Tag: Options on Futures

Learn about Futures Brokers, Futures Trading, and Options on Futures at E-Futures.com

Posted on by efuturesadmin

Futures brokers, futures trading, and options on futures are essential components of the financial markets. With the right knowledge, strategies, and risk management, traders can harness the potential of these instruments to achieve their financial goals. Whether you are a beginner or an experienced trader, understanding these subjects is crucial for success in the exciting world of futures trading. Remember that while futures trading offers opportunities for profit, it also carries inherent risks, so it’s essential to trade responsibly and seek professional advice if needed.

Futures Brokers, Futures Trading, and Options on Futures

Futures trading is a complex and exciting aspect of the financial markets that involves the buying and selling of futures contracts. To navigate this dynamic arena effectively, traders often rely on the services of futures brokers. In this comprehensive guide, we will delve into the world of futures brokers, futures trading, and options on futures. We will discuss these subjects in detail, offering insights, technical terms, statistics, and authoritative information to help both novice and experienced traders better understand this fascinating domain.

Understanding Futures Brokers: What Are Futures Brokers?

Futures brokers are intermediaries that facilitate futures trading transactions on behalf of clients. They play a crucial role in connecting traders with the futures market, providing access to various futures contracts and ensuring compliance with regulatory requirements. Futures brokers are authorized by regulatory bodies, such as the Commodity Futures Trading Commission (CFTC) in the United States, to offer their services.

Services Offered by Futures Brokers

  • Order Execution: Futures brokers execute buy and sell orders on behalf of traders, ensuring that trades are executed at the best available prices in a timely manner.
  • Market Research: They provide traders with research and analysis, helping them make informed decisions about which futures contracts to trade.
  • Risk Management: Futures brokers assist traders in managing risk through strategies like hedging, which involves using futures contracts to offset potential losses in other investments.
  • Margin Management: They help traders understand margin requirements and ensure that accounts maintain sufficient funds to cover positions.

How to Choose a Futures Broker

Selecting the right futures broker is crucial for successful trading. Traders should consider factors such as:

  • Regulation: Ensure the broker is registered with the relevant regulatory authorities to protect your interests.
  • Trading Platforms: Evaluate the broker’s trading platforms for ease of use, functionality, and availability of research tools.
  • Fees and Commissions: Compare fee structures and commissions to minimize trading costs.
  • Customer Support: Reliable customer support can be invaluable, especially during market volatility.
  • Product Offerings: Check if the broker provides access to the specific futures contracts you want to trade.

Futures Trading: What Are Futures Contracts?

Futures contracts are standardized agreements to buy or sell a specific quantity of an underlying asset at a predetermined price on a future date. These contracts can be based on various assets, including commodities, financial instruments, and even stock market indices.

Key Features of Futures Contracts

  • Standardization: Futures contracts have standardized terms and conditions, including contract size, expiration date, and tick size.
  • Leverage: Futures trading allows traders to control a larger position size with a relatively small initial margin deposit.
  • Expiration Date: Each futures contract has a specified expiration date when the contract must be settled.

Trading Futures

Trading futures involves speculating on the future price movement of the underlying asset. Traders can take two main positions:

  • Long Position: A trader buys a futures contract with the expectation that the price will rise, aiming to sell it later at a higher price.
  • Short Position: A trader sells a futures contract with the expectation that the price will fall, planning to buy it back at a lower price.

Why Trade Futures?: Hedging

One of the primary reasons for trading futures is hedging. Businesses and investors use futures contracts to protect against adverse price movements in the underlying asset. For example, a farmer may use corn futures to lock in a selling price for their crop, mitigating the risk of price fluctuations.

Why Trade Futures?: Speculation

Speculative traders seek to profit from price movements in futures contracts without any intention of physical delivery. They aim to capitalize on market trends and volatility.

Why Trade Futures?: Portfolio Diversification

Futures trading offers diversification opportunities as traders can access a wide range of asset classes, including commodities, currencies, and interest rates.

Options on Futures: What Are Options on Futures?

Options on futures are derivative contracts that grant the holder the right, but not the obligation, to buy (call option) or sell (put option) a futures contract at a specified price before or on the expiration date. Options on futures provide flexibility and are used for various trading strategies.

Key Components of Options on Futures

  • Strike Price -The price at which the option holder can buy (for a call option) or sell (for a put option) the underlying futures contract.
  • Expiration Date – Similar to futures contracts, options on futures have an expiration date when the option must be exercised or expires worthless.
  • Premium – The price paid to purchase the option contract.

