In future contract traders can trade in all sort of financial product like equity, base & precious metals etc. Traders primarily enters into future contract to hedge against future price risk. By entering in to future contract using option contract has many benefits. A trader can begin an option contract by two days either using call option or put option.Here traders buy or write, call or put options in the direction you believe the underlying asset can possibly move in future. Accurate stock futures tips
are helpful in designing a profitable future contract.
Reasons because of which a trader should go for option contracts
Hedging : Traders often fear about future price fluctuation. To hedge against this future price risk option contracts are the best solution. It is just like you are insuring your valuables to face future downfalls by entering in to option contract you hedge against futures price movements.
Speculation : The biggest advantage of options is that here you not only make profit when market is up and under favorable conditions even when market is not performing well you can earn profit in that situation also.Here you not only have to predict how much price will change but also in how much time it will change and your prediction must be correct.
Two types of option contracts
American Options : These option contracts can be exercised at any time between purchase and expiration date. There is no constraint in it.
European Options : These option contracts can be exercised only on their expiration date not before that.
Modes to enter in option contracts
Call Option : This give traders a right to buy but there is no obligation.
Put Option : This give traders a right to sell but there is no obligation.
Advantages of Option Trading in Future contracts
Leverage : Even with small capital you can earn good profit here.Traders use a mix of different strategies to maximize the potential of profit.
Low commission : Commission charged by brokers on options are very low and also it depends which brokers services you are using.But yes commission is really low with comparison to trading stocks.
Less Risk : Here you can use different trading strategies with less risk. Probability of success is high and traders have control over the the exposure to risk.
Price Availability : Usually option contracts are available at wide range of sources. Traders can easily monitor its price movements without facing much difficulty and find the best entry and exit points.
Opportunity :As option contracts are available for wide range of financial products like metals, currencies, interest rates, index products.Therefore here traders have ample opportunity to earn good profit.
Along with these benefits there are several other benefits of option contracts. Traders with less risk bearing capability and capital may find this contract best suited to them.Financial advisory firms can help in design an optimum future contract. Also their service like stock futures tips can help in earning good returns on investment.
n future contract traders can trade in all sort of financial product like equity, base & precious metals etc.