Learning Options- Part 4
In real estate, they say that the three most important things are location, location, and location. In options, the three most important things are volatility, volatility, and volatility. Often neglected by option rookies, volatility is the cornerstone of an option professional’s trading strategy.
In its simplest form, expressed as the annualized percentage of [...]

Learning Options- Part 3
Two of the more common option strategies are horizontal spreads (identical strike prices, different expiration days) and vertical spreads (different strike prices, same expiration day). Other spread types are combinations or variations of these categories: Diagonal spreads are a mixture of horizontal and vertical spreads; butterfly spreads combine two different vertical spreads.
Selling [...]

Futures Option Spreads – Delta Neutral Trading
by David Rivera
There are many ways to trade futures option spreads. One way is to trade spreads that can profit from time decay. You can sell options which you believe will lose more time value than the options you buy.
Another way is to buy and sell options based on [...]

Option Trading – Calendar Spreads & Time Decay
by David Rivera
When traders speak of putting on calendar spreads, they normally refer to buying the further month options and selling the closer month option. While I can not argue with this, it is not best for all options.
I am going to be general in this article because [...]

Learning Options- Part 2
Many people like options because they believe them to be less risky than futures. Options sometimes offer reduced risk, but usually at the cost of reduced profit potential.
One drawback of options is that a trader must consider market speed (volatility) as well as direction. Traders who buy or sell options outright to [...]

Learning Options- Part 1
There are four components to an options price: underlying contract price, intrinsic value ( determined by strike price), time value (time remaining until expiration) and volatility. (A fifth element, interest rates, also can affect option prices, but for our purposes is unimportant.)
Intrinsic value refers to the amount an option is in-the-money. With [...]

The Safest Way to Sell Options
Commodity markets have not been spared the mood swings pounding other markets in late 2008, and futures traders continue their quest to find safe methods of receiving consistent returns as they trade the markets. Futures traders often stumble on option writing as a strategy that “makes sense,” at least from [...]

Industry Risk Disclosures for Futures and Options
by Rick Thachuk
The following is content from a typical Risk Disclosure that is usually required to be read by any individual prior to the opening of a futures and options trading account. It appears here only to highlight the risks associated with trading high-leverage instruments such as futures and [...]

Option Spreads: Putting the Odds in Your Favor
by Rick Thachuk
[ A version of this article appears in the Feb 2000 issue of Futures magazine. ]
Option spreads, created by buying an option and simultaneously selling a related option, are seldom the choice investment vehicle of position traders, especially beginning traders, largely because of their intuitive [...]

How Options are treated in the Account Statement
by Rick Thachuk
After the outright purchase or sale of an option, beginners may be a little confused over how the option transaction is recorded in the account statement, particularly from day to day. For instance, if a customer buys an option for $700, then they may expect their [...]

Using Options to Protect a Futures Position
by Rick Thachuk
[ A version of this article appears in the July 1999 issue of Futures magazine. ]
Many traders use protective stop orders to limit the loss of a futures position. Whenever the market price reaches the stop price, so that the open futures position is incurring loss, [...]