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American Futures Option


A futures option that can be exercised at any time before, and including, expiration date. This type of options provides investors with great flexibility as to take advantage of their futures options (specifically the futures price of a commodity or financial instrument) when it seems most favorable to do so without having to wait till expiration (in which case they would run the risk of missing out a profitable early exercise when an option gets deep in the money). This flexibility implies that the premium of an American futures option is higher (or at least not lower) than the premium of a European futures option whose all other features are identical to those of the American option.

American futures options are generally classified as American futures call options and American futures put options.



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Derivatives have increasingly become very important tools in finance over the last three decades. Many different types of derivatives are now traded actively on ...
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