Embed Size (px)
DESCRIPTION
By www.Options-Trading-Education.com Commodity Futures Options Trading In commodity futures options trading as in all options trading traders buy options to hedge risk. They purchase both puts and calls and use options to speculate in energy, agricultural commodities, and both precious and industrial metals. One can purchase futures contracts on commodities such as corn, wheat and soybeans. When doing so the trader watches the long term weather forecasts to see if a drought in a major producing area such as the Ukraine, Brazil, or the American Midwest will drive commodity prices up. When a trader is fairly certain that prices will rise or fall he can buy or sell futures contracts with a fair expectation of profit. However, a drought may resolve itself with plentiful rain and an excellent growing season may be ruined by hailstorms. Thus many traders engage in commodity futures options trading in order to retain the right to buy or sell a contract without tying up money and carrying risk through uncertain times. Calls and Puts in Commodity Futures Options Trading As with all options trading a call gives one the right to purchase and a put gives one the right to sell a specified quantity of a commodity on or before the end of the contract period. Traders who are certain that prices will not rise can profit from selling calls and those who are certain that prices will not fall can profit from selling puts. In general, selling calls and puts is more profitable than buying them over the long term. However, because of the risk of an occasional catastrophic loss, selling options contracts is typically limited to large companies and traders with very deep pockets. Those wish to avoid the risk of a large loss will buy puts or buy calls to lock in opportunity in commodity futures options trading. Traders use both fundamental and technical analysis in order to predict commodity futures prices. Oil may go up because of unrest in the Middle East or down because of a recession in Europe or North America. Knowing the fundamentals that eventually determine prices and following market sentiment via technical trading strategies it is possible to profit from the natural swings in prices of any of the broad range of traded commodities. Profitable Options Strategies There two sorts of options traders. The first type which is the type for whom the commodity markets were developed are the producers, processors, and major buyers of the various commodities. These companies typically buy options in order to contain risk. The risk may be of changes in commodity availability or of fluctuations in demand. The risk may also have to do with currency rates. For example, the US dollar and oil are intertwined as oil is commonly priced in dollars. The second type of options trader is the speculator. This person or company buys and sells commodities or engages in commodity futures options trading solely in order to make money.
Citation preview
COMMODITY FUTURES OPTIONS TRADING
By www.Options-Trading-Education.com
In commodity futures options trading as in all options trading traders
buy options to hedge risk.
By www.Options-Trading-Education.com
They purchase both puts and calls and use options to
speculate in energy, agricultural commodities,
and both precious and industrial metals.
By www.Options-Trading-Education.com
One can purchase futures contracts on commodities such as corn, wheat and
soybeans.
By www.Options-Trading-Education.com
When doing so the trader watches the long term
weather forecasts to see if a drought in a major
producing area such as the Ukraine, Brazil, or the
American Midwest will drive commodity prices up.
By www.Options-Trading-Education.com
When a trader is fairly certain that prices will rise or fall he can buy or sell
futures contracts with a fair expectation of profit.
By www.Options-Trading-Education.com
However, a drought may resolve itself with plentiful
rain and an excellent growing season may be ruined by hailstorms.
By www.Options-Trading-Education.com
Thus many traders engage in commodity futures
options trading in order to retain the right to buy or sell a contract without tying up
money and carrying risk through uncertain times.
By www.Options-Trading-Education.com
Calls and Puts in Commodity Futures Options Trading
By www.Options-Trading-Education.com
As with all options trading a call gives one the right to purchase and a put gives
one the right to sell a specified quantity of a
commodity on or before the end of the contract period.
By www.Options-Trading-Education.com
Traders who are certain that prices will not rise can
profit from selling calls and those who are certain that prices will not fall can profit
from selling puts.
By www.Options-Trading-Education.com
In general, selling calls and puts is more profitable than buying them over the long
term.
By www.Options-Trading-Education.com
However, because of the risk of an occasional
catastrophic loss, selling options contracts is typically limited to large companies and traders with very deep
pockets.
By www.Options-Trading-Education.com
Those wish to avoid the risk of a large loss will buy puts
or buy calls to lock in opportunity
in commodity futures options trading.
By www.Options-Trading-Education.com
Traders use both fundamental and technical analysis in order to predict commodity futures prices.
By www.Options-Trading-Education.com
Oil may go up because of unrest in the Middle East or
down because of a recession in Europe or North America.
By www.Options-Trading-Education.com
Knowing the fundamentals that eventually determine
prices and following market sentiment via technical trading strategies it is
possible to profit from the natural swings in prices of any of the broad range of
traded commodities.By www.Options-Trading-Education.com
Profitable Options Strategies
By www.Options-Trading-Education.com
There two sorts of options traders.
By www.Options-Trading-Education.com
The first type which is the type for whom the
commodity markets were developed are the
producers, processors, and major buyers of the various
commodities.
By www.Options-Trading-Education.com
These companies typically buy options in order to
contain risk.
By www.Options-Trading-Education.com
The risk may be of changes in commodity availability or of fluctuations in demand.
By www.Options-Trading-Education.com
The risk may also have to do with currency rates.
By www.Options-Trading-Education.com
For example, the US dollar and oil are intertwined as oil
is commonly priced in dollars. The second type of
options trader is the speculator.
By www.Options-Trading-Education.com
This person or company buys and sells commodities or engages in commodity
futures options trading solely in order to make
money.
By www.Options-Trading-Education.com
He, she, or the company is only interested in the
commodity in question to the extent that its trading is somewhat volatile which in
turn can lead to profits.
By www.Options-Trading-Education.com
A company dealing with risk containment will often make
a single trade in order to insure against risk.
By www.Options-Trading-Education.com
A speculator may find himself in and out of options
trades as frequently as every day in search of
profits.
By www.Options-Trading-Education.com
For more insights and useful information about options an
options trading visit
www.Options-Trading-Education.com
.
