Options on GSCI futures give the buyer the right, but not the obligation, to buy or sell the underlying GSCI futures contract at a specific price within a specified period of time. Because they are American-style options, the buyer may exercise on any day the option is traded.

Option strike price intervals are set at two GSCI points (I 90, 1 92, etc.). Option strikes for the contract month nearest to maturity are set at one GSCI point (1 91, 192, etc.). The premium (or price) of these options is discovered in the trading arena via open outcry.

Bi-monthly and serial options are listed for the GSCI. For example, in August, options would be listed for expiration in August, September and October. The August option expires on the first business Friday of August and a November option is listed the following Monday. GSCI options listed in the February bimonthly cycle expire on the fourth business day of the contract month, coincident with the futures expiration. Serial-month option contracts (i.e., those not in the February cycle) expire on the first business Friday of those months. Upon exercise, a February option exercises into a February futures position, while a March option exercises into an April futures position,

Option sellers must meet performance bond requirements established by their broker; and all short option positions are marked-to-market at the close of each trading session, potentially requiring an adjustment to this bond. Option buyers, on the other hand, need only pay the entire option premium upfront. Upon exercise and the assumption of a futures position, the option buyer is subject to futures performance bond requirements. Call your broker for more information regarding performance bonds and to obtain a risk disclosure document.