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2. Short Futures

MENU - Futures Strategy Guide

Contents Courtesy of CME.com

short-futures

Scenario:

This trader is a technician.  He sees a major turnaround in the price of Euro FX Futures.  He points out that chart patterns suggest a big downward move, the short-term moving average crossed under the longterm moving average, even the fundamentals look bearish.  He has looked at the options market, but feels that a short futures position would be the best.

Specifics:
Underlying Futures Contract: September Euro FX
Futures Price Level: 1.0100
Days to Futures Expiration: 65
Days to Options Expiration: 55
Option Implied Volatility: 14.9%
Position: Short 1 Futures
At Expiration:
Breakeven: 1.0100 (original futures price)
Loss Risk: Unlimited; losses increase as futures rise.
Potential Gain: Unlimited; profits increase as futures fall.

Things to Watch:

Implied volatility has no effect on this position.  If the trader has an opinion on volatility, he may consider another strategy.  Other strategies may increase the reward and/or reduce the risk.  Check the following page for follow-up strategies.

Follow-up Trading Strategies

short futures: follow-up trading strategies

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MENU - Futures Strategy Guide

Contents Courtesy of CME.com