Trading Commodity Futures Options

http://www.options-trading-education.com/24164/trading-commodity-futures-options/ Trading Commodity Futures Options By www.Options-Trading-Education.com In times of uncertainty trading commodity futures options is often a better bet than trading futures directly. The precipitous fall in crude oil prices is a case in point. It is clear that eventually the global economic picture will improve but no one knows just how soon. If you are stuck in a sell contract at $50 for crude oil and the price goes up to $75 you will be out of luck. If, on the other hand you are trading commodity futures options in crude oil your loss limit will be the cost of the options contract. There is a lot of speculation regarding oil these days. Inside Futures asks just how low are crude oil prices going. Crude oil futures are trading far below their 20 & 100 day moving average telling you that the trend is getting stronger to the downside on a weekly basis as prices look to crack $50 a barrel here in the next several days with the next level of support around $45. If you’re still short this market play by the rules and keep placing your stop above the 10 day high which currently stands at 58.53 and that stop will be lowered later in the week and if you are currently not short crude oil sit on the sidelines as you have missed the boat as this trade has been remarkable to the downside as deflation is a real problem worldwide as recessions in Europe are also putting pressure on crude oil prices at the current time. Remember when you trade commodities it’s very difficult to pick a top or pick a bottom so you want to trade with the trend & the trend clearly is to the downside in this market so do not try to buy this market as the bearishness is still present and prices could still head lower as nobody knows how low prices can actually go. It is apparent that the experts do not know where the bottom of the market will be. Trading commodity futures options in this case is a safer bet than trading futures on oil contracts. Chinese Commodity Futures Trading China has all sorts of problems these days. Their spectacular economic boom is leveling off. The long awaited deflation of their housing bubble is taking place. And investors who are taking money out of the real estate market are rushing into the Shanghai market in droves. This increased buying pressure has resulted in six months of spectacular growth. When there are no more new investors the market will likely tank adding to China’s woes. In the meantime China is looking for new ways to bring fresh capital into its markets. According to the Hellenic Shipping News, they are arranging to offer commodity futures to foreign investors. China has published draft rules to allow foreign investors to trade in some of the country’s commodities futures, potentially paving the way for an imminent opening of a booming market as Beijing looks to increase its sway on global commodity pricing. China is the top global consumer of raw materials and has some of the most liquid commodities futures markets. Although trading firms around the world are eager to access the country’s commodity exchanges, state restrictions on foreign participation and currency flows have prevented the contracts from gaining global prominence. Beware! This is a non-transparent market and it would be better to be trading commodity futures options in China than to be trading futures on commodities. The Hedge Funds Hedge funds, the guys who were so leveraged in 2008 that they contributed to the market crash and start of the worst recession in 75 years are active in commodity futures. It may or may not be a good idea to buy into these funds but their actions are worth watching. Agrimoney.com notes that hedge funds are pulling back on their bullish bets on grains, etc. Hedge funds reduced their bullish positions on grains and coffee, and raised bets on sugar price falls to the highest in 17 months - but ended 2014 far more upbeat on agricultural commodities than they began it. Managed money, a proxy for speculators, reduced its net long in Chicago-traded soft red winter wheat futures and options in the week to last Tuesday for the first time in five weeks, data from the Commodity Futures Trading Commission regulator shows. If you are not absolutely clear about where these markets are going, trading commodity futures options is a much better bet than trading commodities against these guys directly. http://youtu.be/OljewP8T_10

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