Posts Tagged ‘Option’

Commodity Option Trading Strategy

Commodity option can be profitable if you know how to trade it. In order to make money with commodity option you need to know the strategy. But first you must learn how option price is calculated. Without that knowledge you won’t be able to use any strategy. Basically the commodity price like any other asset is affected by supply and demand. If the supply increases and demand unchanged then price will go down. If the demand increases and supply unchanged then price will go up. Another important factor that influences the price is currency. Since US dollar is still the main currency in the world, commodity is priced in US dollar. What happen with US dollar will influence commodity price. If US dollar weakens then commodity price will go up. If US dollar appreciates then commodity price will go down. An example of this is the gold price record recently.

US dollar is plummeting and gold reaching new record.

There are 2 basic strategies in commodity options or options. You can use fundamental analysis and technical analysis when trading. Fundamental analysis looks at the fundamental side of the commodity. The fundamental is the supply and demand for the commodity. If you think the supply will likely to over pace demand then you should buy put option because the price will go down. But if you think demand will over pace supply then you should buy call option because its price will go up. To use fundamental analysis you need to know the demand and supply of the commodity. For example you must have global consumption and production data for the commodity. Weather is a big issue for commodity price because it can lower supply. So you need to put that into your analysis.

An easier option trading strategy is by using technical analysis which is based on chart pattern.

Because it is easy, many beginners prefer using this strategy. Through chart patter, investor tries to predict the future because trend tends to repeat it self. When you see an uptrend you should buy call option. But you should wait until the price reaches the lower channel before buying. Buying the price when it is at upper channel is risky and can reduce your profit.

Technical analysis also use various indicators to confirm you action. The most widely used is RSI or Relative Strength Index. The index tells you when it is overbought or oversold. So it’s not a good idea to buy when it is already overbought.

Forex Option Trading Has Become an Alternative Investment

Article by Trading Binary Options

Forex options market started as an over-the-counter (OTC) financial instrument for banks, financial institutions and large international corporations to hedge against currency risk. As the forex spot market, foreign exchange options is considered an “interbank market. But with plenty of real-time financial data and forex trading software option available to most investors through the Internet, today’s market forex option now includes a growing number of individuals and corporations who are speculating and / or hedging currency exposure via telephone or online forex platforms trading.

Forex option set – A currency option is a financial currency contract giving the forex option buyer the right but not the obligation, to buy or sell a foreign exchange spot contract specific (underlying) to a specified price (exercise price) or before a certain date (expiry date). The amount of binary option buyer pays the seller for the binary option rights forex option contract is called the forex option “premium.”

Forex Option Buyer – The purchaser or holder of a currency option has the choice either to sell the currency contract option before it expires, he or she may choose to hold the currency of the contract until the end of options and to exercise its right to take a position in the currency of the underlying foreign. It is the exercise of the option and taking the subsequent underlying position on the spot market of foreign currency is known as “transfer” or “assigned” a spot position.

The only initial financial obligation of the foreign currency option buyer is to pay the premium to the seller at the front when the currency option is initially purchased. Once the premium is paid, the holder of foreign currency option has no other financial obligation (no margin is required) until the currency option is either offset or expires.

On the date of expiration, the option buyer can exercise his right to buy the underlying position of the spot exchange currency at a strike price of options in foreign currencies, and sales support can exercise their right to sell underlying position of the currency in cash at the exercise price of options in foreign currencies. Most of these currencies are not exercised by the buyer, but are offset in the market before maturity.

It expires worthless if, at the time of the foreign currency option expires, the exercise price is “out-of-the-money.” In simple terms, a currency option is “out of money” if the underlying spot price of foreign currency is below the exercise price of an option to purchase foreign currency, or the spot price of the underlying foreign currency is greater than the put option strike prices. Once a currency option has expired worthless, the option contract currency is over and neither the buyer nor the seller shall have no further obligation to the other party.

Forex negotiable option – seller of the option to change may also be called “writer” or “founder” of a contract foreign currency option. The seller of a currency option is contractually obliged to take the opposite underlying foreign exchange exposure to foreign currency accounts if the buyer exercises his right. In exchange for the premium paid by the buyer, the seller bears the risk may be a disadvantage at a later date in the currency spot market.

Forex option trading has become an alternative investment vehicle for many traders and investors. As a tool for investment, forex option trading provides both large and small investors with greater flexibility in determining the proper forex trading and hedging strategies to implement. Most forex option trading is by telephone, because there are only a few forex brokers offering online forex option trading platforms.

The currency option seller must have the funds in its account to cover the initial margin requirement. If markets move in a direction favorable to the seller, the seller does not need to send more funds to its foreign currency options other than the initial margin requirement. But if the markets move in a direction unfavorable options seller, the seller may need to send additional funds for its foreign exchange account of foreign trade to keep your account balance in foreign exchange trade-in above the maintenance margin requirements.

Binary Options Weekly: Hedging Alternatives For Your Binary Option Positions

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S&P 500 Index Daily Bottom Market Price Action 1250 Call Option

www.StockMarketFunding.com S&P 500 Index Daily Bottom Market Price Action 1250 Call Option. Learn how to trade S&P 500 index options. Tags “S&P 500″ market trading stock stocks analysis finance economy technical investment futures options INDEX news business “technical analysis” education…

online option stock trading

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Advantages Of Binary Option Trading

Binary options have many advantages in terms of return on investment because even if the prices of assets does not move significantly, a slight movement is enough to make lots of money for the trader. So how can you use binary options to best generate maximum profits? This is what we’ll explain here.

