Wild Card Option

You know when you play dealer's choice poker and some clown calls "deuces and jacks and man with the axe are wild." Yeah, that's something totally different.

Here, we're talking about a particular situation that comes up in treasury futures trading. The wild card option has to do with the timing of delivering a short.

When you take a short position, it means you borrow an asset, sell it, and then hope the market price for the asset goes down. Eventually, you have to repurchase the asset and return it to the original owner. Your plan is to buy it back at a lower price, and keep the difference as profit.

Treasury futures, meanwhile, are contracts for the purchase or sale of treasury bonds at some point, well...in the future. Treasuries are U.S. government bonds. The treasury futures market allows speculation in the price of these bonds at points down the road.

With a wild card option, a short in the treasury futures market doesn't need to get delivered at the close of regular trading hours. Instead, the trader can keep the position open during after-hours electronic trading. It allows a few more hours for the price to move in the right direction.