Trading Options on Futures

Options on futures offer multiple strategies for traders, including:

  • Covered Calls – A strategy where a trader holds a long futures position and sells a call option on the same contract to generate income.
  • Protective Puts – A strategy where a trader holds a long futures position and buys a put option to hedge against potential losses.
  • Straddles and Strangles – Strategies involving both call and put options to profit from significant price volatility.

Advantages of Options on Futures: Limited Risk

One significant advantage of options on futures is the limited risk associated with buying options. Option buyers can only lose the premium paid for the contract, while potential gains can be substantial.

Strategic Hedging
Options on futures allow for precise hedging strategies, enabling traders and businesses to tailor risk management to their specific needs.

Trading on the Futures Market: Trading Strategies

Successful trading on the futures market involves employing various strategies to manage risk and maximize profits. Some common strategies include:

  • Trend Following – Traders follow established trends and enter positions in the direction of the trend.
  • Mean Reversion – This strategy involves betting that prices will revert to their historical averages after significant deviations.
  • Arbitrage – Arbitrageurs exploit price differentials between related assets to make risk-free profits.
  • Spread Trading – Traders simultaneously buy and sell related futures contracts to profit from price differentials between them.

Risk Management

Risk management is integral to futures trading. Traders use stop-loss orders, position sizing, and hedging strategies to limit potential losses and protect their capital.

Ready to start trading futures? Call US 1(800)454-9572 – Int’l (310)859-9572 email info@cannontrading.com and speak to one of our experienced, Series-3 licensed futures brokers and start your futures trading journey with E-Futures.com today.

Disclaimer – Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors.  Past performance is not indicative of future results. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.

**This article has been generated with the help of AI Technology. It has been modified from the original draft for accuracy and compliance reasons.

***@cannontrading on all socials.

Options on Futures

Posted on by efuturesadmin

Read more about trading options on futures with E-Futures.com here.

Options on futures trading is a popular and versatile strategy that allows traders to capitalize on price movements in futures contracts. By combining the features of options and futures, traders can benefit from both flexibility and leverage, making it an attractive choice for many investors. In this article, we will explore the best way to trade options on futures, including various strategies and the advantages of trading options on futures compared to trading futures alone.

Before diving into the strategies, let’s first understand the basics of options on futures. Options on futures are derivative contracts that give the holder the right, but not the obligation, to buy (call option) or sell (put option) a futures contract at a predetermined price (strike price) before or on a specified date (expiration date). These options derive their value from an underlying futures contract, such as commodities, stock indexes, or interest rates.

Now, let’s discuss some strategies for trading options on futures:

  1. Buying Call or Put Options: One straightforward strategy is to buy call or put options based on your market outlook. If you anticipate a rise in the underlying futures price, you can buy call options. Conversely, if you expect a decline, you can purchase put options. This strategy allows you to benefit from price movements while limiting your downside risk to the premium paid for the options.
  2. Selling Covered Calls: This strategy involves selling call options on futures contracts that you already own. By doing so, you collect the premium from the option buyer. If the price of the underlying futures contract remains below the strike price until expiration, the options will expire worthless, and you keep the premium. However, if the price exceeds the strike price, you may have to sell your futures contract at the strike price but still retain the premium received.
  3. Buying Straddles or Strangles: A straddle involves buying both a call and a put option with the same strike price and expiration date. This strategy is useful when you expect significant volatility in the underlying futures contract but are uncertain about the direction. A strangle is similar, but the call and put options have different strike prices. These strategies allow you to profit from sharp price movements, regardless of the direction, as long as the movement is significant enough to cover the premium costs.
  4. Spreading Strategies: Spreading involves simultaneously buying and selling multiple options on the same underlying futures contract but with different strike prices or expiration dates. Spreads can be used to limit risk, reduce the initial capital required, and take advantage of price differentials between contracts. Examples of spreads include vertical spreads (buying and selling options with different strike prices), calendar spreads (buying and selling options with different expiration dates), and diagonal spreads (combining both different strike prices and expiration dates).

