cramerjohn004
Forum Regular
Join Date: 12.10.2021
Posts: 414
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Posted: 12.1.2022 3:22:12
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Don''t get me wrong, though...there have been (and will continue to be) genuine cases where out-of-the-money options have produced gains into the thousands of percentage points, and I myself have traded out-of-the-money options and profited from them, but it''s not good enough to buy a cheap call or put simply because it''s cheap. Make sure that you have identified a potential change in volatility through studying price charts or understanding the regular seasonal patterns of volatility that frequently occur. Many futures options traders, however, do not do their homework to confirm these factors before entering into a trade. They approach it with a casino mentality, expecting a large payoff for a small investment. Again, this can happen, and it does happen all the time, but not to the uninformed option trader that has no clue about what volatility is and how it affects option premiums. The bottom line is, without an understanding of volatility and the factors that go into volatility, you will basically be funding some option writer''s retirement. If you anticipate that volatility will increase, then buying out-of-the-money options can be a wise move, but stay FAR away from buying out-of-the-money options if it is evident that volatility is going to be on the decline.
In conclusion, simply putting this one factor at the forefront of your mind when trading ???? options on futures can help tremendously in keeping you from wasting your money buying unproductive out-of-the-money options. Take the time to do your research before jumping into a futures options trade. Your trading account will thank you for it.
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