ewheat
Joined: 15 Nov 2012
Posts: 10
|
 Posted: Thu Nov 15, 2012 11:55 am Post subject: Commodity trade |
 |
|
New commodity traders, most of them have a history with stock options. Most of these traders, when pressed, express a vague desire to diversify as one of their chief reasons for taking the next step to commodities. if they are accustomed to the constraints that stock option selling can place on an investor.
.
Selling benefits
Selling (also known as writing) options can offer benefits to investors in both equities and commodities. However, there are substantial differences between writing stock options and writing options on futures. What it generally boils down to is leverage. Futures options offer more leverage and, therefore, can deliver greater potential rewards (in addition to greater risk).
In selling equity options, you do not have to guess short-term market direction to profit. The same remains true in futures, with a few key differences:
Lower margin requirement (that is, a higher return on investment). This is a key factor that attracts many stock option traders to futures. Margins posted to hold short stock options can be 10 to 20 times the premium collected for the option. With the futures industry’s margin calculation system, however, options can be sold with out-of-pocket margin requirements for as little as one to one-and-a-half times premium collected. For instance, you might sell an option for $600 and post a margin of only $700 (total margin requirement minus premium collected). This can translate into substantially higher return on your working capital.
_________________
pharmacy coupons |
|
FAQ
Search
Memberlist
Usergroups
Register
Profile
Log in to check your private messages
Log in
