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Trading Commodity Futures Options for Profitable Trading and Success
Today is date is a good time to deal with important Commodity Trading issues... Trading commodity futures option markets can be highly profitable (but also carry major risk of loss too). That's why you should always use a stop-loss order with every trade. It can be more wonderful and great than stocks options because it brings risk management to an entirely new level and gives plenty of flexibility as well. Compared to index or stock options, strategies for commodity options trades can be exchanged with lesser margin. These options can also be used for both speculative and income purposes. Moreover, recent margin rules allow usage of less capital for trading commodity options. Options trading system trades can involve complex option strategies with the help of commodity futures brokers who use deep-discount brokerage commissions, online trading platforms, electronic trading network and closely follow emini trading signals.
Commodity options are real similar to trading stock options when it comes to trade transactions. The only difference between these two is multiples of option premiums that each represents. There are different advantages gained from commodity options including low margins & high yields, reduced commissions, low slippage, better hedging, no additional margin trades, call credit spread, and additional trades.
Most the futures options trades use newer account margin rules where the margin is based on applicable trades. This can be very advantageous to the traders. For instance, a trade that uses collar strategy will have lower margin compared to the same trade that uses indices or stocks directly. Lower margins will result to better utilization of capital as well as with higher profits.
With commodity options trades the slippage per trade can be huge. However, in most cases, a trade option involves the same currency size will result to low slippage. The slippage is even lesser with commodity options that are electronically traded like e-mini contracts and gold options. Most of the strategies with trading commodity options need some few adjustments or hedging during the time of the trade. The general rule for hedging or adjustment is going short or long of the principal to watch over if the principal is not in favor of the trade. E-mini contracts and futures provide the best method to hedge or adjust with low capital requirement.
Commodity options trades do not have extra margin needs. With careful assessment of the current trades, possible extra trade opportunities may arise. These additional opportunities can decrease the overall margin that the trade requires.
Apart from the advantages to trade commodity options, the trader must be aware that trading options as well as futures involve considerable risks of loss or gain that maybe or not suitable for all traders. Here is a useful list of tips that one can use for profitable options trades:
- Follow the trends in the commodity market as well as your natural instincts. As soon as you have chosen your trading system, stick to it.
- Do not overtrade and apply techniques of money management on your trading.
- Secure a position in the market wherein your profit goal exists.
- Avoid trading markets that has low capital and with volatile contracts.
- Establish trading plans prior to the market opening. The plans must include objectives, exit points, and entry points.
- Use drawdown minimizer logic technique to lower account equity drawdowns.
- Maintain discipline by using technical signals such as price charts.
- Cut losses short so profits can run.
- Do not overstay on a good market because there's a tendency to overstay on bad markets as well.
- Learn to trade from the short side too and be patient.
- The broker and client must have rapport.