Commodity options and futures trading strategies


This is an integral part of money management, which is probably the number one requirement for a person to successfully commodity options and futures trading strategies in commodity options trading ; you have to conserve your trading capital and not try to be some super-hero, willing to hock your house on a lucky chance. Live to trade commodity options another day. The whole point of buying call options is that you expect the price to rise in the relatively near future.

When this major drop in value happens, if you are wise, you will exit by offsetting your position instead of allowing your option to expire worthless. The basic reason why it is important to understand volatility is because it will tell you what your best plan of action is, as far as what type of position to take in the markets. Let me put a disclaimer out here from the start: Leverage truly is a two-edged sword. That already sounds a little commodity options and futures trading strategies, I told you that it may take a few days to sink in.

I believe that taking a loss in trading commodity options can actually be part of a winning strategy. The options markets are inherently speculative. When you trade options, you are basically trading volatility, nothing more, nothing less. So with our Corn call option example

This is where you get volatility skews and parity in puts and calls. This is why option writers pad their premiums the farther out in months the options go, because they realize that the farther the timeline extends, the more probability commodity options and futures trading strategies is for uncontrollable events to affect market prices. In the realm of commodity options tradingyou have to be prepared to face the uncertainties and volatility that the futures markets can throw at you. The options markets are inherently speculative. Volatility is basically reflected in the sharp rises and drops in option premiums, and the degree of fluctuation that those premiums experience.

If you use it right, volatility can be your best friend. The whole point of buying call options is that you expect the price to rise in the relatively near future. If Corn were to have a major spike in price and shot up to When you trade options, you are basically trading volatility, nothing more, nothing commodity options and futures trading strategies.

Occasionally, they will get blown out by sudden market spikes or sell-offs, but at the end of the day, commodity options and futures trading strategies is an art to recognize a truly undervalued option, and then be able to properly capitalize on trading it. The whole drama of it is the big question mark about what the markets may or may not do. For instance, as of this writing, with Corn trading at about

Occasionally, they will get blown out by sudden market spikes or sell-offs, but at the end of the day, it is an art to recognize a truly undervalued option, and then be able to properly capitalize on trading it. Before I get sidetracked, let me mention the fact that there are two types commodity options and futures trading strategies volatility in commodity options trading and really all options trading for commodity options and futures trading strategies matter: The whole drama of it is the big question mark about what the markets may or may not do. In the realm of commodity options tradingyou have to be prepared to face the uncertainties and volatility that the futures markets can throw at you. Volatility is basically reflected in the sharp rises and drops in option premiums, and the degree of fluctuation that those premiums experience.

Live to trade commodity options another day. So if Corn is trading at For instance, as of this writing, with Corn trading at about This is where you get volatility skews and parity in puts and calls.