Expected value (EV) or expectancy is a very important trading concept that few traders understand and actively discuss as an element of their trading. So what is EV and why is it so important? EV is simply the average result over a number of trades. Mathematically, it is the sum of the probability of winning/losing… Read more.
Tips & Strategies
Going Greek: Understanding your Option’s Delta
Option traders are often speaking another language. I want to help you understand how your option’s value is going to be affected by changes in the market. We can calculate how our option is going to react to these changes by understanding the Option Greeks. The Black-Scholes Model identifies 5 Option Greeks to help us… Read more.
Effective Habits of Successful Traders: Keeping a Trade Log
Your trade log is your map guiding your trading by effectively evaluating your strengths and weaknesses to help you reach your goals. Your compass is your “trading framework”, something that will be covered at another time.
Hedging with Commodity Futures: It’s All About Managing Price Risk!
The goal of hedging is to transfer price risk from one party to another. Hedging has been used for hundreds of years to help producers and buyers protect themselves from price risk.
The Wonderful World of Futures Spread Trading
When it comes to Futures Spreads, many traders ask us what is the benefit of spreading futures contracts. They want to know why we often choose to spread futures contracts instead of either being long or short a single futures contract or option, or use option spreads instead.
Hedging Systematic Risk
This post originally appeared in FutureSource’s Fast Break Newsletter on March 10, 2010, where Craig Turner is a regular contributor on various futures trading topics. Systematic risk is always a threat to even a well-diversified portfolio. When it comes to trading, we are always aware of systematic risk, and look for ways to hedge it… Read more.
Effective Habits of Successful Traders: Why Do I Trade?
Why do I trade? It’s a simple question, yet the vast majority of traders have not outlined why they trade. How much time have you spent thinking about it? Have you ever written down why you trade? If you haven’t, how do you know what your true motivations are? Have you sorted out what your… Read more.
Futures Spread Trading: The Anatomy of a Classic Corn-Wheat Spread
Why do some traders prefer to spread trade versus trading outright futures contracts? The contracts often selected by the trader may be typically trading parallel to one another giving the trader only the “differential” moves between the two contracts. One may take any two markets that they observe have differentials between the price movement and… Read more.
How to Collect Premium with Iron Condors
Different circumstances call for different trading strategies. Part of becoming a complete trader is a balanced, disciplined approach with an eye geared towards managing risk. You can accomplish this by trading futures, options, or a combination of the two. The difficult part is determining which approach will be the best for you, and this formula… Read more.
Options on Futures: An Introduction to Buying Options
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.
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