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+666 Part V: Index Options and Futures 
+ker informs him one day that they are going to charge him $30 per round tum, 
+payable up front, rather than $15 per side. That is the way most futures option bro­
+kerage firms charge their commissions these days. Is this the same thing, $15 per side 
+or $30 round turn, paid up front? No, it is not! What happens if you buy an option 
+and it expires worthless? You have already paid the commission for a trade that, in 
+effect, never took place. Nevertheless, there is little you can do about it, for it has 
+become the industry standard to charge round-turn commission on futures options. 
+In either case, commissions are negotiated to a flat rate by many traders. 
+Discount futures commission merchants (i.e., brokerage houses) often attract 
+business this way. In general, this method of paying commissions is to the customer's 
+benefit. However, it does have a hidden effect that the option trader should pay 
+attention to. This effect makes it potentially more profitable to trade options on some 
+futures than on others. 
+Example: A customer who buys com futures pays $30 per round turn in option com­
+missions. Since corn options are worth $50 per one point (one cent), he is paying 0.60 
+of a point every time he trades a corn option (30/50 = 0.60). 
+Now, consider the same customer trading options on the S&P 500 futures. The 
+S&P 500 futures and options are worth $250 per point. So, he is paying only 0.12 of 
+a point to trade S&P 500 options (30/250 = .12). 
+He clearly stands a much better chance of making money in an S&P 500 option 
+than he does in a corn option. He could buy an S&P option at 5.00 and sell it at 5.20 
+and make .08 points profit. However, with com options, if he buys an option at 5, he 
+needs to sell it at 55/s to make money- a substantial difference between the two con­
+tracts. In fact, if he is participating in spread strategies and trading many options, the 
+differential is even more important. 
+Position limits exist for futures options. While the limits for financial futures are 
+generally large, other futures - especially agricultural ones - may have small limits. 
+A large speculator who is doing spreads might inadvertently exceed a smaller limit. 
+Therefore, one should check with his broker for exact limits in the various futures 
+options before acquiring a large position. 
+) 
+OPTION MARGINS 
+Futures option margin requirements are generally more logical than equity or index 
+option requirements. For example, if one has a conversion or reversal arbitrage in 
+place, his requirement would be nearly zero for futures options, while it could be 
+quite large for equity options. Moreover, futures exchanges have introduced a better 
+way of margining futures and futures option portfolios.