Futures and options on futures differ from equity options in many ways. Last week's Closing the Gap: “Options on Futures” segment discussed the difference in reading quotes for options on futures. This week's discussion focused on delta.
Just like stocks, the delta of options on futures represents the probabilities associated with the expected move. An example was provided using /ES and SPX. While the option chain deltas look the same as equity options, the position delta will be very different because the dollar multiplier for each futures contract varies.
Pete presented a list of the delta for each underlying, the delta of the ATM options and the delta of the 1SD options on the most liquid futures contracts. Pete mentioned that this could be used as a great “cheat sheet." With this information, the guys constructed different pairs trades as an example.
Watch this segment of “Closing the Gap - Futures Edition” with Tom Sosnoff, Tony Battista and Pete Mulmat for the valuable takeaways and for a better understanding of the differences between the deltas for options on futures, and options on equities.
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