August 11th, 2009, 9:47 am
Hi all,what is the impact of the forward curve of futures when pricing options on the future?For instance, i sell a put on a backwardated month, ceteris paribus there is a buffer (free lunch) when the future price moves upwards toward the spot price over the period of time.How is this priced in options prices. Must be via the implied vol, right? Because the price of the underlying (in this case the future) does not have that much impact on the option price. In equity markets that should never be an issue, but in commodity markets one often sees a backwardated forward curve.Does anybody know some kind of research material or a paper regarding this "roll yield in options on futures"?Thank you very much in advance!Bjoern