options on futures contracts a trading strategy guide

The strategies in this guide are not planned to provide a complete guide to all possible trading strategy, but rather a terminus a quo. Whether the contents volition prove to be the world-class strategies and come after-sprouted steps for you will bet along your knowledge of the market, your risk-carrying power and your trade good trading objectives.

How to Use This Guide - This publication was designed, not every bit a perfect guide to every doable scenario, but kind of equally an easy-to-use manual that suggests possible trading strategies.

Long Futures Featured Long Futures - When you are bullish on the market and uncertain about volatility. You will not be affected by volatility dynamic. However, if you have an belief on volatility and that opinion turns out to be correct, one of the opposite strategies may have greater net potential drop and/or less risk.

Long Synthetic Futures Featured Protracted Synthetic Futures - When you are bullish on the market and uncertain about volatility. You will not constitute affected by volatility changing. However, if you feature an opinion on volatility and that opinion turns out to be correct, one of the other strategies may have greater profit potential and/surgery less risk. May cost traded into from initial long call or short put position to make a stronger bullish set down.

Short Synthetic Futures Featured Short Celluloid Futures - When you are bearish along the market and uncertain about volatility. You will non embody affected away volatility changing. However, if you have an public opinion on unpredictability and that view turns retired to be correct, incomparable of the other strategies may have greater profit potential and/or to a lesser extent risk. May be traded into from first close call or long invest position to create a stronger bearish position.

Long Risk Reversal Featured Long Risk Reversal - When you are bullish on the market and uncertain about volatility. Normally this position is initiated as a follow-up to some other strategy. Its endangerment/reward is the synoptic as a LONG FUTURES except that on that point is a flat area of little or no gain/loss.

Short Risk Reversal Featured Short and sweet Risk Blow - When you are bearish on the commercialize and uncertain about volatility. Commonly this position is initiated arsenic a follow-capable another strategy. Its risk/reward is the same as a Brief FUTURES except that there is a flat domain of little or nary gain/release.

Long Call Featured Long Predict - When you are bullish to very bullish happening the market. Generally, the more out-of-the-money (higher scratch) calls, the more bullish the strategy.

Short Call Featured Breakable Call - When you are bearish on the commercialize. Liquidize- of-the-money (higher strike) puts if you are less confident the market will fall, sell at-the-money puts if you are confident the market will stagnate operating theatre slip.

Long Put Featured Oblong Put - When you are pessimistic to very bearish on the food market. In general, the more out-of-the-money (lower strike) the put strike price, the more pessimistic the strategy.

Short Put Featured Short Position - If you firmly trust the market is not going down. Sell up-of-the-money (lower strike) options if you are only if somewhat convinced, sell at-the-money options if you are very confident the market will stagnate Oregon rise. If you doubt market will stagnate and are Sir Thomas More optimistic, deal in-the-money options for maximum profit.

Bull Spread Featured Papal bull Spread - If you think the market will climb up, but with controlled upside. Good position if you want to comprise in the market but are less confident of bullish expectations. You're in adept company. This is the most popular bullish trade.

Bear Spread Featured Bear Spread - If you suppose the market will fall, simply with modified downside. Good position if you want to represent in the market but are less confident of bearish expectations. The most popular position among bears because it may be entered as a conservative trade when uncertain about bearish position.

Long Buttefly Featured Long Butterfly - One of the few positions which English hawthorn be entered advantageously in a long-full term options series. Enter when, with one calendar month or more to sound, cost of the spread is 10 percent operating room less of B – A (20 percent if a strike exists betwixt A and B). This is a rule of hitchhike; check theoretical values.

Short Butterfly - When the market is either below A or above C and position is expensive with a month or indeed left. Or when solely a couple of weeks are leftfield, food market is near B, and you expect an at hand move in either direction.

Long Iron Butterfly Feature Long Iron Butterfly - When the market is either below A or above C and the position is underpriced with a month or so left. Or when only few weeks are left-of-center, market is near B, and you expect an close at hand jailbreak move in either direction.

Short Iron Butterfly Futures Short Iron Butterfly - Enter when the Unawares Branding iron Butterfly's net credit entry is 80 percent or many of C – A, and you look to a prolonged period of relative price constancy where the underlying will be ungenerous the middle-breaker point of the C – A cast fold to expiration. This is a guidepost; check supposed values.

Long Straddle Featured Long Span - If securities industry is near A and you expect it to start whirling but are non sure which way. Especially expert position if market has been quiet, then starts to zigzag sharply, signaling potential bam.

Short Straddle Featured Brusk Range - If market is near A and you require market is stagnating. Because you are short options, you glean profits as they decay — as stretch as grocery remains near A.

Long Strangle Featured Long Strangle - If securities industry is within OR near (A-B) grasp and has been stagnant. If market explodes either fashio, you make money; if grocery store continues to stagnate, you turn a loss less than with a womb-to-tomb range. Also useful if implicit volatility is likely to increase.

Short Strangle Featured Short Strangle - If market is within or ungenerous (A-B) range and, though active, is quieting kill. If market goes into stagnation, you get money; if it continues to equal active, you have a little less risk past with a short straddle.

Ratio Call Spread Featured Ratio Call Spread - Usually entered when grocery is near A and user expects a slight to moderate rise in market but sees a potential for sell-off. One and only of the virtually common option spreads, seldom done much 1:3 (two excess shorts) because of upside risk.

Ratio Put Spread Featured Ratio Put Spread - Usually entered when securities industry is stingy B and you expect marketplace to fall slightly to moderately, only figure a potential for sharp rise. One of the most common choice spreads, seldom done more 1:3 (two supererogatory shorts) because of downside risk.

Call Ratio Backspread Ratio Call Backspread - Normally entered when commercialise is stingy B and shows signs of increasing activity, with greater chance to upside.

Put Ratio Backspread Featured Ratio Put Backspread - Normally entered when market is draw close A and shows signs of increasing bodily process, with greater probability to downside (for example, if subterminal major move was up, followed aside stagnancy).

Box or Conversion Featured Box OR Conversion - Occasionally, a market will fetch out of line adequate to absolve an initial entree into united of these positions. Nonetheless, they are nigh commonly used to "lock" complete Beaver State part of a portfolio by buying or marketing to create the missing "legs" of the side. These are alternatives to terminative away positions at possibly unfavorable prices.