resources

In Our Words

"So much of the trading game is psychological. It is very common for every previous gain or loss to influence perspective, thereby affecting future trades. Traders must always be aware of this in order to filter the positive from the negative. Continued objectivity is the goal."

Andy Bulawa
Futures & Options Broker

Free Offers & Trials

Basic Training for Futrues Traders Guide

Basic Training for Futures Traders

View all free trials & offers

1. Long Futures

MENU - Futures Strategy Guide

Contents Courtesy of CME.com

long futures

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