Commodity futures options trading
Most of these traders, when pressed, express a vague desire to diversify as one of their chief reasons for taking the next step to commodities. Selling equity options can be a lucrative strategy in the right hands.
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However, if you are one of the tens of thousands of investors who sell equity options to enhance your stock portfolio performance, you may be surprised to discover the horsepower you can get by harnessing this same strategy in commodities. In an era when sudden and excessive volatility is common, diversification is more important than ever.
Selling also known as writing options can offer benefits to investors in both equities and commodities. However, there are substantial differences between writing stock options and writing options on futures. What it generally boils down to is leverage. Futures options offer more leverage and, therefore, can deliver greater potential rewards in addition to greater risk.
In selling equity options, you do not have to guess short-term market direction to profit. The same remains true in futures, with a few key differences:. Knowing the fundamentals of a commodity, such as crop sizes and demand cycles, can be of great value when selling commodity options.
In commodities, it is most often old-fashioned supply and demand fundamentals that ultimately dictate price, not the actions of a badly behaving CEO.
5 advantages of commodity vs. equity options | Futures Magazine
Knowing these fundamentals can give you an advantage in deciding what options to sell. Michael Gross is an analyst with Liberty. Free Newsletter Modern Trader Follow. We asked traders what FBI Director Comey's testimony means for stocks and other markets. Silver holding huge commercial short.
Retail is in trouble because of economic conditions. What does this mean for the markets? Election play in gold options. Commodities firm, silver may be at major turning point. Will geopolitical concerns ignite crude market? Oil prices lifted by expected fall in U. Time and price balance in the markets.
How to leverage a performance report. Previous Gann square outs: Next How to leverage a performance report. Related Terms crude oil oil prices crude oil prices options crude oil futures Chevron Exxon Michael Gross 91 oil traders 86 McGraw-Hill 73 James Cordier 71 OptionSellers.