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Commodity futures option
An option whose underlying is a commodity, either directly (for example options on precious metal) or, most often, by way of a futures whose underlying is the commodity.
This term designates both options on commodities (on exercise, the option holder takes a position in the commodity itself) and futures options (on exercise, the option holder takes a position in the underlying futures). To avoid ambiguity, the term commodity futures option should be used when options directly on commodities are excluded.
Synonyms and variations
- Commodities option
- Commodity option