Chapter 34: Futures and Futures Options 663 
one tick in the money. You can give instructions to not have a futures option auto­
matically exercised if you wish. 
SERIAL OPTIONS 
Serial options are futures options whose expiration month is not the same as the expi­
ration month of their corresponding underlying futures. 
Example: Gold futures expire in February, April, June, August, October, and 
December. There are options that expire in those months as well. Notice that these 
expirations are spaced two months apart. Thus, when one gold contract expires, there 
are two months remaining until the next one expires. 
Most option traders recognize that the heaviest activity in an option series is in 
the nearest-term option. If the nearest-term option has two months remaining until 
expiration, it will not draw the trading interest that a shorter-term option would. 
Recognizing this fact, the exchange has decided that in addition to the regular 
expiration, there will be an option contract that expires in the nearest non-cycle 
rrwnth, that is, in the nearest month that does not have an actual gold future expir­
ing. So, if it were currently January 1, there might be gold options expiring in 
February, March, April, etc. 
Thus, the March option would be a serial option. There is no actual March gold 
future. Rather, the March options would be exercisable into Arpl futures. 
Serial options are exercisable into the nearest actual futures contract that exists 
after the options' expiration date. The number of serial option expirations depends 
on the underlying commodity. For example, gold will always have at least one serial 
option trading, per the definition highlighted in the example above. Certain futures 
whose expirations are three months apart (S&P 500 and all currency options) have 
serial options for the nearest two months that are not represented by an actual 
futures contract. Sugar, on the other hand, has only one serial option expiration per 
year - in December - to span the gap that exists between the normal October and 
March sugar futures expirations. 
Strategists trading in options that may have serial expirations should be careful 
in how they evaluate their strategies. For example, June S&P 500 futures options 
strategies can be planned with respect to where the underlying S&P 500 Index of 
stocks will be at expiration, for the June options are exercisable into the June futures, 
which settle at the same price as the Index itself on the last day of trading. However, 
if one is trading April S&P 500 options, he must plan his strategy on where the June 
futures contract is going to be trading at April expiration. The April options are exer-