Hi again,I am struggling to understand a Calendar option traded in ICE. For example say, the contract is Rotterdam Coal Cal 1x Options in ICE. In the specification tab, it is said that:A calendar year option on the associated Rotterdam Coal Futures Contract(ATC). The single expiry option will expire equally into the twelve underlyingmonths which make up the calendar year.Source:https://www.theice.com/products/4244511 ... ptionsForm this statement, I infer followings:1. This is basically a portfolio of 12 options corresponding to 12 months in year. Assets weights are equal.2. In this portfolio, 1st option has underlying Jan Coal future, 2nd is Feb Coal future as so on.Can somebody help me if my underlstanding is perfect? Your help is highly appreciated.Thank you for your time.

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I am not familiar with these products, but I imagine that this is an option on a portfolio, rather than a portfolio of options.

QuoteOriginally posted by: MartinghoulI am not familiar with these products, but I imagine that this is an option on a portfolio, rather than a portfolio of options.I'm not famililar with it either, and the original poster didn't really explain it>> A calendar year option on the associated Rotterdam Coal Futures Contract (ATC). >> The single expiry option will expire equally into the twelve underlying months which make up the calendar year.so at maturity, if it expires on 31 December, I assume that you would receive1 x January future1 x February future1 x March future ....1 x December futureIf it is a European option, then this option on a portfolio would be the same as1 x option on a January future 1 x option on a February future.....1 x option on a December futureso as to the original poster's question, >> 1. This is basically a portfolio of 12 options corresponding to 12 months in year. Assets weights are equal.while Martinghoul is o course correct that "this is an option on a portfolio, rather than a portfolio of options", if it is European, it will have the same value as a portfolio of options>> 2. In this portfolio, 1st option has underlying Jan Coal future, 2nd is Feb Coal future as so on.depends on when it expires, i would thinkIf it expires in June, then presumably it would be July future, August future, ...., June future,but 12 consecutive ones anywaySenior Member

I could be wrong and, again, I am not an expert on these products, but isn't an option on a portfolio not the same thing as a portfolio of options, even when everything is European? I am just thinking of this in terms of the analogous products we have in rates space, i.e. caps/floors and swaptions.

Yes, Robert Merton provided a proof in his 1972 Bell Journal of Economics paper The Theory of Rational Option Pricing, that an option on a portfolio is worth less than a portfolio of options.