The Chicago Board of Trade (CBOT) is a derivatives trading market place. CBOT is one of four designated contract markets of the CME Group. The CBOT was merged into the CME in 2007. The CBOT is a market for the electronic and floor trading of grain futures, equity index futures and interest rate futures. The market also facilitates option trading on many of the listed futures.
CBOT Futures and Options
Futures are contracts to deliver a set amount of a commodity at some future date for a set price. Some futures contracts, such as equity indexes, are cash settlement and no commodity is required to be delivered by the contract. An option gives the option holder the right to buy or sell the underlying futures contract at a specific price for a set period of time. The CBOT carries options contracts on the futures of these commodities: corn, oats, rough rice, soybeans, soybean crush, soybean meal, soybean oil and wheat. Options are available on these financial futures contracts: Dow ($10) , E-mini Dow, 5- and 10-year U.S. Treasury notes and CBOT 5-, 7-, 10- and 30-year interest rate swaps.
Trading Options
The right to buy a futures contract is a call option and the right to sell is a put option. Option traders will either buy or sell call and put options based on where they believe the value of the future contract will be at the time of option expiration. Advanced trading strategies use option contracts in conjunction with the underlying futures contracts to profit from projected price changes in the futures and minimize the risk of financial loss.
Futures contracts have different values for a one point move. A point in corn or wheat futures is $50. A point move in soybean oil is $600 and a Treasury Note future moves in $1,000 increments.
Options on futures of deliverable commodities usually expire a month before the futures contract date. Option contracts on the index and financial futures expire a few days to a week before the futures date. Index and financial futures will also have options with serial expirations between the futures months.
There are not standardized delivery dates for the different futures contracts. Each future product has its own values, trade sizes and delivery dates. The corresponding options contracts will have corresponding strike prices and expiration dates set by the CBOT.
CBOT options trades must be placed through a broker registered with the U.S. Commodity Futures Trading Commission (CFTC). The broker can be a Futures Commission Merchant or an Introducing Broker.
