Since options on futures mark-to-market daily, are we expected to buy and sell options on futures everyday? Somewhat like a day trader?
How can we actually make money from trading options on futures?
Tags: day trader, New York Stock Exchange, Somewhat, Business Finance, Commodities and Futures
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Yes you can, if you predict the future properly. Futures allow you to either purchase or sell a certain commodity at a set price.
So assume you purchase and option to Buy City-Bank share @ 50.00 on April 15th 2011. If on April 15th the shares are selling on the open market @55.00/share. You would exercise you options, allowing you to buy shares @ 50.00 and then re-sell then on the open market @ 55.00 making a 5.00 profit
In the event you are one who want to gain huge profits from stock options, then it is vital that you can understand the meaning of options trading. Sometimes it could be hard to study the exact difference between trading in the stock market and trading inside the stock options market. In fact option markets are parallel to futures markets, that give you the right being a holder to acquire or sell the underlying commodity for the specific price on (European options) or before (US options) a unique date later on (referred to as the expiration or exercise date). Based on the similar fundamental instruments of futures, it also has similar contract specifications. However, the options are traded differently. On futures markets, on stock indexes it may be traded independently using various strategies, or could be coupled with futures contracts and used as a variety of trade insurance.
To make money trading options, in general, you use a spread strategy. So you buy and sell on the low and high side, and keep on eye on how it moves. If it’s moving against you, you take measures to keep the price in the middle.
Common strategies are the iron condor and double calendar.
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