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+Chapter 29: Introduction to Index Option Products and Futures 513 
+At the present time, there are futures options on all of the various index futures 
+contracts. 
+EXPIRATION DATES 
+Futures options have specifics much the same as stock options do: expiration month 
+(agreeing with the expiration months of the underlying futures contract), striking 
+price, etc. If a trader buys a futures option, he must pay for it in full, just as with stock 
+options. Margin requirements vary for naked futures options, but are generally more 
+lenient than stock options. Often, the naked requirement is based on the futures 
+margin, which is much less than the 20% of the underlying stock price as is the case 
+with listed stock options. 
+When the futures option has a cash-based futures contract underlying it, the 
+option and the future generally expire on the same day. Thus, if one were to exercise 
+a '.ZYX option on expiration day, one would receive the future in his account, which 
+would in tum become cash because the future is cash-settled and expiring as well. 
+Example: Suppose that a trader owns a '.ZYX December 165 futures worth $500 per 
+point - call option and holds it through the last day of trading. On that last day, the 
+'.ZYX Index closes at 174.00. He gives instructions to exercise the call, so the follow­
+ing sequence occurs: 
+1. Buy one '.ZYX future at 165.00 via the call exercise. 
+2. Mark the future at 17 4.00, the closing price. This is a variation margin profit of 
+$4,500 (174.00-165.00) X $500. 
+3. The option is removed from the account because it was exercised, and the future 
+is removed as well because it expired. 
+Thus, the exercise of the option generates $4,500 in cash into the account and leaves 
+behind no futures or option contracts. We do not know if this represents a profit or 
+loss for this call holder, since we do not know if his original cost was greater than 
+$4,500 or not. 
+It should be noted that futures option expiration dates, in general, are fairly 
+complex. They are not normally the third Friday of the expiration month, as stock 
+options are. Index futures options generally do expire on the third Friday of the expi­
+ration month, but many physical commodity options do not. These differences will 
+be discussed in the later chapter on futures options.