Section 6: Futures option trading strategies
Options are typically less suited for day trading as they usually require a substantial move in the underlying asset to make up for any time decay or potential decrease in volatility. Many times the implied volatility of an option will spike going into a large report so that when the data is released, all options will lose value due to the fact that the unknown is now known. You can find yourself in an option position that loses value even though the underlying market moved as you had hoped.
By taking a long term position in options you can experience larger price moves. The only limitation you face is the looming threat of time decay working against you. Because options are wasting assets you will have to be very right about the movement in the market and the timing. When everything comes together the profits can be huge but the probabilities of this happening are usually quite low.
It is for these reasons why many traders will try to implement spreads in order to have some options decaying in their favor while others may cost money to hold every day. Option trading is not an easy task but the people who figure it out are able to take advantage of market conditions by positioning them for precisely what they expect from the market.
Futures-Option-Trading.com
1: Futures option trading basics
2: How to price futures options
3: Understanding the Greeks
4: Using option spreads
5: Synthetic options and futures
6: Strategies
7: Tips for buying and selling
8: Risk Disclosures for options
Next Page - Tips for buying and selling options - - - >
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