A ONE-STOP PORTAL OF INFORMATION FOR FUTURES AND COMMODITIES TRADERS
A long at-the-money call gives the holder the right,
but not the obligation, to buy futures at a specific
price for a specific period of time. For example, $20
per barrel for crude oil or $260 per ounce for
gold.
The position profits if futures prices
rally. Profits are unlimited on the upside; total risk
is limited to the premium paid regardless of where
futures trade. This trade is helped by increasing
volatility, while the passage of time works against it.
Hedgers of the underlying commodity can use buy-call
strategies to lock in purchase prices and still
participate in a price decline. This is known as a
"cap."