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Home / Option Spreads

Option Spreads

Trading Option Spreads, While Fading Time Decay

Trading Option Spreads, While Fading Time Decay

December 19, 2013 by Don DeBartolo

Commodity option contracts are decaying assets. Unlike futures contracts from which they are a derivative, option contract values are lost each day to time decay. Therefore, it is prudent to liquidate long option positions even if the target price is not yet realized before time value diminishes the premium.

The Collar: The Bread and Butter Option Strategy for Hedgers

The Collar: The Bread and Butter Option Strategy for Hedgers

November 21, 2011 by John Payne

Many believe that we are in a golden age of farming in this country. Since the summer of 2006, we have seen grain prices move in a big range, both up and down. These price fluctuations combined with below trend yields, new markets (such as China) becoming more willing buyers, and other policy factors have… Read more.

Option Spreads Examined Further: Measured Ways to Play Your Market Hunch

Option Spreads Examined Further: Measured Ways to Play Your Market Hunch

June 8, 2011 by John Payne

New option traders tend to overlook the strategy of combining two options to form spreads, which allow different degrees of market optimism or pessimism. Option spreading is different than futures because a straight futures play only portrays one degree of bullishness/bearishness. If one is long the futures, he better be very sure the market is… Read more.

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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 third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.

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