Trading Options on futures

[CodeBreaker528]

I have been trading grain futures for a few years. I'm looking to get into options but really dont understand a few things.

Is there ever a time when the broker would tell you that they can't offset your winning option?

If the buyer has a winning option, does that mean the the writter holds the other side of that option? Is he or she responsible for paying the buyer?

 

[justtradin]

I live by a koan.All Questions are stupid. Enjoy
Looking to go long & buy calls on wheat in 2 weeks.

 

[CodeBreaker528]

Are you trading the front month?

I traded wheat, corn and soybeans into the flood last year. Wheat and corn slowed down towards the end of the year and I lost interest.
I've been into the beans since then, seems like there's always some action!

 

[justtradin]

Are you trading the front month?

I traded wheat, corn and soybeans into the flood last year. Wheat and corn slowed down towards the end of the year and I lost interest.
I've been into the beans since then, seems like there's always some action!

I get you Codebreaker. Dec Wheat is where I am keying off of to get long.

 

[dr_sean]

you really shouldn't have a problem getting in/out unless it's a limitup/dwn market / one of those kinds of moves in vol.

you can always just hedge it aggressively if you do in fact find that you can't trade out of it...

 

[Rhody Trader]

Is there ever a time when the broker would tell you that they can't offset your winning option?

Chances are you'll never have a problem getting out of a position as market makers stand ready to make a price. If you're trading a low liquidity contract you may not like the price offered, of course, but you should always get one.

If the buyer has a winning option, does that mean the the writter holds the other side of that option? Is he or she responsible for paying the buyer?

You can't look at options quite the same way as futures. There are two ways the long makes money. One is by selling the option at a higher price. The other is by exercising the option when the underlying market price is sufficiently through the option strike to make it profitable. Neither situation automatically implies a loss situation to the option seller.

 

[CodeBreaker528]

You can't look at options quite the same way as futures.
There are two ways the long makes money.
One is by selling the option at a higher price.
The other is by exercising the option when the underlying market price is sufficiently through the option strike to make it profitable. Neither situation automatically implies a loss situation to the option seller.

So I'm guessing that you would exercise only when the premium pays less than a contract at the same price?

 

[Rhody Trader]

The vast majority of the time it doesn't make sense to exercise, especially when you account for extra transaction costs (unless of course you actually want the underlying). There would have to be some really strange price distortion which put the premium below the intrinsic value for it to make sense to exercise.

 

[jackfutu18]

In term of options trading, you can get help from free options selling guide by Time Means Money. Why not?