An option on a commodity futures contract gives the buyer, who pays a market determined price known as a "premium," the right (but not the obligation), within a specific time period, to exercise his or her option. Exercise of the option will result in the person being deemed to have entered into a futures contract at a specified price known as the "strike price." In some cases, an option may confer the right to buy or sell the underlying asset directly, and these options are known as options on the physical asset.
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