Gold options are option contracts in which the underlying asset is a gold futures contract.
The holder of a gold option possesses the right (but not the obligation) to assume a long position (in the case of a call option) or a short position (in the case of a put option) in the underlying gold futures at the strike price.
This right will cease to exist when the option expire after market close on expiration date.
Gold option contracts are available for trading at New York Mercantile Exchange (NYMEX) and Tokyo Commodity Exchange (TOCOM).
NYMEX Gold option prices are quoted in dollars and cents per ounce and their underlying futures are traded in lots of 100 troy ounces of gold.
TOCOM Gold options are traded in contract sizes of 1000 grams (32.15 troy ounces) and their prices are quoted in yen per gram.
|Exchange & Product Name||Underlying Contract Size||Exercise Style||Option Price Quotes|
|NYMEX Gold Options||100 oz|
(Full Contract Specs)
|American||Calls | Puts|
|TOCOM Gold Options||1000 gm|
(Full Contract Specs)
|American||Calls | Puts|
Options are divided into two classes - calls and puts. Gold call options are purchased by traders who are bullish about gold prices. Traders who believe that gold prices will fall can buy gold put options instead.
Buying calls or puts is not the only way to trade options. Option selling is a popular strategy used by many professional option traders. More complex option trading strategies, also known as spreads, can also be constructed by simultaneously buying and selling options.
As gold options only grant the right but not the obligation to assume the underlying gold futures position, potential losses are limited to only the premium paid to purchase the option.
Using options alone, or in combination with futures, a wide range of strategies can be implemented to cater to specific risk profile, investment time horizon, cost consideration and outlook on underlying volatility.
Options have a limited lifespan and are subjected to the effects of time decay. The value of a gold option, specifically the time value, gets eroded away as time passes. However, since trading is a zero sum game, time decay can be turned into an ally if one choose to be a seller of options instead of buying them.
To buy or sell futures, you need a broker that can handle futures trades.
OptionsHouse is a full fledged Futures Commission Merchant that provides a streamlined access to the futures markets at extremely reasonable contract rates.Click here to open a futures trading account at OptionsHouse.com now!
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Risk Warning: Stocks, futures and binary options trading discussed on this website can be considered High-Risk Trading Operations and their execution can be very risky and may result in significant losses or even in a total loss of all funds on your account. You should not risk more than you afford to lose. Before deciding to trade, you need to ensure that you understand the risks involved taking into account your investment objectives and level of experience. Information on this website is provided strictly for informational and educational purposes only and is not intended as a trading recommendation service. TheOptionsGuide.com shall not be liable for any errors, omissions, or delays in the content, or for any actions taken in reliance thereon.