The future price is the attribute of a future contract and Strike price is the attribute of the Option contract . Strike price is the price at which we'll buy/sell the underlying asset - which in this case is the future contract and not the underlying asset of the futures contract. Since in level 1 we are not given with the treatment to price futures.It took me a while to digest that strike price doesn't become the future price to buy the underlying asset of the futures contract (Please correct me if I am wrong), it's just the price at which we can buy the future contract. Can somebody give an example as to when the underlying asset of the futures contract will have the spot price less than strike price of the option but the price of the futures contract will be more than the strike price of the option (to make the call option in the money )?
Also when we mark to market , I've heard that we adjust the future price to buy the asset of the futures contract , such that the present value of the future contract is zero again. Does it mean that if in a day's movement in the price of the asset underlying the future contract goes 5$ above the future price to buy the asset of the futures contract in the contract , do we increase the increase the future price in the contract ?
Also when we mark to market , I've heard that we adjust the future price to buy the asset of the futures contract , such that the present value of the future contract is zero again. Does it mean that if in a day's movement in the price of the asset underlying the future contract goes 5$ above the future price to buy the asset of the futures contract in the contract , do we increase the increase the future price in the contract ?