What You Need to Know to Trade Commodity Options

Breaking down commodity options

    facebook X logo linkedin

    Trading options can be a complicated process. Information overload among the uninitiated is prevalent, as a lot of options strategies are available and traders need to evaluate all of the possible routes ahead of executing a trade. As such, Schaeffer's is  starting a new educational series titled Optimizing Your Options Strategies. The beauty of options trading is that there are options strategies for every market environment. In this series, we will cover all available options strategies for an educated trader to consider when identifying trading opportunities.

    One of the most popular options strategies with arguably the best name in the investing world is utilizing commodity options. Commodity options do not differ significantly from equity options. Ultimately, both of options are derivatives allowing traders the right to buy or sell the underlying. In commodity options, the options give a trader the choice to buy or sell the commodity in question, whereas equity options give a trader the choice to buy or sell the stock (or equity) in question. Remember, options do not obligate one to buy or sell the underlying. Rather, traders have the liberty to exercise options any time before the option expiration date.

    Traders can choose from a wide array of commodities when trading in commodity options. The underlying commodity can be anything from copper or oil to wood or soybeans, or any other raw materials. Much like an equity options trader, the commodity options trader draws up an options contract that must include the following information:

    • Details of the underlying commodity.
    • The expiration date.
    • Details of the premium and the strike price.

    The specifics of a commodity options contract are extremely important to understand. It is highly recommended that a trader pay extra attention to the details surround the commodity options contract.

    Commodity call options and commodity put options logistically work in the same way that equity call options and equity put options do. The only difference is the underlying asset. With equity options, the underlying Is an equity like a stock or ETF. With commodity options, the underlying is a commodity like metals, oil, and corn. A commodity call option involves buying an option on the commodity at a defined strike price and a defined expiration date with a bullish orientation. On the other hand, buying an option on the commodity at a defined strike price and a defined expiration date with a bearish orientation. In both types of commodity options, the option seller will collect a premium from the option buyer.


    Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

    This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

    On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

    Start targeting gains like the ones our subscribers have seen recently, including:

    213.3% GAIN on AutoNation calls
    100.0% GAIN on Monster Beverage calls
    100.4% GAIN on Walgreens Boots Alliance puts
    100.4% GAIN on ON Semiconductor calls
    257.7% GAIN on Dell calls

    101.0% GAIN on Apollo Global Management calls
    103.6% GAIN on JP Morgan  Chase calls
    105.3% GAIN on DraftKings calls
    101.3% GAIN on Airbnb calls
    203.0% GAIN on Shopify calls
    102.0% GAIN on Cboe Global Markets calls
    100.9% GAIN on Boeing calls
    102.1% GAIN on Microsoft puts
    102.3% GAIN on First Solar calls
    101.5% GAIN on PulteGroup calls
    101.0% GAIN on Apple calls
    209.4% GAIN on NXP Semiconductors calls
    100.8% GAIN on Uber Technologies calls
    100.4% GAIN on Academy Sports and Outdoors puts
    102.2% GAIN on Trade Desk calls
    100.8% GAIN on DoorDash calls
    100.0% GAIN on Camping World Holdings puts
    100.0% GAIN on Cboe Global Markets calls
    100.2% GAIN on C3.ai calls
    238.5% GAIN on Oracle calls



    Rainmaker Ads CGI