What Are 10-Year T-Note Options On Futures? – ICoQuet
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What are 10-Year T-Note Options on Futures?

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Among the most actively-traded options on futures, products are 10-Year T-Note futures options. A derivative of 10-Year Treasury Notes, these options on futures vehicles allow traders to speculate the directionality of interest rates as well as hedge risk at the end of a yield curve.

Providing 4 distinct ways to speculate and trade futures markets, options on futures are appealing to traders looking for more market entry choices and greater risk control.

10-Year T-Note Futures Market

A 10-Year Treasury note is a bond issued by the government which matures in ten years. When you buy a 10-Year note, you are essentially providing a loan to the US government which is repaid 10 years later with interest. 10-year Treasury notes have a face value at maturity of $100,000.

Treasury notes are the most popular debt instruments in the world because they are backed by the US economy. When bad news hits markets, many investors flock to US Treasury bonds as a safe haven to protect their risk capital.

Interest rate futures were introduced by the Chicago Board of Trade in 1975 to address the growing need of investors to hedge against unfavorable interest rate conditions. Among these products were 10-Year T-Note Futures, with 3 main objectives for traders:

  • Provide an opportunity to hedge against sharp swings in the cost of money
  • Present the ability to speculate & trade the interest yield curve
  • Create a deep and liquid market against other points on the yield curve

Futures Options: Derivatives of Derivatives

10-Year T-Note options on futures are derivatives of 10-Year T-Note futures, existing derivative security. 10-Year T-Note options on futures afford owners the right, but not the obligation, to buy or sell the underlying futures contract at a specific price on or before the option’s expiration date.

Two types of options are available, call options and put options, both of which can be traded on either the long or short side, offering 4 unique ways for traders to approach these markets.

 

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