Options over commodities

[Ageo]

Guys i have traded options for a while now but only over shares..... Is it possible to trade options over say oil/gold? the reason being is buying a call option will allow me to have a maximum risk of the premium i paid (plus brokerage) and i dont need to worry about being stopped out etc....

I have never looked into futures but is this the way?

Looking at placing longer term trades over some commodities.....

Any thoughts would be appreciated.

 

[mazzatelli1000]

Guys i have traded options for a while now but only over shares..... Is it possible to trade options over say oil/gold? the reason being is buying a call option will allow me to have a maximum risk of the premium i paid (plus brokerage) and i dont need to worry about being stopped out etc....

I have never looked into futures but is this the way?

Looking at placing longer term trades over some commodities.....

Any thoughts would be appreciated.

Straight futures would be the best choice if you want to deal with commodities IMHO

There are options over commodity futures but they are notoriously illiquid

There are also ETF's in the US that have liquid options on them that you can play with e.g. GLD, OIH, XLE

 

[Ageo]

Straight futures would be the best choice if you want to deal with commodities IMHO

There are options over commodity futures but they are notoriously illiquid

There are also ETF's in the US that have liquid options on them that you can play with e.g. GLD, OIH, XLE

Hi mazza,

i have been reading up on oil warrants but its hard to come by information.

bascially im looking at a long term contract where my maximum loss is the premium upfront. I believe with futures the value of your stock changes each day (like cfd's?) which means you need sufficient margin and to me is useless for long term (3-5yrs+).

In the past i have placed long term call options over shares and just wanted to know if its possible to do the same with crude oil (im after the commodity not oil shares).

I would prefer if the company i dealt with was here in Australia....

cheers

 

[Glen48]

I have been looking a site from Global Forex Trading were you can play around with play money..It covers most options Gold Silver and a lot of others..some how I have made $217 better than a month on the share market all i have to do now is work out what i did to make the loot..

 

[50chickens]

Guys i have traded options for a while now but only over shares..... Is it possible to trade options over say oil/gold? the reason being is buying a call option will allow me to have a maximum risk of the premium i paid (plus brokerage) and i dont need to worry about being stopped out etc....

I have never looked into futures but is this the way?

Looking at placing longer term trades over some commodities.....

Any thoughts would be appreciated.

Igmarkets have daily gold and oil options available, although they don't look that great as a hedge. typically for gold the daily options are about 20$us each side of the current price- eg, atm spot is 733 and so the two outside strike prices would be around 754 and 714.. the minimum contract size is 0.5 contracts @ 100$ per point per contract. plus the spread on them is kinda huge. so for example i tested a long straddle using just 1 contract each way and right after taking the trade i was down $400 US (with a $4000 aus outlay). after the end of the night gold had traded down about $25 and i recalculated the value of those options. instead of a $400US loss, i was now $687 US in profit (theoretically). So.. i figure that you need gold to move about $10-15US just to break even with those options.



i also had a weird one a few weeks ago right after i opened my account (and was nieve to the above) .. i bought a the lowest put @ 150$ and gold was about 20$ away from that strike. just before i went to bed on a friday night gold was getting smashed (as it usually does on a friday) so my $150 had turned into about $600 US by that time. the wierd part was where i got up on saturday morning to find out my option had closed at 8 something (around $600us) however, come monday i check my account and found out it had been booked to my account at a slight loss. So i called IGMarkets and they said that it had had expired at that price (1.02 against my buy of 1.58 iirc) and then i questioned why it had shown on the saturday as closing at 8.something on my statement and he said that it was because they don't book profits/losses on saturday mornings aus time because there is noone in the australia office at that time and so they do it on monday. But he didn't really answer my question - why the difference between the value after the market close, and booking profits/losses on monday. Booking profits/losses i don't think really had anything to do with it - unless the options value was recalculated on a new price when it is booked (what i think really happened).

 

[Reealjrd]

Hello friends,

I have traded in commodities. I i usually prefered oil and gold. I used to trade in oil cas for just .50 pips means i used to only wait for 50 paise movement and book profits.

 

[mazzatelli1000]

Hi mazza,

i have been reading up on oil warrants but its hard to come by information.

bascially im looking at a long term contract where my maximum loss is the premium upfront. I believe with futures the value of your stock changes each day (like cfd's?) which means you need sufficient margin and to me is useless for long term (3-5yrs+).

In the past i have placed long term call options over shares and just wanted to know if its possible to do the same with crude oil (im after the commodity not oil shares).

I would prefer if the company i dealt with was here in Australia....

cheers

Ageo - yes there are options over the gold and oil futures.
I am only aware of these in the US market, but beware the bid ask prices are very wide.

As for Australia, I am not aware of such alternatives.

Sorry I couldnt be much more help

 

[Ageo]

Ageo - yes there are options over the gold and oil futures.
I am only aware of these in the US market, but beware the bid ask prices are very wide.

As for Australia, I am not aware of such alternatives.

Sorry I couldnt be much more help

Mazza yes i have been reading up on Options over Futures but the expiry dates seem to short for my liking. Im after long term (2+ yrs) but it seems no1 is offering anything like that. CWA (warrants) offer 120 days which is what im after just the expiry is way too short.


hmmm back to the drawing board me thinks..... thanks for the help everyone.

 

[50chickens]

Ageo, if you find anything can you please post it here... i'd also be interested.

 

[Ageo]

Ageo, if you find anything can you please post it here... i'd also be interested.

Will do mate

 

[50chickens]

Will do mate

Ageo, have a look at optionsxpress.com.au. I've opened an account with futures enabled, and you have access to future options, although that section of the website seems fairly hidden.

also, i found this website - www.barchart.com which you can get option quotes from (although there's no bid/ask so i dont know how close they are for the real market price).

eg http://www2.barchart.com/optqte.asp?sym=GC&view=add&mode=d

 

[wayneL]

Ageo, have a look at optionsxpress.com.au. I've opened an account with futures enabled, and you have access to future options, although that section of the website seems fairly hidden.

also, i found this website - www.barchart.com which you can get option quotes from (although there's no bid/ask so i dont know how close they are for the real market price).

eg http://www2.barchart.com/optqte.asp?sym=GC&view=add&mode=d

Most futures options are exclusively pit traded so you usually have to call an on-floor broker to get bid/ask prices.

They are a pain in the @rse to try and trade online... possible, but not optimum. Much better to use a human if you want to trade pit traded futures options.

 

[cutz]

Most futures options are exclusively pit traded so you usually have to call an on-floor broker to get bid/ask prices.

Ah

That explains why i cant see any quotes on the SPI series, been scratching my head over that one.

 

[Page]

Commodity trading is not that easy task friend to do. As most of the people think around. For trading in commodities lot of practice is required and self strategies are required.

 

[wayneL]

Commodity trading is not that easy task friend to do. As most of the people think around. For trading in commodities lot of practice is required and self strategies are required.

I don't think commodity "trading" is any different to stock trading. In fact is many respects option trading in commods can be easier... sometimes.

There are some structural and practical considerations one must learn though.

1/ The contract expiries and delivery periods for physical delivery contracts, and how that affects open interest... indeed open interest itself.

2/ Knowing the face value of the contract. Many look at the margin requirements and think that is what they are trading, when in fact their position is much larger than they realize.

3/ The contracts themselves are fixed amounts that may be too large for a small trader. One gold contract for eg, has a face value of ~$87,000USD (over 100k AUD). You can trade 25k worth or 120k worth... position sizing is more blunt.

That's the main things, plus the individual fundamentals of each commod.

But you rarely get the sort of huge gaps you see in stocks either and lock limit moves are rare.

FWIW