How to buy oil options

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How to buy oil optionsHow To Buy Oil Options

Crude oil options are the most widely traded energy derivative in the New York Mercantile Exchange ( NYMEX ), one of the largest derivative product markets in the world. The underlying of these options is not actually crude oil itself, but crude oil futures contracts. Thus, despite their names, crude oil options are, in fact, options on futures .

Both American and European types of options are available on NYMEX. American options . which allow the holder to exercise the option at any time over its maturity, are exercised into underlying futures contracts. Thus, a trader who is, for instance, long on the American call/put crude oil options takes long/short position on the underlying crude oil futures contract.

Below the table summarizes the American option positions that once exercised results in the respective underlying futures position shown in the second column.