680 Part V: Index Options and Futures 
Similar situations can also occur on the downside, where, if the future has traded as 
low as it can go, it is said to be "limit offered." 
As was pointed out earlier, futures options sometimes have trading limits 
imposed on them as well. This limit is of the same magnitude as the futures limit. 
Most of these are on the Chicago Board of Trade (all grains, U.S. Treasury bonds, 
Municipal Bond Index, Nikkei stock index, and silver), although currency options on 
the Chicago Mere are included as well. In other markets, options are free to trade, 
even though futures have effectively halted because they are up or down the limit. 
However, even in the situations in which futures options themselves have a trading 
limit, there may be out-of-the-money options available for trading that have not 
reached their trading limit. 
When options are still trading, one can use them to imply the price at which the 
futures would be trading, were they not at their trading limit. 
Example: August soybeans have been inflated in price due to drought fears, having 
closed on Friday at 650 ($6.50 per bushel). However, over the weekend it rains heav­
ily in the Midwest, and it appears that the drought fears were overblown. Soybeans 
open down 30 cents, to 620, down the allowable 30-cent limit. Furthermore, there 
are no buyers at that level and the August bean contract is locked limit down. No fur­
ther trading ensues. 
One may be able to use the August soybean options as a price discovery mech­
anism to see where August soybeans would be trading if they were open. 
Suppose that the following prices exist, even though August soybeans are not 
trading because they are locked limit down: 
Lost Sole Net Change 
Option Price for the Day 
August 625 call 19 - 21 
August 625 put 31 +16 
An option strategist knows that synthetic long futures can be created by buying 
a call and selling a put, or vice versa for short futures. Knowing this, one can tell what 
price futures are projected to be trading at: 
Implied Futures Price = Strike Price + Call Price - Put Price 
= 625 + 19 - 31 = 613 
With these options at the prices shown, one can create a synthetic futures posi­
tion at a price of 613. Therefore, the implied price for August soybean futures in this 
example is 613.