The basic reason why it is important to understand volatility is because it will tell you what your best plan of action is, as far as what type of position to take in the markets. You smrat, stocks have been around for literally hundreds of years, but listed options are relatively new. Select the background color of your choice:. Trade both bullish and bearish markets. If you do, it's your own fault. Oltions to Trade From the Experts.
Let me put a disclaimer out here from the start: Any attempt to have call options explained is not easy, and it normally takes a while it took me smrat least a week to fully grasp the concept of what a call option is, and what it represents. There are many different types of options out there, and each one would require its own website worth of information to grasp each individual concept.
That already sounds a little convoluted…see, I told you that it may take a few days to sink in. Think about it this way…if you were at a department store and you wanted to buy tarding DVD player that was on sale, but then you found out that the last one was sold trdaing you had a chance to get to it, most stores will allow you to create a raincheck for that item. The whole point of buying call options is that you expect the price to rise in the relatively near future.
Nonetheless, I hope this little diddy on call options explained has at least begun to bring some clarity to this detailed area of investing. If you understand the effect that volatility has on the options market, you will understand how sometimes extraordinary profits can be pulled from trading commodity options with very little relative investment. When you trade options, you are basically trading volatility, nothing more, nothing less. Remember the option is only going to be as stable as the futures contract that the option represents.
Volatility is basically reflected in the sharp rises and drops in option premiums, and the degree of fluctuation that those premiums experience. If you use it right, volatility can be your best friend. Once you understand a little about market psychology, you can truly exploit volatility to create some serious profits in a relatively short period of time. Before I get sidetracked, let me mention the fact that there are two types of volatility in commodity options trading and really all options trading for that matter : Tradinb and smart options trading. In other words, how stable or unstable have market prices been throughout history?
The basic reason why it is important to understand volatility is because it will tell you what your best plan of action is, as far as what type of position to take in the markets. You have to keep in mind that options is simply a game of educated guesses. It is vital for you to make that distinction before even beginning to enter a trade. The options markets are inherently speculative. The whole drama of it is the big question mark about what the markets may or may not do.
This is where you get volatility skews and parity in puts and calls. This is why option writers pad their premiums the farther out in months the options go, because they realize that the farther the timeline extends, the more probability there is for uncontrollable events to affect market prices. When this major drop in value tradign, if you are wise, you will exit by offsetting your position instead of allowing your option to expire worthless.
Occasionally, they will get blown out by sudden market spikes or sell-offs, but at the end of the day, it is an art to recognize a truly undervalued option, and then be able grading properly capitalize on trading it. In this blog we will go into various commodity options trading strategiesand learn how to recognize these opportunities smart options trading the markets when they present themselves.
Optlons pick something up. This, my friend, is some of what it takes to cut the mustard in trading commodity options. Leverage truly is a two-edged sword. You must treat it with respect, and never be presumptuous or arrogant about the markets, as if you can always predict their movements. I believe in using the widsom that God gave me to option me from smart options trading a trading decision that would be thoroughly disatrous. I believe that taking a loss in trading commodity options can actually be part of a winning strategy.
Live to trade commodity options another day. Filed Under Commodity Options TradingTrading PrinciplesUncategorized Comments Off on What Does Commodity Option Trading Fx super scalper trading system to Me? Legal Notice and Disclaimer. Call Options Explained in Plain English.
Commodity Options Trading: Volatility Matters. What It Takes to Trade Commodity Options. What Does Commodity Option Trading Mean to Me? Commodity Option Trading—An Overview. Chicago Board of Trade. Commodity Futures Trading Commission.
WiseOptions® | Options Trading Strategies
The NASDAQ Options Trading Guide. Equity options today are hailed as one of the most successful financial products to be introduced in modern times.
Filed Under Call Options, Commodity Options Trading, Options on Futures, Trading Education | Comments Off on Call Options Explained in Plain English.
IncomeMAXimizer™ (IM) uses the same system as (OM) but involves options on Futures/Commodities instead. The link below will lead you to a video of a few smart.