Gold Futures Options

Contract size and quotation

The standard COMEX gold option covers one 100-troy-ounce gold futures contract. Premiums are quoted in US dollars per ounce. A $25 premium therefore costs $2,500 for one option, before fees.

The minimum premium increment is $0.10 per ounce, equivalent to $10 per contract. This is the smallest quoted price step, not the option’s total cost or its maximum daily price change.

The option month and the futures month

An option’s named month is not necessarily the month of its underlying future. For standard monthly COMEX gold options, a January option references February futures; a February option also references February futures. The exchange specifies these pairings.

For example, if you buy a January call, changes in February gold futures determine its intrinsic value. A spot-gold chart gives useful context but does not supply the exact price used for that calculation.

The standard monthly option expires before its named contract month begins. Use the exchange’s options expiration calendar for the actual date. Weekly and other series have their own terms; do not identify an expiration date from the month label alone.

What happens when you exercise?

The standard monthly option is American-style: its holder can exercise on a business day before expiration as well as on expiration day. Exercising a call creates a long futures position at the strike. Exercising a put creates a short futures position.

Suppose you exercise a $2,000 call when its underlying future is at $2,100. The resulting long position has a $100-per-ounce advantage, or $10,000 across 100 ounces. That is the option’s intrinsic value before subtracting the premium and fees.

Exercise does not immediately hand you gold bars. It leaves a futures position to manage. If you keep that position, later price changes affect your result and margin requirements apply. Keeping a physically deliverable future into delivery can create delivery obligations.

Closing the option instead

You can sell the option to close when a market is available. Before expiration, its price may include time value in addition to intrinsic value. Exercising sacrifices that remaining time value, so compare the available sale price with the exercise value.

Check your broker’s exercise deadlines and handling of expiring positions. Paying the option premium does not mean you have funded a futures position that may result from exercise.

Continue learning

Gold Options explains call and put profits, losses and breakevens. Where to Trade Gold Options covers broker access and trading costs. For the market outlook, read What Moves Gold Prices?