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From active speculation to risk management, traders take advantage of the unique flexibility of options on a routine basis. However, in contrast to standardized futures products, trading options requires a bit more expertise. Let’s examine the mechanics of buying and selling options contracts.
Often, there are a number of traders with a bad taste left in their mouths after they trade options. More often than not though, this distaste is from a lacking risk management plan – not the instrument. In this article, I am going to introduce two simple concepts for managing risk with your option positions.
As prudent, astute investors, I’m sure you have been watching this significant sell-off in the Precious Metals sector. If you bought or purchased Gold coins or bullion from 2010 to as recent as last month, you’re likely underwater. As a perpetual Bull on Gold, I understand how to manage risk and try to convey this to my clients.
One of the most common things you’ll hear a futures trader say is, “Make sure you lock in profits with stops!” One thing some traders don’t realize is that you can lock in profits with options as opposed to using just a stop loss order. This article will focus on how locking in profits is… Read more.
Talk with any hedger and they’re sure to tell you about an experience with trading on margin. Margin is a good faith deposit that a hedger must have in their account in order to initiate a long or short futures position. For example, the margin on a corn contract is currently $2,362.00. This means that… Read more.
Tip 1: Have an exit plan. It seems very elementary, but some traders will spend numerous hours looking for opportunities to enter a market, but put no thought into how and when they are going to exit. Whether you base your trading decisions technically or fundamentally, you will need to know when you are going… Read more.
This post originally appeared in FutureSource’s Fast Break Newsletter, where Drew Wilkins is a regular contributor on various futures trading topics. One of the most common questions a futures broker gets is, “How do options on futures work?” The truth is, options can be as simple or complex as you want them to be. This… Read more.
This is a revised version of an article that originally appeared in FutureSource’s Fast Break Newsletter on September 24, 2004. Have you purchased an option position in the past, and had the market move in your favor, only to ultimately lose money on the trade? Read this article and you might get some answers about… Read more.