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Commodity Option Trading Article
This is a selection made from among articles on Commodity Option Trading. For a permanent link to this article, or to bookmark it for future reading, click here.
Understanding Options Trading
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Like futures, an option gives you the right, but not the obligation, to buy an underlying stock at a specified price at a predetermined date in the future.
You earn a profit if the stock’s market value rises above the price by which you acquired your contract upon the agreement’s expiry. If the stock’s market value drops, then you lose your premium.
There are two forms of options: the call option and the put option. If you buy a call option, you are expecting your stock price to go up and you would prefer the put option if you expect the opposite, meaning you expect prices of your stock to decline.
You actually earn a profit regardless of whether the price of your stock goes up or down unlike other derivative instruments where you only earn a profit when the price of your stock rises.
Hedging strategies are used if you are not sure whether the price of your stock will rise or go down. In this case, you will opt to buy a Put option on your stock. If the price actually goes down, then you earn a profit, but if it goes up, you merely lose your profit.
It is also important to remember that if you think your stock will go down, it is best to sell your stocks and earn a profit from it and just purchase put options.
Another strategies traders engage in are selling their options before it expires to buy the underlying stock, let their contracts expire or sell their options. Selling options is actually not a problem as there are agencies responsible for buying these options in order to maintain balance in the system.
You might want to join options forums so you’ll have access to valuable tips that you may not otherwise find in trading books. There are also various online options trading sites that offer free tutorials as well as membership in the exchange.
Like most investments, you also need to be updated about the economy and the different business players if you want to buy options on stocks about their company. It is important to have a good gauge of which businesses to look out for and to trade on.
Armed with enough information, you will be ready to expand your money through online options trading.
In conclusion, if you are risk averse but would want to maximize your investments, then online option trading might work best for you. But of course, you have to equip yourself with as much knowledge as you can.
Commodity Option Trading Specific links
Commodity Option Trading News
UK electronics retailer DSG's shares jump - Washington Post
LONDON -- Shares in DSG International PLC rose 21 percent Friday from a 20-year low after Credit Suisse raised its rating of the stock to "outperform" on the basis that market concern over the economic slowdown had left the stock too cheap. Shares in ...
Read more...Gold soars to $US800 in haven buying - The Australian
GOLD futures ended sharply higher in New York as safe-haven buying amid spooked markets sent it past $US800 an ounce. The commodity also found support as participants bought back previously sold positions after options rolled into futures contracts ...
Read more...Check Services - Commodity Online
His pitch is irresistible: “Buy a basket of juniors with warrants and it could be the easiest 500% you’ll ever make.” In this exclusive look at one of the most overlooked and misunderstood investment vehicles, Dudley Baker of ...
Read more...Economic crisis is just a symptom: The disease is greed - Edmonton Journal
EDMONTON - After carving out new bear-market lows Thursday, stocks bounced back to end the week on an upbeat note. In New York, the Dow Jones Industrial Average jumped nearly 500 points Friday -- largely during the final hour of trading -- to close ...
Read more...Turning Plowshares Into Put Options - Forbes
The oil sector wasn't the only commodity-related bubble to pop in 2008. However, what is shocking is the amount of optimism that can still be seen toward this sector. The Schaeffer's put/call open interest ratio (SOIR), which compares call open ...
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