4.2.1.3.1.2. Delivery and Margin Requirements of Futures Options
When a futures option is exercised, settlement can involve the delivery of a futures contract. If the holder of the exercised option has a long call, she will receive a long futures contract. The assigned party will receive a short futures contract. The holder of a long put will receive a short futures contract upon exercise, while the assigned party will receive a long futures contract. This type of settlement is often referred to as physical settlement. Settlement can also be financial, which means the holder of the option will receive the cash value of the futures contract. Whether an option is settled through physical or financial settlement depends on the contract.
The futures contract is exercised at the strike price of the option. It will be marked to market daily beginning on the trading day that the clearinghouse accepts the exercise notice. If the holder of the exercised option has a long call, she will receive a long futures contract. The assigned p