"Being comfortable with executing orders on the trading platforms is extremely important. I'm always happy to take the time out with a customer and walk them through the software, or if they are placing orders with me over the phone, making sure we both know exactly what their goal is with each and every trade."
– Matt Vitiello
Futures & Options Broker
1. Long Futures
MENU - Futures Strategy Guide
Contents Courtesy of CME.com
Scenario:
This trader feels that Live Cattle futures are poised for a rally. The implied volatility of the options is relatively high, but the trader does not expect it to come down soon. Therefore, he decides to buy one futures contract.
Specifics:
| Underlying Futures Contract: | April Live Cattle |
| Futures Price Level: | 73.00 |
| Days to Futures Expiration: | 75 |
| Days to Options Expiration: | 55 |
| Option Implied Volatility: | 16.2% |
| Position: | Long 1 Futures |
At Expiration:
| Breakeven: | 73.00 (original futures price) |
| Loss Risk: | Unlimited; losses increase as futures fall. |
| Potential Gain: | Unlimited; profits increase as futures rise. |
Things to Watch:
Changes in implied volatility have no effect on this position. If the trader has an opinion on volatility, he may consider another strategy. Another strategy may increase potential profits and/or reduce potential losses. Check the next page for suggested follow-up strategies.
Follow-up Trading Strategies
MENU - Futures Strategy Guide
Contents Courtesy of CME.com
