Commodity Futures Trading Options

Written by BK Shaw
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There are several different ways to trade, and one way is by commodity futures trading options. An option gives one the right, not the obligation to buy or sell a specific commodity at a certain price. This means you don't have to worry about ending up with 25,000 bushels of soybeans in your driveway, once the contract has expired! It's just a bet on a price going above or below what they call the "strike price."

Price is not the only factor when considering commodity futures trading options. Two other major components of options are time and volatility. Time means the length of time until expiration; in other words you must see the price movement before the expiration date. I have seen many people lose trades because they didn't give themselves enough time on the option. However, I have also seen traders be on top of a big move, when the price movement occurs, but they get so caught up thinking they have a lot of time left, they don't pull the plug. Moral of the story is have a trading goal and stick to it; plan your trade, and trade your plan!

Be aware of volatility when enjoying commodity futures trading options. There are professional traders who trade volatility alone. This means they buy an option when volatility is very low and sell when volatility is high. You may not need to see such a big movement in price when trading volatility alone.

Choosing a Broker for Commodity Futures Trading Options

There are lots of choices out there. I like to look for a brokerage with a solid online presence. Technology has made trading easy and fun, so find someone fun to work with!


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