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Home / Education / Futures & Options Strategy Guide / How to Use This Guide

How to Use This Guide

Futures & Options Strategies Guide Overview

This publication was designed, not as a complete guide to every possible scenario, but rather as an easy-to-use manual that suggests possible trading strategies.  One way to use it effectively is to follow these simple steps:

1.  Determine Your Market Outlook.

Are you generally bullish, bearish, or undecided on future market moves?

2.  Determine Your Volatility Outlook.

Do you feel that volatility will rise, fall, or are you undecided?

3.  Look Up the Corresponding Strategy on the Appropriate Table.

Whether you are initiating a position or trying to follow up a current position, line up the correct row and column on the proper table to find a strategy that will help you make the most of your outlook.

4.  Determine the “Best” Strike Price.

By analyzing your market and volatility outlook further you should be able to select the option strike that provides the best opportunity.  The Guide does not go into detail on selecting the best strikes.  You can do this by calculating a few “What-If” scenarios.

Learn 21 futures and options trading strategies in this complimentary,  easy-to-read guide. Download Now >>

Some Things You Should Be Aware Of:

  • In addition to breaking down market analysis into two main questions (“What is your market outlook?” and “What is your volatility outlook?”), you must also consider margin requirements, commission costs, taxes and execution costs, as well as other possible factors.
  • The follow-up strategies in this Guide are usually “One Trade” changes.  In other words, we asked: “How can a trader transform a position into a more desirable position with just one trade?” We did, however, bend this rule a little when one trade produced no acceptable strategy.
  • Although you may be able to transform a trade with just one transaction, the resulting position can contain options at strikes that may or may not be appropriate for your new outlook.
  • The ratio spreads and ratio backspreads are strategies that do not fit neatly into one of the nine scenarios.  Therefore, a trader MUST analyze these strategies in greater depth.  The strikes chosen bear greatly on the resulting profit/loss.  Do several “What-If” scenarios before using these strategies.
  • There are many other strategies, such as: calendar spreads, condors, Christmas trees, and option strips that are not addressed here.  While they are all valid strategies, they do not fit neatly into this approach.
  • The suggested strategies on the following pages are just that – suggestions.  Because of limited space, the strategies suggested may or may not the “best” ones for your trading plan.

How to Use The Tables

On the next page is a table suggesting strategies to use when “Initiating a Market Position.” Let’s go through an example: A trader has been watching a major increase in the value of the S&P 500® futures contract and feels the market is poised for a minor downward move.  A small market drop with volatility dropping and futures leveling off is this trader’s outlook.

The market scenario is bearish.  The trader looks across the top of the page and finds “BEARISH.”

The volatility scenario is down.  The trader looks down the left of the page and finds “VOLATILITY FALLING.”

The trader lines up the BEARISH colum with the VOLATILITY FALLING row and finds two possible suggested market scenarios: Number 6, SHORT CALL, and Number 18, RATIO PUT SPREAD.

The trader now does a number of “What-If” scenarios to determine the best strike, the profit objective and loss tolerance before making any trading decisions.

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Futures & Options Strategies

  • Long Futures
  • Long Synthetic Futures
  • Short Synthetic Futures
  • Long Risk Reversal
  • Short Risk Reversal
  • Long Call
  • Short Call
  • Long Put
  • Short Put
  • Bull Spread
  • Bear Spread
  • Long Butterfly
  • Short Butterfly
  • Long Iron Butterfly
  • Short Iron Butterfly
  • Long Straddle
  • Short Straddle
  • Long Strangle
  • Short Strangle
  • Ratio Call Spread
  • Ratio Put Spread
  • Ratio Call Backspread
  • Ratio Put Backspread
  • Box or Conversion

Contents Courtesy of CME Group.

Risk Disclosure

WHEN INVESTING IN THE PURCHASING OF OPTIONS, YOU MAY LOSE ALL OF THE MONEY YOU INVESTED.

WHEN SELLING OPTIONS, YOU MAY LOSE MORE THAN THE FUNDS YOU INVESTED.

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Tips & Strategies

How Does Inflation Affect Markets?

The highest inflation measure in more than 40 years has left many markets in utter disarray: Nasdaq is at its lowest since 2020, interest rates are their highest since 2007, and the US dollar is the strongest it’s been since the early aughts

The End of an Era for the Euro

If you started trading in the last two decades, you’ve only known a world in which the euro is worth more than the US dollar. You’d have to go all the way back to 2002 to find data points representing the EUR/USD conversion rate that start with a zero to the left of the decimal point.

Charts

Probabilities are Accurate Until They Aren’t

What do all the probabilities in your life have in common? They’re all dynamic – constantly changing. At the conclusion of the event a binary 0% or 100% is realized, but the journey to that ending can witness wild swings in either direction….

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  • How to Harness the Power of Moving Average Crossovers
  • Technical Analysis of Stocks: Understand the Pros and Cons
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Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

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