I understand options on future are a derivative security of a derivative security, but this makes me even more excited. I see one should build before foundations learning how futures work. Well to wrap up my considerations I really do not like to lose real money nor make experiments with paper accounts, let alone with margin accounts that could punish me for the smallest mistake. If i will figure out a way to experiment with small money I am going to build my bones To the other reply i received another consideration: I may be wrong but have the gut feeling that everybody pointed out the slippage bid ask and liquidity, but there are also quite some similar disadvantages in shorting option that should be put out on a scale *First of all i can almost for sure liquidate my retail position before the expiration with options if I trade a liquid one. * Ok some stocks do not have options but is also true if i want to short stocks I then need to find securities to short sell with my broker and is not so automatic.. * ..and do not have to pay high borrowing fees. *The stop loss shorting stocks then should be larger than in a long position, because of the nature of the corrections, reducing my win ratio. *My downward risk (if I want) can be controlled and i do not risk squeezes. * No uptick rule. * Upward If i am right with options and vega and delta come to help me with the right degree of volatility I can gain quite a bit of dough. Although not expert I guess these are not trivial advantages.
I trade the CL (oil futures) options frequently. There is a multi-year set-up with the term structure in steep backwardation. After a volatile period, this allows for some very interesting calendar and diags. Also, options are much lower cost/risk for longs or hedged. But for futures options, I'd say there are very few liquid markets. If that's ALL you're trading, then it makes no difference because you can't use margin for options.