Trading future options vs Trading futures

D

dextor

Hi guys,

I was wondering why some are not trading future options where they would cap their losses. If you have been trading futures (vanilla), that means the stops have to be wider and you may experience more losses than you would trade options.

It seems that the margins for future options are very low and you would not experience margin calls if you do directional trading.

-- Add: if you have an account size of 10k to 20k, it seems to make more sense trading futures options if you swing.
 
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Options on future’s have wider spreads and in off hours are less liquid. For a day trader, the future is a better instrument. For a swing trader, i’d Say options can make sense if you don’t over lever them and have the proper understanding of how they trade.
 
I have looked at trading futures options a couple of times. Ibhave only done it once so that I could carry an oil position over the weekend. You would not get a margin call if your trade is defined risk. Even trading futures contracts (or anthing else) you should never get a margin call if managed properly. The one thing that concerns me with options on futures is thier liquidity. How well will the order fill? I would be interested to hear what others think about that issue
 
I'll probably not be selling contracts to earn premium, but just using options as a means of placing directional bets. Additionally, i'm just trading 1 or 2 contracts. it seems to make sense to cap my losses that way.
 
dextor said:
I'll probably not be selling contracts to earn premium, but just using options as a means of placing directional bets. Additionally, i'm just trading 1 or 2 contracts. it seems to make sense to cap my losses that way.
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Thats what I did when I traded stock options. Progressed into vertical spreads which worked well for me. I think its because I had such a good experience with stock options that I keep thinking about doing with futures. Keeping Roberts advice in mind of course.
 
dextor said:
Hi guys,

I was wondering why some are not trading future options where they would cap their losses. If you have been trading futures (vanilla), that means the stops have to be wider and you may experience more losses than you would trade options.

It seems that the margins for future options are very low and you would not experience margin calls if you do directional trading.

-- Add: if you have an account size of 10k to 20k, it seems to make more sense trading futures options if you swing.
More...

Options traders trade volatility, not direction. Futures traders focus on direction.
Margins on Options (I assume you meant short options) are not an indication of risk.
If you are long you are "fighting" trend and time decay.
You can not come and conclusively say that Options are less risky.
 
MattZ said:
Options traders trade volatility, not direction. Futures traders focus on direction.
Margins on Options (I assume you meant short options) are not an indication of risk.
If you are long you are "fighting" trend and time decay.
You can not come and conclusively say that Options are less risky.
More...
Not sure that I completely agree with you Matt. You are correct that some option strategies trade volitility. I conceed that. But they can also be directional. Take for example the simplest trade there is. You think the CL contract is going higher, so you buy a call.
 
Traderjohnsblog said:
Not sure that I completely agree with you Matt. You are correct that some option strategies trade volitility. I conceed that. But they can also be directional. Take for example the simplest trade there is. You think the CL contract is going higher, so you buy a call.
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Or sell a put.
 
You have the right to disagree but you presented a solution to direction without providing all the other variables that affect Options. When you buy a call option, you not only need to guess the direction but also gauge the volatility that affects the pricing, the time of expiration (due to time decay), and finally choose the right strike price. Therefore, a direction is only part of the equation when it comes to trading options.
 
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Matt, what you are essentially saying is that options cannot be use to trade direction then - Am I interpreting this correct? Isn't there an intrinsic value attached to options (which I think can be use to represent your direction) ? Of course this is also determined by delta right?

I was trading on IB margin account, wasn't referring to shorting options. I was referring to long options.

Fighting trend and time decay yes, if you hold a longer duration. What if you use it as a type of stop loss rather than using hard stops - for directional trades that is. ( in short for a day or 2 trades - day trading (shorter term))


MattZ said:
Options traders trade volatility, not direction. Futures traders focus on direction.
Margins on Options (I assume you meant short options) are not an indication of risk.
If you are long you are "fighting" trend and time decay.
You can not come and conclusively say that Options are less risky.
More...
 
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