Options

Options on Futures Contracts

What are known as put and call options are traded on most active futures contracts. The principal attraction of buying options is that they make it possible to speculate on increasing or decreasing futures prices with a known and limited risk. The most that the bu

How Option Premiums are Determined

Option premiums are determined the same way futures prices are determined, through active competition between buyers and sellers. Three major variables influence the premium for a given option: The option’s exercise price, or more specifically, the relationship

Futures vs. Options

By James Mound I am often asked why I am such a big believer in spreading options. Simply put (no pun intended), option spreading provides avenues to create definition to trades that futures or straight options do not. Allow me to explain. When you buy or sell a f

Futures: What You Trade Determines How You’re Taxed

By Jim Forrester, CPA Futures trading covers a vast array of trading instruments, from stock indices and U.S. Treasury bonds to precious metals, energy sources such as oil and gas, and everyday foodstuffs including meats, grains and coffee. Some futures traders bu

Buying Put Options

Whereas a call option conveys the right to purchase (go long) a particular futures contract at a specified price, a put option conveys the right to sell (go short) a particular futures contract at a specified price. Put options can be purchased to profit from an a

Buying Options on Futures Contracts

Introduction Although futures contracts have been traded on U.S. exchanges since 1865, options on futures contracts were not introduced until 1982. Initially offered as part of a government pilot program, their success eventually led to widespread use of options o

Buying Call Options

The buyer of a call option acquires the right, but not the obligation, to purchase (go long) a particular futures contract at a specified price at any time during the life of the option. Each option specifies the futures contract which may be purchased (known as t