Futures Trends are Strong: Limited Risk Options Strategies in Gold, Sugar and Coffee
There are some strong commodity markets and in the last ten trading sessions none stronger than Sugar, Coffee, Wheat and Gold. In percentage terms Sugar was up 14.75%, Coffee 13.64%, Wheat 11.30% and Gold a trailer at 8.09%. For those interested in joining these commodity trends, limited risk options strategies provide the opportunity to participate in continued gains without risking a lot of money if one is wrong. In addition, the strategies are designed to provide good value; an opportunity to participate without taking substantial Vega risk and enjoying the benefits of the Implied Volatility Skew. Here are three examples, including trades for Gold, Sugar and Coffee. They are based on settlement prices from Friday and may not be indicative of where they can be executed. Whenever trading, be mindful of liquidity and commissions. These are essential factors in any trading decision.
For those of you interested in learning more about Options Trading and designing Options Positions to meet your risk/reward parameters, Options Strategy Network will be offering Group Options Training Webinars for Intermediate Traders. The Next set of Sessions will take place on Tuesday 8/23 at 5:30 PM and 9:30 PM Eastern Time and Thursday and 8/25 also at 5:30 PM and 9:30 PM Eastern Time. If those times are inconvenient, register anyway and we'll locate the appropriate session. Topics to be discussed will include the Greeks, Implied and Historical Volatility and applying this information to developing positions with good risk/reward relationships. Each session lasts one hour and the cost is $50 per registrant. Please sign up at our Contact Link or by emailing: info@optionsstrategynetwork.com. The sessions will cover some of the information in the Options Traders' Essential Outline.
All of the trades shown below involve Buying a Call Spread and Financing it by Selling a Put Spread. In each case, the amount you can make is approximately equal to the amount at risk. The trade has limited risk because you are short a put spread and limited profit potential because you are long a call spread. The details of the trades are shown below but the positions are designed to be away from the current market price.
| GCV1 | Long Call Spread | Strike Diff= | 30.00 | Approx. | Distance | Max . | |
| Settlement | Short Put | Pct. | to Settle | Profit/Loss | |||
| 1850.10 | Long Call Stk. Price | 1920.00 | 3.78% | 69.90 | 31.20 | ||
| Short Put Stk. Price | 1780.00 | -3.79% | 70.10 | -28.80 | |||
| Strike One | Strike Two | Stk One | Stk Two | Spd Px | Credit or | ||
| Calls | 1920.00 | 1950.00 | Calls | 35.20 | 27.90 | 7.30 | Debit |
| Puts | 1780.00 | 1750.00 | Puts | 30.00 | 21.50 | 8.50 | 1.20 |
| SBH1 | Long Call Spread | Strike Diff= | 3.00 | Approx. | Distance | Max . | |
| Settlement | Short Put | Pct. | to Settle | Profit/Loss | |||
| 29.68 | Long Call Stk. Price | 34.00 | 14.56% | 4.32 | 3.25 | ||
| Short Put Stk. Price | 25.50 | -14.08% | 4.18 | -2.75 | |||
| Strike One | Strike Two | Stk One | Stk Two | Spd Px | Credit or | ||
| Calls | 34.00 | 37.00 | Calls | 2.12 | 1.51 | 0.61 | Debit |
| Puts | 25.50 | 22.50 | Puts | 1.51 | 0.65 | 0.86 | 0.25 |
| KCZ1 | Long Call Spread | Strike Diff= | 10.00 | Approx. | Distance | Max . | |
| Settlement | Short Put | Pct. | to Settle | Profit/Loss | |||
| 269.85 | Long Call Stk. Price | 300.00 | 11.17% | 30.15 | 10.87 | ||
| Short Put Stk. Price | 240.00 | -11.06% | 29.85 | -9.13 | |||
| Strike One | Strike Two | Stk One | Stk Two | Spd Px | Credit or | ||
| Calls | 300.00 | 310.00 | Calls | 8.57 | 7.14 | 1.43 | Debit |
| Puts | 240.00 | 230.00 | Puts | 6.24 | 3.94 | 2.30 | 0.87 |
There are numerous ways to design Options Strategies. In each of these cases, a trader with a long market bias can establish a limited risk long position and take in a small credit. At Options Strategy Network we use our 25 years of Options Trading and Risk Management Experience to Train Traders to improve their Options Knowledge Base. Our Individual or Group lessons can help you make an improvement in areas you’re not even aware of. Sign up now.
FUTURES AND OPTIONS TRADING INVOLVES SIGNIFICANT RISK AND IS NOT SUITABLE FOR EVERY INVESTOR. THE INFORMATION IS OBTAINED FROM SOURCES BELIEVED TO BE RELIABLE, BUT IS IN NO WAY GUARANTEED. PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS.
