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Trading Options on Futures Using Strategies You Already Know

 

Trading strategies using options and futures

Sep 03,  · Final Words – Futures Strategy. Futures are a remarkable trading vehicle that allows traders to trade a variety of instruments. Regardless of the futures trading strategies you use, make sure you know them so deeply that you can execute it without hesitation. The markets are constantly changing so regardless how good of a trader you are, there’s always a new trading trick that can help optimize your trading /5(3). The 3 Types of Trading: Intraday, Day, and Swing. Active futures traders use a variety of analyses and methodologies. From ultra short-term technical approaches to fundamentals-driven buy-and-hold strategies, there are strategies to suit everyone’s taste. Options and Futures Example. If the price of gold rises above the strike price of $1,, the investor would exercise his right to obtain the futures contract, otherwise, he may let the options contract expire. The maximum loss of the call options holder .



Options Trading Strategies: A Guide for Beginners


Did you know that as an equity trader you can apply the same strategies to options on futures that you use with equity options? One of the benefits of being an options trader is that you can use the same trading strategy in multiple markets.

All traders have at one time or another found it difficult to consistently find new trades from their watch list; adding options on futures markets can help expand your watch list to find more trades. If you already have trade set ups for equity options, you benefit from the ability to apply those same set ups across all futures markets, thus giving you access to more trades. Using the same tools you already use to create your equity market assumption about where you think the underlying will move, you can Trading strategies using options and futures trades to take advantage of that move.

Essentially, if you already know how to trade equity options then adding options on futures becomes an easy transition and a valuable addition to your trading plan.

Take a look at some of the trade strategies you might use to trade Equity Index options that can also be used to trade options on futures. Directional trading by buying calls and puts is a common way to trade options and can be used in the same manner in options on futures. Trading options on futures by purchasing puts and calls is a way to capitalize on a fast moving market with a set amount of risk what you pay for the option just the same as buying a call or put in an equity option.

Other spread strategies like debit spreads can also provide a subsidized way to buy put and call options with a fixed risk and reward. Regardless of the strategy, all of the directional trades that you currently use in equities will be applicable here.

In fact, trading options on futures can, in many cases, have an advantage. Rather than trade the futures contract alone, options on futures allows a trader to make a trading assumption about the direction of price similar to trading a futures contract, but with the advantages of only risking what you paid for the option rather than the usual higher cost of the futures contract, all while taking advantage of a fast move in these markets.

Their belief is that Silver will be worth more in the next month, Trading strategies using options and futures. This trader buys this call that is about one month out so that there is time for silver to rise and for him to sell the call for more than what he paid for it.

Just like equities, options on futures can also be traded using multi-leg trade strategies like spreads and butterflies. Combinations can be traded as one order or add legs to existing positions to build spreads.

It can also be an opportunity to trade by selling premium with less margin requirement than selling puts alone. A spread strategy will behave the same whether in equity options or options on futures. The trader would sell the 20, call and buy the 20, call that expires in three weeks when the YM is trading around 19, and receive a credit of around 20 points. This example of taking advantage of premium from volatility is just one way a trader using multi-leg strategies can benefit from options on futures.

If a trader believes that year Treasury Bonds ZB are going to move down, he could sell an out of the money January weekly call spread Trading strategies using options and futures expires at the end of the current week.

The trader would keep the entire credit received if bonds closed below at the end of the week. Just like equity options, Trading strategies using options and futures, with options on futures, volatility traders and non-directional traders can use the same strategies which are already familiar. Non-directional traders can implement strategies like selling straddles and strangles to take advantage of decreasing volatility in a sideways market.

Other strategies like calendar spreads are also possible just like with equity options, Trading strategies using options and futures. If a trader believes that YM is going to consolidate over the next few weeks, one of the ways he could trade is by selling a straddle. If YM is currently trading at 19, a trader could sell the Jan 31 19, put and call for points.

The strategy would pay off if YM moved less than points by expiry of the spread. As an experienced equity index trader, you can hedge your positions in a couple of different ways using the futures markets and your existing trading knowledge. You can consider combining any existing futures holdings and options on futures to create a perfect one-to-one hedge.

The same is possible with foreign exchange FX contracts allowing traders to hedge any foreign currency exposure they might have. A trader who has multiple stock holdings could help offset a downturn in the market by buying sufficient puts in the ES contract.

The trader can choose between long- and short-term expiries depending on the time frame they wish to hedge. For example, ES is trading at 2, The trader could buy March 2, puts for 46 points to hedge over the short term or buy September 2, puts for points to hedge over the longer term. Next time you are searching for a new trade, consider looking at the many options on futures products available and use the knowledge you already know.

CME Group is the world's leading and most diverse derivatives marketplace. All Products Home. Active trader. Hear from active traders about their experience adding CME Group futures and options on Trading strategies using options and futures to their portfolio. Find a broker. Get quick access to tools and premium content, or Trading strategies using options and futures a portfolio and set alerts to follow the market. Market Data Home.

Real-time market data. E-quotes application. Access real-time data, charts, analytics and news from anywhere at anytime, Trading strategies using options and futures. Explore historical market data straight from the source to help refine your trading strategies.

Clearing Home. Technology Home. Uncleared margin rules. Understand how CME Group can help you navigate new initial margin regulatory and reporting requirements. Calculate margin. Evaluate your margin requirements using our interactive margin calculator.

Education Home. New to futures? Learn why traders use futures, how to trade futures and what steps you should take to get started. Create a CMEGroup, Trading strategies using options and futures.

Options on Futures for Equity Traders. You completed this course. Get Completion Certificate. Directional Trades Directional trading by buying calls and puts is a common way to trade options and can be used in the same manner in options on futures. Multi-Leg Trades Just like equities, options on futures can also be traded using multi-leg trade strategies like spreads and butterflies.

Non-Directional Trades Just like equity options, with options on futures, volatility traders and non-directional traders can use the same strategies which are already familiar. Summary Next time you are searching for a new trade, consider looking at the many options on futures products available and use the knowledge you already know. Test your knowledge. Related Courses. Previous Lesson. All rights reserved.


 

Options vs. Futures: What’s the Difference?

 

Trading strategies using options and futures

 

producer can hedge in the following manner by using crude oil futures cooliup0ti.gqtly, • An August oil futures contract is purchases for a price of $59 per barrel • Spotpricesarecurrently$60 • WhathappenswhenthespotpriceinAugustdecreasesto$55? – Producergains$4perbarrelonthepurchasefromthedecreased price. Sep 03,  · Final Words – Futures Strategy. Futures are a remarkable trading vehicle that allows traders to trade a variety of instruments. Regardless of the futures trading strategies you use, make sure you know them so deeply that you can execute it without hesitation. The markets are constantly changing so regardless how good of a trader you are, there’s always a new trading trick that can help optimize your trading /5(3). Jan 19,  · Here’s a list of a few Futures & Options Trading Strategies that you can use to manage your risks: Futures & Options are used to manage portfolio risks. Futures Contracts, standalone, are like raging bulls. You cannot predict the size of holes it may dig in your kitty. Hedgers do have a sound basis. They need not worry much.