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What You Need to Know About Trading Futures Options

May 15, 2020

Trading futures options requires you learn how to trade futures, how to trade options and how to trade futures options. You need a detailed understanding of each futures option contract you are going to trade, learn what drives futures and options prices, and learn how to decide which futures options contracts to buy and sell.

Experienced futures options traders always have a plan before entering a trade. This plan includes how many contracts to buy or sell, how much risk they are willing to take, how much money they are willing to lose on a single trade and at which price level to take profits.

Understanding how futures options trading works is a key factor to consistent trading and avoiding mistakes. Each type of futures options contract has its own unique contract specifications which you need to fully understand – futures options can trade at odd times during the day, each future options has a specific and unique expiration day often different than the underlying future and each futures options contract has the same point value as the underlying future which determines the profit and loss of a position based on the price action.

Additional Information

Finally, if you are currently trading stock options or index options, then you probably already have a good grasp of how futures options work, but there are also some differences you should understand. Take a look at the PDF.

Adding Futures Options to Your Trading

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See also

Futures Plus Futures Options Symbology

What is a Future Option?

Market BasicsFutures OptionsA futures option is a type of security that grants the trader the right to buy or sell a futures contract at a specific price by a specific date. There are two types of futures options: call options and put options. Call...

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Futures Plus Futures Options Symbology

Why Trade Futures Options?

Market BasicsFutures OptionsFutures options combines the benefits of both trading futures and trading options and offers a number of advantages over other financial instruments. Limited Risk – Buying a call or put futures option offers the trader...

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