Protective Put Strategy For Futures Options In Different Scenarios | Options Trading Strategies
How To Apply This Strategy To Trading Futures Options
As previously stated, when we buy futures options, three potential outcomes exist. The futures options can go up, go down, or remain stagnant. Let’s hypothesize results across these three scenarios. Say you buy the futures options for $31.00 and buy the front month 30 put for $1.00.
In the “up” scenario, let’s assume the futures options price is $31.50 at expiration. The results are that you have a $.50 gain from capital appreciation and a $1.00 loss from the purchase of the put which combined gives us a $.50 overall loss.
It is important to realize that the up scenario will only produce a positive return if the futures options gain is greater than the amount paid for the put.
To find out more visit our website.
http://www.optiontradingstrategies.org
Author 309 > has blogged 217 times
