The Futures Markets can be used for Portfolio Hedging and Portfolio diversification.
This is a quick primer on the use of gold futures, which can be unleveraged by fully funding a trading account, as a portfolio diversifying tool. We also discuss the basics of portfolio hedging using E-mini S&P 500 futures and options.
Strategizing in today's hot commodity markets.
Experienced futures and options broker, Carley Garner of DeCarley Trading, talks about recent price action across various commodities, the long-term prospects of commodity market bulls, and a few practical trading strategies for today's market volatility.
Trading Crude Oil Futures and Options
All eyes are on the energy markets; governments are weaponizing crude oil and natural gas around the world and consumers are feeling the pain. Nearly everyone has an opinion on where energies go from here, but speculating on such is a dangerous game. Here are some ideas on how to trade the oil and gas markets with a little more comfort using micro futures and options strategies.
Have cash on the sidelines in your investment portfolio? You can hedge it with this option strategy.
Stock and bond investors have had a rough year. As a result, there is a historically large amount of cash sitting on the sidelines waiting to be put back into the financial markets. If you are holding cash with the intention of investing at better levels in the stock market, but don't want to miss out if a bull market emerges could consider a risk reversal strategy using e-Mini S&P 500 futures options in which traders sell put options and use the proceeds to buy call options. This provides some upside exposure with the ability to "go long" by taking delivery of the underlying futures contract at the strike price of the short put should the market correction persist to lower levels.
Big picture commodity market ideas and strategies to ponder
Where will gold and crude oil futures go as we approach the end of the year and how can commodity option traders prepare for multiple scenarios.
Selling options on commodities isn't for everyone, but it is worth a look.
They say trading is the hardest way to make easy money. The same can be said of selling options, particular selling options on futures. It is a strategy that works most of the time, offers plenty of room for error, and merely requires traders to not be wrong in order to profit. Yet, the inevitable black swan or even a far less unusual occasion can produce massive drawdowns. In this video, we discuss some things to keep in mind about the strategy such as why it is worth considering and why option sellers must stay on their toes to survive.
Various ways to hedge a stock portfolio with futures and options.
Buying put options on stock index futures is one way to hedge portfolio risk but it isn't the only way. In fact, there are less used strategies that might offer more practical solutions such as selling call options to pay for any put protection purchased. Of course, such practices don't make sense in all circumstances.
How to use the CME’s new Micro E-mini Stock Index Options to Speculate and Hedge Around the Clock
2020 brought unprecedented market volatility but, in turn, it also provided an incentive for the CME Group to offer options trading on its new suite of micro-sized stock index futures. Micro E-mini options open the door to fine-tune risk and reward prospects with proper position sizing and they also enable small traders to speculate with nearly any strategy while trading within their means. In short, account size is no longer a barrier of entry to the various options trading strategies and covered calls and puts which would require large margin requirements and the acceptance of significant risks when executed in the larger E-mini futures and options contracts.
In this video we discuss:
• What are Micro E-mini options?
• Micro-sized futures and options on the CME trade 23-hours per day!
• How can Micro E-mini options be used to hedge futures positions?
• Constructing ultra-low-risk option strategies using Micro E-mini options.
• Option spread trading: butterflies, vertical spreads, and outright long and short options.
• Trading closer-to-the-money with less risk.
An Elevated VIX Creates Attractive Option Trades: Ratio & Butterfly Spreads in High Volatility
Ahead of the US Presidential election in 2020 the E-mini S&P options on futures markets were pricing in a substantial amount of implied volatility. The abnormal option prices offer some unusual opportunities for option traders.
Trading Commodity Options with Creativity: How to use the market’s money to finance speculations.
Options are priced to lose. Thus, habitually buying options require impeccable timing and a little luck to succeed. However, traders might benefit from the use of option spread strategies aimed at using the market’s money to purchase long calls and puts. In short, speculative option purchases can be financed by the sale of an eroding asset. Of course, this approach isn’t without its disadvantages and opportunity costs but in the right circumstances, there are low and limited risk ventures with potentially attractive payouts. Come find out how to creatively use calls and puts ad building blocks to create strategies with various risk and reward prospects. Highlights include:
• A crash course in option mechanics.
• An unconventional but logical approach to option trading.
• How to create custom delta positions with long and short call and puts.
• FREE option trades built for leverage and profit potential.
• Debit option spreads aimed at keeping risk low and limited.
• Trading examples.
Trading gold futures and options on futures
Carley discusses various options and futures strategies using gold as a portfolio diversifier. Gold, unlike other physical assets, has very little industrial or practical purposes but it can be an effective way to hedge a traditional portfolio. Yet, using inefficient products such as ETFs could expose traders to unexpected risks and drawbacks. The futures and options markets, on the other hand, offer highly efficient access to gold price exposure fitting the needs and risk tolerance of any sized investor or speculator.
- Why consider gold for hedging or speculating?
- Various gold futures sizes and exchanges.
- Gold futures vs ETFs.
- What moves the gold market?
- Analyzing and understanding gold seasonal tendencies.
- Mining for clues in the COT Report.
- Technical analysis and gold futures.
- The time and place for gold is not “always”.
- Hedges or diversifiers are only helpful if profits are locked in.
Trading Commodity Options ...with Creativity, an options on futures trading book by Carley Garner.
Trading Commodity Options…with Creativity takes readers on an unfamiliar voyage destined to simplify the options on futures markets and arm market participants with the knowledge to employ smarter commodity market strategies.
Many books have been written on options trading, but most focus on the academic side of options suggesting there are black and white answers and reliable mathematical formulas to determine profit and loss. Yet, options traders must be ready and willing to deal in gray areas, approximations, and guesswork. Trading Commodity Options…with Creativity bridges the gap between traditional options trading literature and real-life trading examples. Through tough-learned lessons, this book tackles the nearly impossible task of streamlining the process of developing an appropriate options strategy for any market environment and risk tolerance, then making the necessary mid-trade adjustments to improve the odds of success.
Carley Garner is a frequent contributor of commodity market analysis to CNBC’s Mad Money TV show hosted by Jim Cramer. She is also a regular guest on the Options Insight segment on Bloomberg Television with Abigail Doolittle. Garner has been a futures and options broker, where for over nearly two decades she has had a front-row seat to the trials, tribulations, and victories traders have been dealt by the commodity markets.
Trading Commodity Options…with Creativity is Garner’s fifth title. She is a best-selling author and has been praised for her knack of portraying complicated subject matter in an easy-to-read and entertaining format. Readers will undoubtedly walk away with the tools needed to utilize options, tame the treacherous commodity markets, and create custom-risk and reward profiles to meet the needs of traders regardless of size and experience.