ADVANCED FUTURES & OPTIONS STRATEGIES WITH HEDGING & FIREFIGHTING TECHNIQUES
Advanced futures and options strategies with hedging and firefighting techniques can help traders manage risk, protect positions, and potentially profit from various market scenarios.
Calendar Spread: Involves buying and selling futures or options contracts with different expiration dates but the same underlying asset and strike price. This strategy can be used to capitalize on differences in time decay and volatility between the contracts.
Vertical Spread: Combines the purchase and sale of options contracts with different strike prices but the same expiration date. Examples include bull call spreads (buying a lower strike call and selling a higher strike call) and bear put spreads (buying a higher strike put and selling a lower strike put). These strategies allow traders to limit potential losses and profits within a specific price range.
Delta-Neutral Hedging: Involves establishing a position where the delta (the sensitivity of an option’s price to changes in the underlying asset price) is offset by the underlying asset or its related derivatives. This strategy aims to remove directional risk and focuses on profiting from changes in implied volatility.
Risk Reversal Strategy: Combines buying a call option and selling a put option on the same underlying asset, both with the same expiration date. This strategy allows traders to protect against downside risk while benefiting from potential upside movements.
Option Hedging Strategies: Option hedging strategies are employed to mitigate potential losses or protect existing positions against adverse price movements.
Iron Condor Strategy: Combines a bear call spread and a bull put spread on the same underlying asset with the same expiration date. This strategy aims to profit from a range-bound market, where the underlying asset’s price remains between the strike prices of the options contracts.
Covered Call: A covered call strategy involves selling call options against a stock held in the portfolio. By selling the call options, the investor receives a premium, which can offset potential losses if the stock price decreases. However, there is a risk of missing out on further upside gains if the stock price rises above the strike price.
Butterfly Spread: Combines buying and selling multiple options contracts with three different strike prices but the same expiration date. This strategy seeks to profit from a narrow range of prices around the middle strike price, with limited risk and potential for significant profits if the underlying asset’s price falls within the desired range.
Firefighting Techniques (Risk Management): Stop-loss Orders: Setting predetermined price levels at which to exit a position to limit potential losses.
Trailing Stop Orders: Adjusting stop-loss orders as the price moves in a favourable direction to protect profits.
Position Sizing: Determining the appropriate size of each position based on risk tolerance and account size.
Diversification: Spreading investments across different assets to reduce exposure to a single stock or sector.
The additional topics that are covered in this course are below.
© Copyright by Genesis Creative House