Till now I have been only trading options on indexes and futures indexes . I would like to trade options on some commodities. -which are traded electronically. Please tell me how to make a start and gradually build on knowledge gained. I have an a/c with IB so really I should make a start there. But I have no clue which commodity to start. Any elementary book on this would be helpful as well. All comments much appreciated. Thanks
Are there any differences between options on futures and options on indexes? I can't think of any except of underlying.
Margin requirements are less for naked sales on options on futures. There is little liquidity on the Liffe soft commodities on IB. They never added brent crude options either. Maybe when IB offer pit access in chicago and new york there will be some good markets to look at.
No there might not be any differences. I want to diversify for spreading the risk because I feel all financial products are corelated and in some adverse event options on commodities may not be co related.
you might consider (honest) paper trading first.... then put real money into it.... if you cant make it paper trading, oh well most brokers hire former traders to mow their lawns......
paper trade em 1st. IB doesn't follow much in the way of physical commodities. U need a broker that can do pit traded. Also, this is a good text to start with. http://www.amazon.com/gp/product/00...104-2086144-1764711?s=books&v=glance&n=283155 These two guys add a nice perspective to what should be evaluated when getting involved with trading calls/puts spreads whether debit or credit. Take a gander.
there are some metals options that will trade electronically starting in March..... CBOT............ there will be 3 market makers so the spread will be something to watch.... making money in the futures market is tough enough....and with the comish on options being so high...lotsa luck I'm doing OK with some buy and hold options this year...but not enough to compensate for the time I put in, and there's always the issue of gyrating markets making it difficult to enter or exit at the price you want..... keep in mind that pit traded option trades can be busted back to you with disasterous consequences and the brokers operate on a "not held" basis.... you are swimming with sharks...... just an opinion of course...............
on not held basis, what does that mean ? if you only trade long options, how can a busted trade have disasetrous consequences?
not held meaning "not held liable" I have had COMEX option trades that were cleared by my broker's clearing firm and reported to me by e-mail only to have the exchange late in the day or even the next day cancel the transaction..... the money you thought you had credited to your account from the sale can (and will) be debited and you still own the position.... If you make additional hedge trades or the market goes against you, you can quickly get killed.....
Not held = your broker will try to fill you on a best efforts basis, i.e. bend over. Usually they ARE held unless the underlying market is in a fast market situation. Just stick to the more liquid contracts and you won't have a problem. Energy can be dicey, especially nat gas - make sure you understand fair value and unless you've got two-way communications with the floor don't send them market orders. If you're trading on some discount internet order-entry system, your broker usually won't bother calling the floor for a market, plus you often will wait 30-60 minutes after your trade hits the tape to get a report especially in NY markets. If you're just beginning to learn, play with the screen options first, i.e. ES, and now there is even pretty liquid screen trading of bond/note options side-by-side with the pit.