Diversify in investments by using the binary options

First, you can use the binary options with a number of underlying assets such as indices, options, but also currencies and commodities. Most experienced traders use options to achieve maximum gains in minimal time. Indeed the period between the purchase of the option and its expiration is often very short, which can generate a lot of money in no time. Most binary brokers offer an 85% return within an hour of your option being opened.

Develop appropriate strategies

Binary options may also be used to develop strategies for trading simple but effectively. The more experienced traders indeed use binary options to become familiar with a range of assets they did not know about.The all or nothing option makes it possible to get used to detecting trends without seeing many parameters to consider as is often the case with traditional forex trading.

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The options allow you to cover your positions

Most investors who invest in binary options use binary option trading strategies in order to cover their other positions . In doing so, it is possible in a traditional trade, to cover risks of loss related to this trade by buying a binary option which reverse any gains and will offset the loss of the traditional method. To do this, take a position with a binary option when you have confirmation that the trend does not follow the sense that we had anticipated at the outset. Then another trade is opened in the oposite direction. For example if you had opened a trade with 0 with an 85% ROI and the trade was going the wrong way, by opening another trade you would only loose instead of 0. as your counter trade would make a return of 5 had you made another 0 trade.

In short stay tuned!

Finally, it is possible to trade binary options on an almost continuous, since the options markets are available 24 hours a day, 7 days a week. What is needed above all, to make an efficient use of binary options strategies is to stay as closely as possible to the economic and political events that influence asset prices. In this way, you can easily find the best market opportunities.

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Related Options Trading Articles

Books suggestions on option trading?

Question by Brian: Books suggestions on option trading?
Hi, I’m looking for a good book on options trading that would be good for a rookie / first timer but not be too basic that it would be worthless soon. Something that covers the basics but also goes into the more advanced parts. I’m interested in more than just calls, using puts to protect stocks I already own is what i’m trying to understand better. Sometimes I feel like a well written book is better than all the info on the internet for some reason. The book would ideally also cover many of the rookie to advance strategies of options. As i’m starting to see a combo of stock purchases and option purchases could be more beneficial to me. I’m a quick learner and just getting into trading stocks. Last 2 months already earned myself a 17% realized increase!

FYI: I already have this book and its great!
The Neatest Little Guide to Stock Market Investing, 2010 Edition by Jason Kelly

Thanks
-Brian
I haven’t traded a single option yet. I’ve gotten close to doing it. At this point I am granted access for level 2 option trading. I’m sure I could get higher that is just what I asked for at the moment to stop me from possibly getting too far over my head.

Best answer:

Answer by InspectorBudget
There are good tutorials on the Chicago Board of Options Exchange web site:

http://cboe.com

They give pretty comprehensive descriptions of options, plus strategies like Iron Condor, Strangles, Straddles, Collars, etc.

Add your own answer in the comments!

what is the best strategy to trade in option?

Question by ghost: what is the best strategy to trade in option?
i am in search of a strategy which can minimise my loss and maximise my profit in option trading.

Best answer:

Answer by Homer Simpson
If you are asking this question, you should not be trading options. It is risky and not for people with no in depth knowledge.

What do you think? Answer below!

Stock Option Trading | Problem with Candlesticks & Elliot Waves | www.homeoptionstrading.com

For the uninitiated, Point and Figure charting is the only charting method that analyzes price without the noise of time. The noise amplification of time in other forms of charting Candlesticks, Heikin Ashi and OHLC is visually disruptive as you try to reconcile the conflicting patterns between daily, minute, weekly and monthly charts. This visual confusion is removed with Point and Figure charts. Some retail training firms like to popularize the myth that, “Everyone looks at these Candlestick patterns/Elliot Waves in charts”. They are partly right. Though, their use of the term “Everyone” applies to retail off-the-floor traders who collectively only make up ~ 15% at most, in some cases even less, of the total traded volume on exchanges, depending on which exchange it is. Which raises the question: What are the eyes of those on the floor moving 80+% of traded volume looking at? Price and PRICE ALONE. With truck loads of calls and puts to hedge, floor traders could care less how many times during the day, price touched the tail of a dragon fly doji. They’ve already pre-planned to get more of; or, offload their inventory of calls/puts at a specific strike, for a given price. As a retail option trader, trading less than 10 contracts per trade, you are not exempt from tuning your eyes to focus only on price. How do you simulate the observation of price alone from off-the-floor, if you remove the use of Candlesticks, OHLC Bars and Heikin-Ashi charts? Use Point & Figure charts …
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Charting Options: S&P 500 Index Calls & Puts 1130 Call vs 1130 Put Option Chart

www.StockMarketFunding.com S&P 500 Index Charts Options Trading SPX Strategies Live Short Term Trade S&P 500 Index Calls & Puts 1130 Call vs 1130 Put Option Charts Put Option with a Call. Realted ETFs SSO, SDS, SPXU & SPY. Live online options trading entry on the 1130 (S&P 500 Index).
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Have you ever gone to an options trading seminar to learn a new strategy? Chances are that when you did, you were told, “If you’re bullish, then place this innovative option spread. If you’re bearish, then do this other innovative option strategy.” The problem is, most options educators ignore that little detail of how best to predict future price movement. In this webinar, Steve Lentz will cover: Explanation of the Directional Movement Indicator (DMI) Explanation of high probability directional option credit spreads Trading plan for combining the two into a DMI Credit Spread System MetasStock Expert and Explorer formulas