Chapter 34: Futures and Futures Options 661 
needs March soybean futures to be trading at 608.25 or higher at expiration in order 
to have a profit at that time. This is the normal way in which a call buyer views his 
break-even point at expiration: strike price plus cost of the call. It is not necessary to 
know that soybean options are worth $50 per point in order to know that 608.25 is 
the break-even price at expiration. 
If the future is a cash settlement future (Eurodollar, S&P 500, and other 
indices), then the options and futures generally expire simultaneously at the end of 
trading on the last trading day. (Actually, the S&P's expire on the next morning's 
opening.) However, options on physical futures will expire before the first notice day 
of the actual futures contract, in order to give traders time to close out their positions 
before receiving a delivery notice. The fact that the option expires in advance of the 
expiration of the underlying future has a slightly odd effect: The option often expires 
in the month preceding the month used to describe it. 
Example: Options on March soybean futures are referred to as "March options." 
They do not actually expire in March - however, the soybean futures do. 
The rather arcane definition of the last trading day for soybean options is "the 
last Friday preceding the last business day of the month prior to the contract month 
by at least 5 business days"! 
Thus, the March soybean options actually expire in February. Assume that the 
last Friday of February is the 23rd. If there is no holiday during the business week of 
February 19th to 23rd, then the soybean options will expire on Friday, February 
16th, which is 5 business days before the last Friday of February. 
However, if President's Day happened to fall on Monday, February 19th, then 
there would only be four business days during the week of the 19th to the 23rd, so 
the options would have to expire one Friday earlier, on February 9th. 
Not too simple, right? The best thing to do is to have a futures and options expi­
ration calendar that one can refer to. Futures Magazine publishes a yearly calendar 
in its December issue, annually, as well as monthly calendars which are published 
each month of the year. Alternatively, your broker should be able to provide you with 
the information. 
In any case, the March soybean futures options expire in February, well in 
advance of the first notice day for March soybeans, which is the last business day of 
the month preceding the expiration month (February 28th in this case). The futures 
option trader must be careful not to assume that there is a long time between option 
expiration and first notice day of the futures contract. In certain commodities, the 
futures first notice day is the day after the options expire (live cattle futures, for 
example). 
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