
 202 .418 .5080
 www.cftc.gov
 Buying Options on Futures Contracts:
 A Guide to Uses and Risk has been prepared as a service to the investing public by:
 National Futures Association
 200 West Madison Street, Suite 1600
 Chicago, Illinois 60606-3447
 800 .621 .3570
 http://www.nfa.futures.org
 © 2000 National Futures Association

For more information about options visit:
https://www.cannontrading.com/tools/education-futures-options-trading-101
Have a question? Contact Cannon Trading at:
https://www.cannontrading.com/company/contact
Or
Call us at: +1 (800) 454-9572
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Buying Options on Futures Contracts - A Guide to Uses and Risks

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