Lead options are option contracts in which the underlying asset is a lead futures contract.
The holder of a lead 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 lead futures at the strike price.
This right will cease to exist when the option expire after market close on expiration date.
Lead option contracts are available for trading at London Metal Exchange (LME).
LME Lead option prices are quoted in dollars and cents per metric ton and their underlying futures are traded in lots of 25 tonnes (55116 pounds) of lead.
|Exchange & Product Name||Underlying Contract Size||Exercise Style||Option Price Quotes|
|LME Lead Options||25 ton|
(Full Contract Specs)
Options are divided into two classes - calls and puts. Lead call options are purchased by traders who are bullish about lead prices. Traders who believe that lead prices will fall can buy lead 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 lead options only grant the right but not the obligation to assume the underlying lead 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 lead 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!