Know Your Options: Options on Futures as Strategic Investment Vehicles

Author(s):
Russell Rhoads
Date:
October 15, 2018
Research Type:
Vision Note
Executive Summary

TABB Group recently took on the task of looking at the options on futures segment of the listed derivative markets. What we found was an area where there is strong and growing liquidity as well as a toolset that gives speculators and risk manager the ability to alter exposure to a wide variety of risks.

Use cases include:

  • Mitigating currency risk when investing in a local equity market • Hedging exposure to the price of copper for a producer
  • Using options to manage set exposure to large cap and small cap equities
  • Taking advantage of volatility expectations associated with growing season
  • Option strategies that may be used to speculate on the spread between different oil markets
  • Interest rate exposure management relative to the credit default swap markets

TABB found that all signs point to a continuation of the trend toward greater volume and liquidity in these products as increased knowledge leads to greater participation and a rising tide of factors that will raise all boats. The family of options on futures products cover all major asset classes, come in unique and useful product combinations, and offer exceptional liquidity for traders and risk managers.

Areas of Interest
  • Derivatives
  • Options
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