Calendar Spread Options (CSOs) are options on the price differential between two futures months. The price differential is defined as a specified nearby futures month price minus a specified deferred futures month price. Unlike standard options, CSOs are sensitive only to the value and volatility of the spread itself, rather than the price of the underlying commodity. Fluctuations in grain and oilseed prices do not affect CSO premiums as strongly as a hedging strategy that simply combines standard options from two different calendar months. This fact card will give you a quick snapshot of who uses these contracts and why, plus the contract specifications you need to know to begin trading.
All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
