Trading future and options


That already sounds a little convoluted…see, I told you that it may take a few days to sink in. Think about it this way…if you were at a department store and you wanted to buy a DVD player that was on sale, but then you found out that the last one was sold before you had a chance to get to it, most stores will allow you to create a raincheck for that item.

The whole point of buying call options is that you expect the price to rise in the relatively near future. So if Corn is trading at For instance, as of this writing, with Corn trading at about Another HUGE benefit of buying call options is the fact that unlike buying the futures contract your risk is limited; with buying options, you can never lose more than your initial investment. So with our Corn call option example Once you buy the option, your risk is set, and you now have the right to buy one Corn contract stock at the If Corn were to have a major spike in price and shot up to For example, if you were to buy a call option on Corn with a strike price of So, buying a Corn call option with a But if Corn were to have a dramatic and quick spike in price, and it jumped up to Nonetheless, I hope this little diddy on call options explained has at least begun to bring some clarity to this detailed area of investing.

If you understand the effect that volatility has on the options market, you will understand how sometimes extraordinary profits can be pulled from trading commodity options with very little relative investment. When you trade options, you are basically trading volatility, nothing more, nothing less. Remember the option is only going to be as stable as the futures contract that the option represents.

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. Once you understand a little about market psychology, you can truly exploit volatility to create some serious profits in a relatively short period of time.

Before I get sidetracked, let me mention the fact that there are two types of volatility in commodity options trading and really all options trading for that matter: In other words, how stable or unstable have market prices been throughout history?

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. This chapter gives you all the necessary information that you need to know before placing your first futures trade. The chapter also throws light into why brokers and exchanges charge margins. This chapter gives you an overview of how to use a margin calculator.

In addition the chapter also touches upon spread trading such as calendar spreads. The chapter explains all that you need about shorting, be it futures or stocks with practical real life examples. Emphasis is also made on things you need to take care of when you short stocks or futu.. This chapter is a primer on trading Nifty Futures. All that you need to know about Nifty futures is discussed in this chapter including the impact cost, liquidity, and benefits of trading Nifty future..

This chapter is a primer on how future contracts are priced with respect to the spot prices. The chapter also discusses the concept of premium, discount, and the convergence of futures and spot price.. This chapter gives a step by step instruction on how to hedge a portfolio of stocks with the help of a futures instrument. The chapter also has a detailed description on beta and method to calculate t..

This chapter explores in details the concept of open interest and its relevance to futures trading. The chapter also includes a guide on how to interpret the change in open interest with respect to ch.. Background — Forwards Market An introductory article on Futures. Introduction to Stock Markets 14 chapters 2.