A futures position is not share ownership
A share is an ownership stake; a security futures contract is an obligation and not an asset, needs 20 percent margin from both sides, and settles in cash daily.
Complex products · 8 guides
Complex products.
Separate a product’s structure from the story being told about it. Start with a question and work through the explanation at your own pace.
Crypto spot and futures have different mechanics
One XBTF futures contract is 0.10 bitcoin on a $1.00 multiplier and settles in cash daily; a fully paid spot coin has no date and settles nothing.
Exercise and assignment are different events
Holders exercise about 7 percent of options and OCC assigns those notices at random; at expiration the default is exercise at $0.01 in the money.
Expiration is a deadline with consequences
An option in the money by $0.01 is exercised by exception unless instructed otherwise, and the exchanges' exercise-notice cutoff is 4:30 p.m. Central Time.
Futures mark-to-market, one day at a time
A futures contract settles in cash daily: a 100-share contract bought at $120 and settling at $125 credits the buyer $500 that day, debits the seller $500.
In OTC forex, who is on the other side?
The dealer is your counterparty, and NFA Section 12 sets the deposit at 2 percent of notional on ten major currencies and 5 percent on everything else.
Options: rights on one side, obligations on the other
A holder pays the premium in full; an uncovered writer posts 100 percent of proceeds plus 20 percent of contract value, floored at proceeds plus 10 percent.
What is inside an option premium?
A premium is intrinsic value plus time value. An XSP 645 call at 12.40 with the index at 650 is $500 intrinsic and $740 time value, $1,240 per contract.