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Intro to Options Trading

Watch this RJOF Quick Tips: Introduction to Options video presented by our Senior Market Strategist, Mike Sabo to learn what options on futures are, options trading and how to implement it in your futures trading plan. 




Why Options Trading on Futures?

Options are a great way to fine-tune your trading approach beyond simply “buy if it’s going up” and “sell if it’s going down.” Many traders like the defined-risk aspect of options trading, for example. But, it doesn’t mean options are entirely without risk. You have to get direction,time frame, and amount of move right in order to profit.


What are Options on Futures?

There are two types of options. Calls give the buyer the right but not the obligation to buy a futures contract at a certain price prior to option expiration. Puts give the buyer the right but not the obligation to sell the underlying futures market at a certain price prior to option expiration.


Buying vs. Selling Options on Futures

Most individual traders tend to buy options because they know their maximum risk (premium paid) upfront. But, selling options can give you opportunities to profit because you collect and keep the premium the buyer pays if the option expires worthless or decreases in value. However, there is potentially unlimited risk in selling options.


A beginner's guide to learning options on futures

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The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that RJO Futures believes to be reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgement at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.

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