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This strategy is essentially a way to buy price protection, while allowing participation in a rising market at relatively little cost. It is also used for a bullish outlook, and profits if prices rally. Profits are unlimited on the upside, and risk is limited to the premium paid for the options contract, regardless of where futures trade. An out-of-the-money call requires a stronger price move than an in- or at-the-money option to be profitable, but it is also less expensive. This trade is helped by increasing volatility, but the passage of time works against buy-call strategies.

Position
Premium
Dollar Premium
Delta
Buy one $23 crude oil call $0.30$300 +.21
- Net debit $0.30 $300 00
- Net delta 0000 +.21
00 0000 00
Maximum risk $300 per position00 00
Maximum profit Unlimited on the upside00 00
Break-even futures price $23.30 00 00

Position
Premium
Dollar Premium
Delta
Buy one $290 gold call $0.30$30 +.06
- Net Debit $0.30 $30 00
- Net delta 0000 +.06
00 0000 00
Maximum risk $300 per position00 00
Maximum profit Unlimited on the upside00 00
Break-even futures price $290.30 00 00

  

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