Let's have a closer look at stir options.

Options on short term interest rate futures.

Stir options operate like other options you will have seen before.

There are calls and puts which give you the right to buy or sell the underlying.

With the underlying here being a specified interest rate futures contract.

On the screen you can see an example of an option on a three month arrival futures contract.

You can see that the underlying asset for the option is one futures contract and exercise of the option will take the holder into a long or short position In the underlying futures contract, the tick value and tick size are the same as for the arrival futures contracts.

And you will note that the exercise style is American, meaning the buy of the option can exercise at any point up to and including the final expiry date.

American style exercise is the standard for exchange traded interest rate options, but it's rare in the OTC market where European and Bermin styles tend to dominate.