Now, let’s explore the advantages of trading options on futures compared to trading futures alone:

  1. Limited Risk: With options on futures, your risk is limited to the premium paid for the options. This provides a defined risk-reward profile, allowing you to plan and manage your trades more effectively.
  2. Leverage: Options on futures allow you to control a larger amount of the underlying asset with a smaller capital investment compared to trading futures contracts outright. This leverage can amplify profits if the market moves in your favor.
  3. Flexibility: Options on futures offer a wide range of strategies that can be tailored to different market conditions and personal preferences. Whether you are bullish, bearish, or uncertain about the market, there are strategies available to suit your outlook.
  4. Hedging: Options on futures provide a valuable tool for hedging against adverse price movements in the underlying futures contract. By buying put options, for example, you can protect your long futures position from downside risk. This can be particularly useful for commodity producers or consumers who want to lock in prices for future delivery.

When it comes to choosing a futures broker that specializes in trading options on futures, it is essential to consider factors such as commission rates, trading platforms, research tools, and customer support. One popular futures brokerage that offers options trading and specializes in futures options is E-Futures.com. It is advisable to research and compare the features and services offered by different brokers to find the one that best suits your trading needs.

Options on futures trading provides a flexible and efficient way to capitalize on price movements in futures contracts. By employing various strategies, traders can potentially profit from both rising and falling markets while managing risk effectively. The advantages of trading options on futures, including limited risk, leverage, flexibility, and hedging capabilities, make it a valuable addition to any investor’s toolkit.

Ready to start trading futures? Call 1(800)454-9572 and speak to one of our experienced, Series-3 licensed futures brokers and start your futures trading journey at E-Futures.com today.

Disclaimer – Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors.  Past performance is not indicative of future results. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.

Stop Getting Stopped? + Trading levels for 10.20.2022

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Stop Getting Stopped??

By Mark O’Brien, Senior Broker

In our continued interest in assisting traders with strategy recommendations, here’s another look at one that can give short-term futures traders staying power in volatile markets. Any sound futures trading plan includes establishing the risk the trade will be taking – either in the form of a straight dollar amount, or a price point in the futures market you’re trading. The implementation of that plan typically involves the placing of a stop order to exit your futures position. One challenge to this plan is that it can lead to continuous exits and reentries in the market and an ongoing recalculation of your risk. This can be a repeated effort with mixed results, especially in volatile markets.

What if you could set up a trade with a risk toleration similar to an amount you would take with any straight futures trade, but with a greater price toleration and the “cost” to this would be a slightly reduced profitability that becomes less impactful to your trade as its profit increases?

I’m describing the straightforward purchase of an option that opposes the direction of your futures position. Let’s look at a timely example to paint a clearer picture.

At this blog’s writing the Dec. E-mini S&P 500 is trading at ±3705.00. If a trader decided to take a short position in the market and further decided – based on whatever technical indicators they used for guidance or a simple dollar amount – a risk of $1250 was appropriate for the trade, that would call for a placement of a 25-point BUY STOP order at 3730.00. Note the volatility in the market today. The Dec. E-mini S&P 500 has traded inside a nearly 100-point range (low = 3676.75 – high = 3774.25) and 3730.00 traded within the last few hours.

Setting aside an exit price for the moment, let’s look at an alternative strategy that involves entering the same short position at 3705.00 and at the same time incorporating the purchase of a 3705.00 call expiring tomorrow at 3:00 P.M., Central Time with a premium of ±25 points (±$1250). With this option in place your risk tolerance has been set to $1250 for the duration of the option’s lifespan, but your position’s tolerance to an adverse price has no limit. As far as an adverse move in the market your futures position might suffer, so too will the price of your option pay off. No matter how adverse the move, the risk on the trade will remain $1250 – the cost of the option.

The trade-off: by tomorrow at 3:00 P.M., Central Time, the market would have to move in favor of the position by at least the equivalent to the cost of the option (25 points), in order for the trade to begin profiting at the rate of a straight futures position. The market needs to move favorably enough to cover the cost of the option before the trade can turn profitable. Any favorable move by less than 25 points results in a commensurate reduction in the risk of the trade. For example, if at 3:00 P.M., Central Time the market is trading at 3695.00, the 10-point profit in your futures position partially offsets the 25-point cost of the option, resulting in a loss of $750.00.

The example above makes one important assumption, which is if the short futures position is below the option’s strike price at 3:00 P.M., Central Time, it is liquidated.

Also, you can adjust your risk depending on the opposing option you select, up or down the strike price ladder and the option’s expiration date. Of course, you would consider the risk parameters of any futures / futures option combination that will give you the needed perspective a trade like this has.

More on options here and specifically weekly options here.

