Exchange Traded Options by BetterTrades
An exchange traded option is an option that is traded on a regulated exchange,
where the terms of each option are standardized by the exchange. This simply
means the underlying asset, quantity, expiration date and strike price are
known in advance. Exchange-traded options are also known as "listed options"
and the knowledge of such can lead to better trades.
The primary benefit of exchange-traded options is in the liquidity,
standardized contracts, quick access to prices and the use of clearing houses
by the exchanges. The clearing houses ensure the option contract will be
The over-the-counter options are different from exchange traded options, as
they do not trade on exchanges. The over-the-counter options are exercised on
the ability of the other party to meet the obligation.
A financial option is a contract between a buyer and a seller that gives the
buyer the right, but not the obligation, to buy or sell an underlying asset at
a later day at an agreed-upon price. In exchange for granting the option, the
seller collects a payment (called a premium) from the buyer.
A futures options contract is a standardized contract to buy or sell a
specific commodity of standardized quality at a certain date in the future.
The price is determined by the supply and demand among the parties competing
to buy and sell at the time. The items may be non-traditional (foreign
currency, commercial paper, bonds) or baskets of corporate equity. The future
date is called the delivery date or final settlement date.
The commodity options market is a market in which producers may purchase the
opportunity to sell or buy a commodity at a specific price. There are two
separate commodity options – one to insure products being sold against price
declines, another to insure products purchased against price increases.
A commodity is something for which there is a demand, but is supplied without
differentiation across the market. It's a product that is the same no matter
who produces it, such as copper or rice. These products are the same
regardless of who produces them, with the price based on supply and demand.
These are basic resources and agricultural products such as iron ore, crude
oil, coal, ethanol, salt, sugar, coffee beans, soybeans, aluminum, rice,
wheat, gold and silver.
Commodity trades are made on exchanges, including, the Chicago Board of Trade,
Kansas City Board of Trade, Euronext.liffe, Kuala Lumpur Futures Exchange,
London Metal Exchange, New York Mercantile Exchange, Multi Commodity Exchange,
and Dalian Commodity Exchange.
Types of Exchange Traded Options