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Home / Education / Futures & Options Strategy Guide / Long Futures

Long Futures

Overview

Pattern evolution:

Long Futures

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

When to use: When you are bullish on the market and uncertain about volatility. You will not be affected by volatility changing. However, if you have an opinion on volatility and that opinion turns out to be correct, one of the other strategies may have greater profit potential and/or less risk.

Profit characteristics: Profit increases as market rises. Profit is based strictly on the difference between the exit price and the entry price.

Loss characteristics: Loss increases as market falls. Loss is based strictly on the difference between the exit price and the entry price.

Decay characteristics: None.

CATEGORY: Directional
SYNTHETICS: Long put A, short call A

Example

Long Futures Example

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.

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Additional Futures & Options Strategies

  • How to Use This Guide
  • 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.

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Risk Disclosure

THIS MATERIAL IS CONVEYED AS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION.

THIS MATERIAL HAS BEEN PREPARED BY A DANIELS TRADING BROKER WHO PROVIDES RESEARCH MARKET COMMENTARY AND TRADE RECOMMENDATIONS AS PART OF HIS OR HER SOLICITATION FOR ACCOUNTS AND SOLICITATION FOR TRADES; HOWEVER, DANIELS TRADING DOES NOT MAINTAIN A RESEARCH DEPARTMENT AS DEFINED IN CFTC RULE 1.71. DANIELS TRADING, ITS PRINCIPALS, BROKERS AND EMPLOYEES MAY TRADE IN DERIVATIVES FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS. DUE TO VARIOUS FACTORS (SUCH AS RISK TOLERANCE, MARGIN REQUIREMENTS, TRADING OBJECTIVES, SHORT TERM VS. LONG TERM STRATEGIES, TECHNICAL VS. FUNDAMENTAL MARKET ANALYSIS, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE INITIATION OR LIQUIDATION OF POSITIONS THAT ARE DIFFERENT FROM OR CONTRARY TO THE OPINIONS AND RECOMMENDATIONS CONTAINED THEREIN.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN TRADING FUTURES CONTRACTS OR COMMODITY OPTIONS CAN BE SUBSTANTIAL, AND THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING LEVERAGED POSITIONS AND MUST ASSUME RESPONSIBILITY FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR THEIR RESULTS.

TRADE RECOMMENDATIONS AND PROFIT/LOSS CALCULATIONS MAY NOT INCLUDE COMMISSIONS AND FEES. PLEASE CONSULT YOUR BROKER FOR DETAILS BASED ON YOUR TRADING ARRANGEMENT AND COMMISSION SETUP.

YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD READ THE "RISK DISCLOSURE" WEBPAGE ACCESSED AT WWW.DANIELSTRADING.COM AT THE BOTTOM OF THE HOMEPAGE. DANIELS TRADING IS NOT AFFILIATED WITH NOR DOES IT ENDORSE ANY TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICE.

GLOBAL ASSET ADVISORS, LLC (“GAA”) (DBA: DANIELS TRADING, TOP THIRD AG MARKETING AND FUTURES ONLINE) IS AN INTRODUCING BROKER TO GAIN CAPITAL GROUP, LLC (GCG) A FUTURES COMMISSION MERCHANT AND RETAIL FOREIGN EXCHANGE DEALER. GAA AND GCG ARE WHOLLY OWNED SUBSIDIARIES OF STONEX GROUP INC. (NASDAQ:SNEX) THE ULTIMATE PARENT COMPANY.

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