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

Trader’s Checklist Click below on the image to play the VIDEO

 

Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors.  You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time when it comes to Futures Trading.

Futures Trading Levels

10-20-2022

#goldfutures #sp500futures #crudeoilfutures # nasdaqfutures #dowfutures #futurestrading #futuresbrokers
SP500 #ES_FNasdaq100  #NQ_FDow Jones  #YM_FMini Russell #RTY_FBitCoin Index #BRTI SP500 Dec. Gold #GC_F Dec. Silver #SI_F Oct. Crude Oil #CL-F Dec. Bonds  #ZB_F Dec. 10 yr  #ZN_F Dec. Corn #ZC_F Dec.  Wheat #ZW_F Nov. Beans #ZS_F Dec. SoyMeal #ZM_F Oct. Nat Gas #NG_F Dec. Coffee #KC_F Dec. Cocoa #CC_F October Sugar #SB_F Dec. Cotton #CT_F Sept.  Euro Currency

Improve Your Trading Skills

Get access to proprietary indicators and trading methods, consult with an experienced broker
 1-800-454-9572 Explore trading methods. Register Here

Economic Reports, Source: 

Forexfactory.com

 

This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.

NFP tomorrow, Oct. 7th Futures Trading Levels

Posted on by efuturesadmin
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The next big scheduled event is tomorrow: this Friday’s monthly Non-farm payrolls report from the U.S. Labor Department.

If you’re a futures trader and your markets of choice to trade include stock indexes (S&P 500, Nasdaq, Dow Jones, Russell 2000, etc.), or treasuries (30-yr. T-bonds, 2-, 5-, 10-yr. T-notes), currencies, even metals and energies, you know the importance this report.

Intraday chart of LAST MONTH’s NFP report of the mini SP for your review below:

E-Mini S&P 500 5 minute chart

 

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

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Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors.  You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time when it comes to Futures Trading.

Futures Trading Levels

10-07-2022

 

#goldfutures #sp500futures #crudeoilfutures # nasdaqfutures #dowfutures #futurestrading #futuresbrokers
SP500 #ES_FNasdaq100  #NQ_FDow Jones  #YM_FMini Russell #RTY_FBitCoin Index #BRTI SP500 Dec. Gold #GC_F Dec. Silver #SI_F Oct. Crude Oil #CL-F Dec. Bonds  #ZB_F Dec. 10 yr  #ZN_F Dec. Corn #ZC_F Dec.  Wheat #ZW_F Nov. Beans #ZS_F Dec. SoyMeal #ZM_F Oct. Nat Gas #NG_F Dec. Coffee #KC_F Dec. Cocoa #CC_F October Sugar #SB_F Dec. Cotton #CT_F Sept.  Euro Currency

Improve Your Trading Skills

Get access to proprietary indicators and trading methods, consult with an experienced broker
 1-800-454-9572 Explore trading methods. Register Here

Economic Reports, Source: 

Forexfactory.com

 

This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.

Options on MICRO Futures – Free Course + Trading Levels 8.30.2022

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Free, no obligation Introduction to Options Course

You don’t have to be a Certified Financial Advisor (C.F.A.) to take continuing education courses in the Futures Option Market.  Although if you were, you could get continuing education credits by completing this course.

Learning through video presentation, Q and A, and text, I found these videos helpful for me to brush up on my option knowledgebase as well and recommend everyone who either has options trading experience or wants to learn options for the first time, I found these tools to be invaluable and hope you do too.

If you are like me, a life long learner, you will benefit from an hour and 11 minutes’ worth of topical videos: Introduction to Options course.

From Chapters such as “What is an Option? To “getting to know underlying Futures” discussions about exercise price, expiration dates, Call and Put descriptions, exercise and assignments, understanding the difference: European vs. American style, Moneyness, time and intrinsic value of the option, Profit and Loss, Theoretical pricing, to name just a few of the Interactive course chapters.

The CME has provided this at no charge. Here is the link to start today Intro to Options Course

Here is a sample chapter titled Options on Futures vs ETFs

Options on Futures vs ETFs Video

Sierra Charts Teton Order Routing demo

Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors.  You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time when it comes to Futures Trading.

Futures Trading Levels

08-30-2022

Improve Your Trading Skills

Get access to proprietary indicators and trading methods, consult with an experienced broker
 1-800-454-9572 Explore trading methods. Register Here

Economic Reports, Source: 

Forexfactory.com

This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgement in trading.

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