Good Wednesday, Traders!
This week, we are all about making the most of our trading ideas to gain more profit potential even on the same trade ideas using a special form of gearing for our trades in the futures markets.
This is done by adding the additional gearing or “leverage” of options on futures contracts.
And just as we use options on individual stocks in many of our stock trading services, we are now beginning to use options on futures trades.
To make this work all the better, we’ve brought in an options-on-futures specialist. His name is Jeff Tompkins, and he cut his teeth in the markets working for Morgan Stanley (MS).
He will be working with me to bring the next level of leverage to futures trading in our new product, Weekly Options on Futures Forecast.
Now, let’s look at one of the more profitable trading futures contracts this week.
Gold continues to provide great trading opportunities from last year through so far for this year.
Last year, gold provided great near term trading opportunities, particularly using our Tunnel Trading strategy.
The Tunnel Trading strategy set up numerous entry and exit levels that provided profit opportunities for short term trades even on an intraday basis.
This year, even as the US stock market has gone south as measured by the S&P 500 Index by more than 11% on a cash basis, gold in the cash market and more so in the futures contract markets has gained by more than 3%, made even greater with the embedded leverage of futures contract markets.
And of course, the amount of leverage on your own trades will depend upon the level of initial margin posting, with less initial margin making for more embedded leverage on each trade.
But there is more that we can do to lever up our futures trades even more so than just minimizing initial margin levels on capital committed for trades in gold as well as for every other futures contract markets.
Options Gear Up Potential Gains
Now, just as we discussed in yesterday’s posting on gearing up or increasing leverage on trades on the Russell 2000 Index contract trade ideas, we can do the same for gold right now by using options on futures.
The CME provides calls and puts on its futures contracts just like options are traded on stocks.
All of the similar trading rules and risks apply, including the potential of assignment of the contracts if sold.
And if we are looking at the above trade in the Gold futures contract (GC), there are a series of call options that easily fit into trading ideas for the same GC contracts.
So, for long bullish trades on GC, you would look at buying calls on GC contracts at strike prices above the current contract market price. And for short or bearish trades on GC contracts, you would look at buying puts on GC contracts at strike prices generally lower than the current contract price.
But option trading can go way further with options that can be put together to make for nearly infinite combinations of options trading strategies using underlying futures contracts on gold as well as for nearly every other futures commodity.
This is where Jeff Tompkins comes in, so look for more opportunities using options on futures over the coming days and weeks.
For more on the markets as well as trading education and trading ideas like this one, look for the next edition of Josh’s Daily Direction in your email inbox each and every trading day.
I’ll be bringing you more of my stock and futures contract trading tutorials as well as some additional trading ideas.
And if you know someone who’d love to make this a part of their daily trading routine, send them over to joshsdailydirection.com to get signed up!
Keep On Trading,
P.S. I have been teaching more and more traders how to make their own trading accounts work so well that they can effectively become a side job with plenty of regular earning opportunities. And in particular, learn how this is really working with digital currencies such as BTC!To learn how to do this effectively using the strategies developed inside my War Room, click here!