In a previous article, I explained commodity option expiration, exercising, and assignment. I noted a long (purchased) option position (call or put) has the right to exercise the contract. To make an informed decision, I will explain the result of exercising an option contract. A commodity option contract is a decaying asset that will expire…. Read More.
It is essential to understand option expiration, exercising, and assignment as a commodity option trader. Know these principles, whether purchasing outright calls or puts, selling or “writing” option contracts, or using complex option spread strategies. Not only will you be better equipped for such events, but also having this acumen could potentially improve your trading… Read More.
I love spreading options. They allow me to get involved in certain markets that my account size may prevent me from trading if I were using futures or long only options. I can design a trade specific to my feelings on market direction and time. I can combine calls and/or puts to make my trade… Read More.
If you are a “writer” of commodity options, you inherently have exposed and unlimited risk. However, it’s this risk potential that provides the capacity to reap rewards. Therefore, a savvy commodity option writer understands that managing risk is more important than reaping rewards. In a previous article, I detailed a strategy to execute a strangle… Read More.
The recent break in the grain markets has had my phone ringing with producers and speculators alike, clamoring for a plan to handle what they perceive to be a confusing market. For the first time in two months, I could feel some panic coming from those who are long the markets. Many are fretting they… Read More.
It is extremely difficult to look at a chart and see how your option position will react between entry and expiration. Charts will tell us everything a market has done up to the minute, but you are ultimately living up to the “hard right edge” of that chart. Risk graphs provide the option trader with… Read More.
Volatility plays a significant role in the pricing of options. As traders, we must understand and pay close attention to a market’s volatility as we build our option strategies. When we see extreme volatility in a market, we feel an overwhelming sense of uncertainty. The normal psyche of a trader is to react emotionally as… Read More.
We have covered the option tree strategy in the previous post. In the spirit of the campaign season, I had the readers decide which strategy I should cover next. Per the poll results, with forty-four percent of the votes, I present a review of long and short option straddles. Please keep in mind that we… Read More.
If you are a “writer” of commodity options, you inherently have exposed and unlimited risk. However, it’s this risk potential that provides the capacity to reap rewards. Therefore, a savvy commodity option writer understands that managing risk is more important than reaping rewards. The trade setup below details a strategy to help protect short option… Read More.
There are various exotic option strategies with different objectives and theoretical scenarios. I’m going to walk you through the basics in detail, while keeping these complex instruments as simple as possible! In addition, over the next few weeks, we will cover a few prime options strategies for futures traders that benefit from the leverage and… Read More.