Futures and options trading video tutorial

The Basics of Futures Options

 

futures and options trading video tutorial

Many new traders start by trading futures options instead of straight futures contracts. There is less risk and volatility when buying options compared with futures contracts. Many professional traders only trade options. Before you can trade futures options, it is important to understand the basics. Watch tutorial videos that will help you learn how to use our ApexTrader futures trading platform options on Futures, and retail off-exchange foreign currency transactions involve substantial risk and are not appropriate for all investors. Watch video tutorials on the ApexTrader futures trading platfrom An investor should understand these and additional risks before trading. Options involve risk and are not suitable for all investors. Futures, options on Futures, and retail off-exchange foreign currency transactions involve substantial risk and are not appropriate for all.


Options vs. Futures: What’s the Difference?


Sell near month, buy far month, same strike price Near month time value decays faster Small debit, trading range market Butterfly Buy at the money call putsell 2 out of the money calls putsbuy out of the money call put Any time credit received Sell in the money put and call Receive large premium Futures Options have time premium and market in trading range Box Buy at the money put, sell out of the money put Small debit, bearish market Buy call, sell calls of higher strike price Neutral, slightly bullish Large credit and difference between stroke price of option bought and sold Conversion Buy futures, buy at the money put, and sell out of the money call Any time credit received Futures Options Writing Have you ever wondered who sells the futures options that most people buy?

Their sole objective is to collect the premium paid by the option buyer. 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 futures and options trading video tutorial 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 futures and options trading video tutorial reasons: Most futures options expire worthless and out of the money. Therefore, futures and options trading video tutorial, the option writer futures and options trading video tutorial 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, futures and options trading video tutorial.

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. For example: someone who goes long cocoa at can write a strike price call option with about one month of time until option expiration.

This allows you to collect the premium of the call option if cocoa settles belowbased 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 toyou 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.

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.

Cannon Trading Co. We believe you should stay with the major trend when writing futures options, with rare exceptions, futures and options trading video tutorial. 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, futures and options trading video tutorial 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, futures and options trading video tutorial.

We can either assist your option writing style or recommend trades and strategies we believe are appropriate, using the above guidelines. Cannon Trading believes there is still opportunity in buyingbut you must be very patient and selective. We believe buying futures options just because a market is extremely high or low, known as "fishing for options" is a big mistake.

Refer to the guidelines on our "Trading Commandments" before purchasing any futures options. Historic volatility, technical analysis, the trend and all other significant factors should all be analyzed to increase your probability of profit. All full-service accounts will receive these studies, opinions and recommendations upon request.

Cannon Trading Company's "Trading Commandments" can be used as a guideline to assist you in the process and decision making of selecting the right market and futures options to purchase.

A common strategy we implement involves the writing and buying of futures options at the same time, known as bull call or bear put spreads. Ratio futures and options trading video tutorial calendar spreads are also used and are recommended at times. Please do not hesitate to call for help with any of these strategies or explanations.

Here are a few examples we use often: If coffee is trading at 84, we can buy 1 coffee call and write 2 calls with the same expiration dates and 30 days of time until expiration. This would be in anticipation of coffee trending higher, but not above in 30 days. We'd be collecting the same amount of premium as we're buying, so even if coffee continued lower we'd lose nothing. Our highest profit would be attained at based on options on futures expiration. To determine risk we'd take the difference between andwhich is 35 points and divide it by two, because we sold two calls for every one purchased.

You'd then add the Risk lies if coffee rises dramatically or settles over A typical calendar spread strategy we use often would be to write 1 option with about 25 days left until expiration and buy 1 with 60 days left. Example: If coffee was trading at 84 and we thought prices might be heading slowly higher. We can write 1 coffee call with less time and buy 1 coffee call with more time in futures and options trading video tutorial anticipation that the market will trend higher, but not above the strike before the first options on futures expiration.

Some additional risk here lies in the difference between the two contract months. The objective is, if coffee trades higher over the next month but not above the strike price, we'd collect the premium of the option we sold by letting it expire worthless.

In addition, the option we purchased may also profit if coffee rises higher, but it may lose some value due to time decay if coffee doesn't rally enough. Don't hesitate to call for help with any of these strategies or explanations. Remember, futures and options trading video tutorial, the key is still going futures and options trading video tutorial be picking the general market direction correct.

Therefore, you must analyze and study each market situation with several different trading scenarios and determine which one best suits your risk parameters. The art of trading these strategies is deciding when, where, which futures markets, and what ranges to use.

If you are an inexperienced options trader use these strategies through the broker assisted program. For more information, check out our Online Trading Futures Market Glossary The material contained in 'Futures Options Trading ' is of opinion only and does not guarantee any profit, futures and options trading video tutorial.

These are risky markets and only risk capital should be used. Past results are not necessarily indicative of future results. Have a question Our Approach You and your broker will work together to achieve your trading goals. We develop long term relationships with our clients so that we can grow and improve together.

 

Trading Options Basics For Online Futures Trading | Cannon Trading

 

futures and options trading video tutorial

 

Watch video tutorials on the ApexTrader futures trading platfrom An investor should understand these and additional risks before trading. Options involve risk and are not suitable for all investors. Futures, options on Futures, and retail off-exchange foreign currency transactions involve substantial risk and are not appropriate for all. Learn All the Basics of the Futures and Options on Futures to Level Up Your Trading Knowledge and Skills. Learn how to trade on financial markets almost around a clock. Find out about leverage and low margin to increase your ROI significantly. Make trades on bear markets the same way as on bull markets.4/5(). Watch tutorial videos that will help you learn how to use our ApexTrader futures trading platform options on Futures, and retail off-exchange foreign currency transactions involve substantial risk and are not appropriate for all investors.