Options on Futures OR Outright Futures?

By John Thorpe, Senior Broker

Trading futures Options may be more suitable for your account’s well being when you are right about the direction of the asset, but incorrect about the timing of the move. Through options, you are literally buying time and value if they are in the money at expiration.

What is an option?

An option on a futures contract is the right, but not the obligation, to buy or sell the underlying futures contract at a predetermined price on or before a given date in the future.

Option Benefits

• Options can be used like insurance policies to limit losses on a futures contract.
• They can also be used for speculative purposes, whether you are selling options to receive premium income or using options to establish a position in a particular commodity, index or interest rate.
• As hedging instruments, options can produce offsetting gains in the face of adverse price changes in the cash market.
• Options permit you to efficiently deploy capital, in the form of option premium. In this case, you can participate in the price movements of the underlying asset, without having to buy the asset outright.

Below is a roughly 1 hour course produced by the CME titled:

“Introduction to Options”

Please click the link to access this Free course

  Introduction to Options

As always, plan your trade and trade your plan. Please contact your broker or Cannon Trading with any questions.