Chapter 29: Introduction to Index Option Products and Futures 515 
movement by the underlying futures contract, as well as on the potential change of 
implied volatility of the options in question. 
The older method of margining option positions is known as the "customer mar~ 
gin" method. The customer margin method generally results in higher margin 
requirements. The reader is referred to the chapter on futures and futures options 
for an in-depth discussion of SPAN and other option margin requirements. 
OTHER TERMS 
Just as futures on differing physical commodities have differing terms, so do options 
on those futures. Some options have striking prices 5 points apart while others have 
strikes only 1 point apart, reflecting the volatility of the commodity. Specifically, for 
index futures options, the S&P 500 options have striking prices 5 points apart, and 
the NYSE options have striking prices 2 points apart. 
There is no standard method for quoting futures on options as there is with 
stock options. In some cases, striking price symbols are similar to stock option sym­
bols (A=5, B=lO, C=l5, etc.), while in others the letters are used incrementally (A=l, 
B=2, C=3, etc.). Moreover, the method used may differ with each quote vendor. In 
some cases, quote systems use the numeric value of the strike instead of letters. This 
makes quoting options much simpler, and perhaps the entire industry (including 
stock option vendors) will adopt this method someday. Since there is no standard 
method for quoting, one must obtain the symbols individually for futures options, a 
fact that makes quoting them extremely inconvenient. 
There are position limits for some futures options, hut they allow for very large 
positions. Check with your broker for exact limits in the various futures options. 
QUOTES 
Most futures option quotes (bids and offers) are not displayed on quote-vending 
machines, as is also the case with futures. Options traded on the Chicago Mercantile 
Exchange are the exception. This can he somewhat distressing to the trader used to 
dealing in stock options, since options are normally far less liquid than the underly­
ing security. It might be acceptable to trade off of last sales in a liquid futures con­
tract, but not so with the options. As a result, futures options have not attracted many 
stock option traders into their fold. Of course, where electronic markets exist, the 
bids and offers of options would be shown publicly. 
The consequence of the inconsistencies in terms as well as the general unavail­
ability of quotes has been that index futures options are generally traded by profes­
sionals, with the public largely ignoring them. This does not mean, however, that