First and foremost, who are your future’s advisor, is he/she a reputable broker or is he/she someone you just pick up off the street? You need to find a trusted advisor who is willing to share the information you need to know to take advantage of the futures market. Next do your due diligence on the advisors credentials, find out if they are registered investment advisors, accredited by the relevant regulatory body and what amount of experience they have in the futures market. Lastly do your research on the particular futures broker you want to take on board.
Have you looked at the futures prices in the newspaper or online at the local news website? Are you looking for more current information than past results? Many brokers will provide you with charts and information based on the information they collate in the course of their work. Is this the kind of information you want to take the risk of buying futures options with? There is a risk of losing your money.
Have you ever thought about what futures are exactly? Futures are simply a contract that allows one party to purchase an option for a future date and time. An option can be thought of as a future “position” that can either be long or short, it is dependent on which way the contract is set to be held
When it comes to understanding futures and options it helps to know what a futures option is. Simply put, a futures option is an agreement or contract between two parties. The party choosing to exercise their option has to pay a fee called a premium. The premium can fluctuate and is dependent on the price of the futures in question at the time the option is agreed upon, the amount of premium desired and many other factors.
Understanding the difference between a call and put option can help you understand how a futures pricing system works. A put option is when you are buying from a seller and the price of the futures rises above the strike price (the price agreed upon in the futures contract). In the past the only way to accomplish this was to sell before the price hit the high and hope that the price would fall enough to allow you to buy back the asset below the strike price at a lower price. This was not always the most profitable strategy because many people lost money doing it. However, with more sophisticated strategies it is possible to realize profits from trading futures with this method.
Conversely, a call option represents the right to sell a particular futures contract when the future price falls below the strike price. Again, this is a risky strategy, but it is possible to realize profits if you know what to look for in the market. If the value of the asset declined and the seller is willing to sell, then you may be able to exercise your right to sell. On the other hand, if the price does not decline and the seller is unwilling to sell then you have no recourse but to hold your position until the price bounces back up.
Knowing when to trade futures and options is one of the keys to success when it comes to trading on the futures exchanges. You have to have a strategy for anticipating where the markets will go before they do so that you are not caught off guard when the markets decide differently than you anticipated. You can take my futures and options quiz for me and learn a lot about futures by studying market behavior and determining the trends that occur. When you do so you will have a better idea when it is time to execute your trades and when you should simply sit on your hands.