477
A put might more properly be called a stick. For the whole point of a put—its purpose, if you 
will—is that it gives its owner the right to force 100 shares of some godforsaken stock onto 
someone else at a price at which he would very likely rather not take it. So what you are really 
doing is sticking it to him.
—Andrew T obias
Getting By on $100,000 a Year (and Other Sad T ales)
 ■ Preliminaries
There are two basic types of options: calls and puts. The purchase of a call option on futures1 provides 
the buyer with the right, but not the obligation, to purchase the underlying futures contract at a speci-
fied price, called the strike or exercise price, at any time up to and including the expiration date. 2 A put 
option provides the buyer with the right, but not the obligation, to sell the underlying futures contract 
at the strike price at any time prior to expiration. (Note, therefore, that buying a put is a bearish trade, 
while selling a put is a bullish trade.) The price of an option is called the premium, and is quoted in 
An Introduction to 
Options on Futures
Chapter 34
1 Chapters 34 and 35 deal specifically with options on futures contracts. However, generally speaking, analogous 
concepts would apply to options on cash (physical) goods or instruments (e.g., bullion versus gold futures). 
Some of the advantages of basing an option contract on futures as opposed to the cash asset are discussed in the 
next section.
2 For some markets, the expiration date on the option and the underlying futures contract will be the same; for other 
markets, the expiration date on the option will be a specified date prior to the expiration of the futures contract.