Gasoline options are option contracts in which the underlying asset is a gasoline futures contract.
The holder of a gasoline option possesses the right (but not the obligation) to assume a long position (in the case of a call option) or a short position (in the case of a put option) in the underlying gasoline futures at the strike price.
This right will cease to exist when the option expire after market close on expiration date.
Gasoline option contracts are available for trading at New York Mercantile Exchange (NYMEX).
NYMEX Gasoline option prices are quoted in dollars and cents per gallon and their underlying futures are traded in lots of 42000 gallons (1000 barrels) of gasoline.
|Exchange & Product Name||Underlying Contract Size||Exercise Style||Option Price Quotes|
|NYMEX Gasoline Options||42000 gal|
(Full Contract Specs)
|American||Calls | Puts|
Options are divided into two classes - calls and puts. Gasoline call options are purchased by traders who are bullish about gasoline prices. Traders who believe that gasoline prices will fall can buy gasoline put options instead.
Buying calls or puts is not the only way to trade options. Option selling is a popular strategy used by many professional option traders. More complex option trading strategies, also known as spreads, can also be constructed by simultaneously buying and selling options.
As gasoline options only grant the right but not the obligation to assume the underlying gasoline futures position, potential losses are limited to only the premium paid to purchase the option.
Using options alone, or in combination with futures, a wide range of strategies can be implemented to cater to specific risk profile, investment time horizon, cost consideration and outlook on underlying volatility.
Options have a limited lifespan and are subjected to the effects of time decay. The value of a gasoline option, specifically the time value, gets eroded away as time passes. However, since trading is a zero sum game, time decay can be turned into an ally if one choose to be a seller of options instead of buying them.
To buy or sell futures, you need a broker that can handle futures trades.
OptionsHouse is a full fledged Futures Commission Merchant that provides a streamlined access to the futures markets at extremely reasonable contract rates.Click here to open a futures trading account at OptionsHouse.com now!
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