Options on Futures - How Futures Options Work
Reviewed by Leon Moyer - Published October 9, 2026 - Last reviewed October 9, 2026
In this lesson
Explain what the underlying of a futures option is and list the main ways futures options differ from stock options.
An option on futures is a contract that gives its buyer the right, but not the obligation, to take a long or short position in a specific futures contract at a set price, on or before the option's expiration date.
The idea is the same as a stock option: a call is the right to buy, a put the right to sell, and the seller takes on an obligation. What changes is the thing the option is on. Instead of 100 shares of a company, the underlying is one futures contract, such as a contract for 100 ounces of gold or one E-mini S&P 500 futures. Almost every difference covered in this module follows from that.
What is the underlying of a futures option?
A futures contract is an agreement to buy or sell a set quantity of something (a commodity, an index, a currency, an interest rate product) at a price agreed today, for a future date. The U.S. regulator, the Commodity Futures Trading Commission (CFTC), describes a commodity futures option as giving "the purchaser the right to buy or sell a particular futures contract at a future date for a particular price" (CFTC: Futures Market Basics).
So there are two layers between a futures option and the physical market:
An option on futures sits two steps away from the commodity
Gold
The commodity, priced per troy ounce
December gold futures
A contract for 100 troy ounces
Option on Dec gold futures
The right to a futures position at the strike
That second layer matters in three practical ways:
- Price. The option's value tracks the price of its futures contract, not the spot price of the commodity. A December gold option follows December gold futures, which can trade at a different price from gold for immediate delivery.
- Exercise. Exercising a futures call gives you a long futures position at the strike price; exercising a put gives you a short futures position. You do not receive gold, oil or corn directly. Exercising Futures Options walks through it.
- Expiration. Each option is tied to one futures contract month, and it often expires before that month begins. Futures Options Expiration covers how the calendar works.
If calls, puts, strikes and premiums are new to you, the What Is an Option? lesson covers them using stock options.
How do futures options differ from stock options?
The core mechanics carry over. The surrounding rules mostly do not.
- Contract size varies. There is no single multiplier. Each product has its own exchange-published contract specification; Futures Option Contract Specs and Multipliers shows how to read it.
- Regulation is different. FINRA describes stock options as securities (FINRA: Options). Futures options fall under the CFTC, which notes that firms and people handling customer funds or giving trading advice must register with the NFA. You can look up a firm or person in NFA's free BASIC database.
- Customer protection is different. FIA's standard futures risk disclosure, posted on the CFTC's website, states that funds deposited with a futures commission merchant are not protected by SIPC, even if the firm is also a broker-dealer (FIA Combined Disclosure Statement).
- Hours are longer. CME Group lists gold options, for example, as trading Sunday to Friday, 5:00 p.m. to 4:00 p.m. Chicago time, with a daily one-hour break (CME Group gold options specs). Prices can move while the stock market is closed.
How does a futures call make or lose money?
At expiration, a futures option works like any other option, measured against the futures price: a call is worth the futures price minus the strike, or zero; a put is worth the strike minus the futures price, or zero. Multiply by the contract size to get dollars.
Worked example
Futures option example: buying a gold call
All prices here are hypothetical, chosen for easy arithmetic, not current market levels.
December gold futures trade at $2,500 an ounce. You buy one December gold 2,550 call for $30.00 an ounce. One gold futures contract is 100 troy ounces.
Anatomy of a gold futures option
ONE CONTRACT
Dec Gold 2,550 Call
Underlying
Dec gold futures
Contract unit
100 troy oz
Strike
$2,550/oz
Premium
$30.00/oz
$30.00 x 100 oz = $3,000 premium
- Cost: $30.00 x 100 ounces = $3,000, paid when you buy.
- Break-even at expiration: $2,550 strike + $30.00 premium = $2,580 on December futures.
- Maximum loss: $3,000, if December futures are at or below $2,550 when the option expires.
- Maximum profit: no fixed limit, since futures prices have no ceiling.
Illustrative and hypothetical. The ticker and prices are invented for teaching, and the figures exclude commissions, fees, margin interest and taxes, which reduce real results. Past or hypothetical outcomes do not indicate future results.
What the gold call is worth at expiration
Call value at expiration (cost: $3,000)
The shape is the familiar long call: a flat loss below the strike, then $100 of profit per $1 above the break-even. Gold shares a stock option's 100x multiplier; most futures do not.
Who trades options on futures?
Two broad groups use them.
- Hedgers are businesses exposed to a price, such as a farmer worried about falling corn prices. Buying a put or call on futures sets a worst-case price while keeping some upside.
- Speculators use them for a view on a market that has no shares to buy, such as interest rates, oil or an equity index outside stock-market hours, with the defined risk of a long option.
Selling a futures option can lose far more than the premium. An uncovered short call on futures has no limit on its loss. An uncovered short put can lose up to the strike x the contract size minus the premium: on one 2,550 gold put, $255,000 minus the premium if gold futures fell to zero. Some futures can even go negative, as May 2020 WTI crude oil futures did (CFTC), so a put's loss can exceed that. FIA's standard risk disclosure warns that selling an option "generally entails considerably greater risk than purchasing options" (FIA Combined Disclosure Statement).
Check your understanding
You buy a call on March crude oil futures. What do you get if you exercise it?
Show answer
A long position in one March crude oil futures contract at the strike price. You do not receive barrels of oil directly.
Using the gold example, what is the profit or loss if December futures finish at $2,600 at option expiration?
Show answer
A profit of $2,000. The call is worth $50 an ounce ($2,600 - $2,550), or $5,000 for 100 ounces. Subtract the $3,000 premium and $2,000 remains, before fees.
Which U.S. agency oversees options on futures?
Show answer
The Commodity Futures Trading Commission (CFTC). The National Futures Association (NFA) is the industry's self-regulatory organization.
Key takeaways
- An option on futures is the right to take a long (call) or short (put) position in one futures contract at the strike price.
- Its value follows the futures price, and at expiration a call is worth the futures price minus the strike, times the contract size.
- Contract size is set product by product, so the same quoted premium can mean very different dollars.
- Futures options are overseen by the CFTC and NFA, held in a futures account, and not covered by SIPC.
- Buying risks the premium; selling, or holding the futures after exercise, can lose far more.
Common questions
What is the difference between futures and options on futures?
A futures contract is an obligation to buy or sell something at a set price on a future date, and both sides can gain or lose. An option on futures is a right, not an obligation, to take a long or short position in that futures contract at the strike price. The option buyer's loss is limited to the premium; the seller's is not.
Are options on futures regulated by the SEC?
No. Options on futures trade on futures exchanges and are overseen by the Commodity Futures Trading Commission (CFTC), with the National Futures Association (NFA) as the industry's self-regulatory organization. Options on stocks and ETFs are securities, regulated on the securities side.
Can I trade futures options in a regular stock brokerage account?
Usually not in the same account. Futures and futures options are held in a futures account at a futures commission merchant (FCM), which some brokers offer alongside their securities accounts after a separate application and approval. Check what your broker offers.
Are futures options riskier than stock options?
Not by nature, but the contracts are often much larger, so the same price move can mean far more dollars. Buying an option still risks at most the premium. Selling one, or exercising into a futures position, can lose much more than the money first deposited.