Business, Legal & Accounting Glossary
A serial option is an option investors may buy on futures contracts if they want to invest in futures during a month when a futures contract isn’t available. For example, if there were no pork futures for sale in February, an investor could buy a serial option on pork futures for March in anticipation of a futures contract becoming available. If the investor exercises the serial option, they then own the futures contract for that month. Most serial options are written for the next month following the option’s purchase; a serial option trades only for about 30 days. Exchanges created the serial option to provide commodity investors and producers with another short term way to hedge their investment. They can also use a serial option to extend a hedge from one month to the next. And because the time frame of a serial option is shorter than for a conventional option, theoretically the risk premium is lower as well.
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This glossary post was last updated: 5th February, 2020 | 16 Views.