Oft optionen futures trading gmbh
This is why we recommend exiting positions once a market trades through an area you perceived as strong support or resistance.
Option writing can also be used for hedging purposes and reducing risk. An option writer has the exact opposite to gain as the option buyer. The writer has unlimited risk and a limited profit potential, which is the premium of the option minus commissions. When writing naked futures options your risk is unlimited, without the use of stops.
This is why we recommend exiting positions once a market trades through an area you perceived as strong support or resistance. So why would anyone want to write an option? Here are a few reasons: Most futures options expire worthless and out of the money.
Therefore, the option writer is collecting the premium the option buyer paid. There are three ways to win as an option writer. A market can go in the direction you thought, it can trade sideways and in a channel, or it can even go slowly against you but not through your strike price. The advantage is time decay. The writer believes the futures contract will not reach a certain strike price by the expiration date of the option.
This is known as naked option selling. To hedge against a futures position. This allows you to collect the premium of the call option if cocoa settles below , based on option expiration. It also allows you to make a profit on the actual futures contract between and This strategy also lowers your margin on the trade and should cocoa continue lower to , you at least collect some premium on the option you wrote.
Risk lies if cocoa continues to decline because you only collect a certain amount of premium and the futures contract has unlimited risk the lower it goes. Cannon Trading Company Inc. Be strict when choosing which futures options to write and don't believe in writing options on futures as your only strategy. Using the same strategy every month on a single market is bound to burn you one month, because you end up writing options on futures when you shouldn't.
We believe you should stay with the major trend when writing futures options, with rare exceptions. Use market pullbacks to support or resistance as opportunities to enter with the trend, by writing futures options which best fit into your objectives. Volatility is another important factor when determining which options on futures to write, it's generally better to sell over valued futures options then under valued futures options. Remember not to get caught up with only volatility, because options on futures with high volatility could always get higher.
The bottom line is, pick the general market direction to become successful over the long-term. We also believe in using stops based on futures settlements, not based on the value of the option. If a market settles above or below an area you believed it shouldn't and the trend appears to have reversed based on the charts, it's probably a good time to exit your positions. We can help you understand the risks and rewards involved, as well as how to react to certain situations, i.
At CME Group, enjoy options trading across all the major asset classes on one global marketplace. Benefit from the deep liquidity of our benchmark options on futures across Interest Rates, Equity Index, Energy, Agriculture, Foreign Exchange and Metals, giving you the flexibility and market depth you need to manage risk and achieve your trading objectives. And, by trading options where you trade the underlying futures hedge, you can maximize capital efficiency through margin offsets and streamlined operations.
CME Group is the world's leading and most diverse derivatives marketplace. Toll Free US Only: Trading All Products Home. Delayed Quotes Block Trades. August Options Review Now Available. Futures contracts are available for all sorts of financial products, from equity indexes to precious metals.
Buy a call if you expect the value of a future to increase. Buy a put if you expect the value of a future to fall. The cost of buying the option is the premium. Traders also write options. Many futures contracts have options attached to the them. Gold options, for example, are based on the price of gold futures called the underlying , both cleared through the Chicago Mercantile Exchange CME Group.
The premium and what the option controls varies by the option, but an option position almost always costs less than an equivalent futures position. Buy a call option if you believe the price of the underlying will increase. If the underlying increases in price before the option expires, the value of your option will rise.
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