Trading Commodities: Futures, Options Or Both

The first question we need to answer is how experienced of a trader are we. An experienced trader may prefer futures contracts whereas a trader just beginning may feel more secure trading options. Some very experienced traders use both. They may buy a futures contract and go long while buying a put option to protect the downside instead of placing a protective stop. Again they may place a stop and buy the put option both providing downside protection and possible profit on a reversal. From my experience it depends on how you may have started with commodities and how long you paper traded to get a feel for the business. Do not jump right in trading because you have a big ego or a big bank account. You may end up with a lot less money and think much less of your abilities. With the economic troubles of the past couple of years I think it has changed how some people trade. Some people are confused because it seems that the markets have changed how they move.

Crude Oil up and stocks down doesn’t work anymore as being just one example. All things considered, unless you are very successful trading futures contracts(very few are) options may be the better choice for most traders. Even with high volatility a sudden surge in prices against your position won’t wipe you out like a futures contract is capable of. There are some things to keep in mind about trading options. There are many places to learn about trading options so get the facts, study and remember to paper trade. Following the markets and paper trading cannot be 선물옵션 stressed enough, you probably shouldn’t make a real trade for at least 3 months and then only if you are comfortable with the volatility of the markets. With options always make sure you trade in liquid markets. Orange Juice, Lumber, Feeder Cattle and Pork Bellies are just a few to be careful of. In these markets options aren’t traded in very high numbers, remember liquidity.

Always check on your Brokers site for option chains and see where the traders are buying and selling options. Always look for high open interest, that will allow you to sell fairly quickly when you want to take profits. Also be sure to check the contract month you are buying options on to see how much time is left before expiration. This is very important along with the strike price will determine the cost of the option. Strike price is another article all in itself. One rule of thumb, besides open interest, I like to buy as close to the futures price as possible. It is more expensive but when you get the big moves your option will increase in value more than the further out options you can buy cheaper. Well I guess you know my favorite way to trade by now, Options. Especially for new people with smaller accounts. I believe it’s the best and cheapest way to learn to trade. Remember also to cut your losses and let your winners run(another article) but never be afraid to take profits.

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