Futures and Futures Options Trading

For this reason, we often refer to the practice of buying options in the commodity markets as the purchase of a lottery ticket. Past results are not necessarily indicative of future results. All of that, and you still want low costs and high-quality customer support. Futures Options have time premium and market in trading range. Visit the Traders' University to listen to one of our futures product webinars. Undervalued option with volatility increasing.

Almost all commodity brokers offer online trading, but there are some that specialize in online trading. TradeStation offers one such platform. TradeStation offers a versatile trading platform when it comes to charts, quotes, strategy analysis as well as order entry.

Best Futures and Commodities Brokers 2018

Sell options in an IRA account without any additional restrictions, or higher margin requirements — Many brokerage firms charge higher margins to their IRA trading option sellers, or limit them to trading with a small percentage of their commodity allocated IRA balance. We are capable of quick and efficient order placement of short option strategies — Even online traders will need assistance from time to time, and we do it without any additional cost to the client or desk fee.

Access to experienced staff members nearly 16 hours per day — We are personally available by email and phone throughout the trading day, and well beyond. We check and respond to email persistently to ensure everything is going smoothly for our clients. Trade guidance and recommendations — We offer newsletters with option selling ideas and guidance, and can offer personal support to individual option sellers.

Margin call management advice, and adjustment recommendations — Margin calls can happen, even to the most responsible traders. We help our clients adjust their risk exposure and margin, without necessarily liquidating positions or refunding the account.

We have direct access to trade desks to execute trades during times of platform failure or technical issues. Carley Garner Trading Books. Order from Amazon today! Carley nails the seemingly impossible task of leveling the playing field by imparting vital concepts in easy to digest bites Third Edition of A Trader's First Book on Commodities, now available In the latest edition of Carley Garner's beginners' book on commodities, she details everything you need to know about futures and options trading before placing a trade.

BUY NOW In their quest for trading commodities profitably, beginning traders spend a substantial amount of time studying market theory, various types of market analysis, and paper-trading in the futures and options markets. 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.

We can either assist your option writing style or recommend trades and strategies we believe are appropriate, using the above guidelines. Most futures options expire worthless and out of the money, therefore most people lose when buying options on futures. Cannon Trading believes there is still opportunity in buying , but 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 and 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 and , which 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. 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 the 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.

Some futures options trade based on different futures contract months and should always be considered in your trading. Don't hesitate to call for help with any of these strategies or explanations.

Best brokers for trading futures and commodities: summary

The best online brokers for trading futures overall TradeStation and Generic Trade do a good job of serving two different types of futures traders. See our TradeStation review. Commodity futures and options on futures products and services offered by E*TRADE Futures LLC, Member NFA. Banking products and services are offered by E*TRADE Bank, a federal savings bank, Member FDIC, or its subsidiaries. Sell Commodity Options with DeCarley Trading Sell Options on Futures Most brokerage firms restrict, hinder, or forbid option sellers. At DeCarley, we embrace them.