Gold futures and options horizons

Not every way of holding gold suits the same investment horizon. The workbook sets this out directly, comparing gold futures, gold options, gold ETFs and gold funds side by side on exactly this point.

The workbook's comparison table gives each route a different natural time horizon:

• Gold futures — a 12-month time horizon.
• Gold options — governed by the exchange's own contract launch calendar, rather than a fixed period.
• Gold ETFs and gold funds — can be held for a very long tenure, or even for a lifetime, because these are actual investments in the underlying gold, not contracts that expire.

The same table compares cost: futures carry mainly the interest cost of delaying purchase, options add a risk premium reflecting the buyer's discretion on whether to exercise, while ETFs and funds carry the actual market cost of gold at purchase plus ongoing management charges. On risk, futures behave like an index fund, options cap the buyer's maximum loss at the premium paid, and ETFs and funds simply track the price of gold and its fluctuations.

Illustrative figures. Ms Reddy wants gold exposure for a goal 6 months away and a separate goal 15 years away.

For the 6-month goal, a gold futures contract with a 12-month horizon could technically be used, but its fixed expiry means she would need to roll it over or close it out well before the underlying commodity horizon actually matters to her — futures are built around a 12-month cycle, not a short 6-month need.

For the 15-year goal, a gold ETF or gold fund fits naturally, because these can be held for a lifetime without any expiry or roll-over decision — she simply continues holding the units, unlike a futures or options contract that would lapse long before her horizon is reached.

Chapter 19 (Comparison of Products across categories), section 19.2.11, "Gold Futures V/s Gold Options V/s Gold ETFs," tabulates time horizon, cost and risk across the four gold routes. Expect a question asking which gold route best matches a given investment horizon.

• Gold futures have a fixed 12-month horizon, not an open-ended one — a common assumption is that futures, like ETFs, can simply be held indefinitely.
• Gold options follow the exchange's contract calendar, not a standard 12-month cycle like futures.
• Only ETFs and funds are genuinely lifetime holdings, because they represent actual ownership of gold or gold-backed units, not a contract that expires.