Understanding Option Premium in Futures Linked to Treasury Options

Summary

The document raises a derivatives-pricing question about VXTY futures, whose contract specification references options on ten-year Treasury futures. The author distinguishes option selling, which involves receiving an option premium, from entering a futures position, where no comparable upfront premium is ordinarily exchanged. They ask whether selling the futures contract nevertheless provides an implicit premium because its value is linked to options, and how to understand the pricing across these layers.

The document contains no answer, derivation, or pricing evidence. It therefore identifies a useful conceptual distinction between the value of an option referenced by a futures contract and the cash flows of trading the futures itself, but does not resolve how the specific contract is priced or whether any option-related exposure can be interpreted as a premium. Readers would need the contract methodology and relevant derivatives-pricing framework to draw a conclusion; the text alone is insufficient to establish one.

Key ideas

• The question concerns a futures contract priced with reference to options on Treasury futures.
• Option sellers receive an option premium, while futures positions generally do not involve the same upfront premium exchange.
• The document asks whether option-linked futures embed an economically meaningful premium for sellers.
• No answer or pricing analysis is provided, so the question remains unresolved.

Tags

# Do you receive premium from selling VXTY futures?


# Do you receive premium from selling VXTY futures?












I am having some difficulty understanding VXTY futures and how they are priced. The contract specs say it is priced off of OZN options (10yr UST futures options). I understand there is a premium received by options sellers and there is no premium received from a futures contract seller, and the differences in the futures contract price represent carrying cost, borrowing cost, etc.

My question is, do you receive a premium (even if implicitly) from selling VXTY futures since it is a futures contract priced off options?

The additional level of abstraction to get from OZN options to VXTY futures is where I get lost with respect to the fundamentals of derivatives pricing.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.