An option is the right, but not the obligation, to buy or sell a futures contract at a price (the strike price) agreed today.
They give hedgers and investors a more flexible alternative to futures. When buying an option the purchaser is not entering into a firm obligation - they are simply buying a choice of action.
This choice allows a hedger the opportunity of locking in a fixed price, or a speculator the chance of benefitting from price movements, while maintaining the ability to simply walk away from the contract if it doesn't suit.
The American-style options trade monthly up to 63 months.
Options Strike Price Gradations
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