516 Part V: Index Options and Futures 
futures options are unworthy of the strategist's time and effort. In fact, just the oppo­
site may be true - the lack of general information may produce some inefficiencies 
that the strategist can benefit from. 
One factor concerning the trading of futures options can be of major concern 
to many customers and salesmen. Salesmen who are registered to sell stocks are not 
necessarily registered to sell futures - an additional test must be passed in order to 
sell many types of futures options. Similarly, many customers - primarily institutions 
- have received approval from their constituents to trade in stock options, but would 
need further approvals to trade futures or futures options. Neither of these things 
should stand in the way of the strategist - if there are opportunities in futures 
options, then the customer should find a broker who can trade them. Also if the 
strategist finds that he requires certain approvals from within his own institution 
before he can trade futures, then he should obtain those approvals. 
STANDARD OPTIONS STRATEGIES USING INDEX OPTIONS 
The stock option strategies described in all of the preceding chapters of this book can 
be established with index options as well. The concepts are normally the same for 
index options as they would be for stock options. If one buys a call at one strike and 
sells a call at a higher strike, that is a bullish spread; if one sells both a put and a call 
at the same strike (a straddle), that is a neutral strategy. One uses deltas to determine 
how many options to sell against the ones that he buys in order to establish a delta 
neutral strategy. Likewise, he uses the deltas to tell, along the way, how his position 
is progressing and how to adjust it to keep it delta neutral. 
We will not describe these same strategies over again. They have already been 
described in detail. The risk of early assignment removing one side of a position can 
alter some strategies. In some cases there are particular advantages or disadvantages 
with index options and futures. Thus, we will briefly go over some major option 
strategies, giving details pertaining to their usage as index option strategies. 
OPTION BUYING 
The most common reason for wanting to buy index options is to take advantage of the 
diversification that they provide, in addition to the normal advantages that option 
purchasing provides: leverage and limited dollar risk. Many people feel that it is eas­
ier to predict the general market direction than it is to predict an individual stock's 
direction. This feeling, can, of course, be put to good advantage by buying index 
options. However, sometimes it is not better to buy the index options. In such cases, 
it may actually be smarter to purchase a package of individual stock options.