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With options markets, as with futures markets, long and short refer to the buying and selling of one or more contracts, but unlike futures markets, they do not refer to the direction of the trade. For example, if a futures trade is entered by buying a contract, the trade is a long trade, and the trader wants the price to go up, but with options, a trade can be entered by buying a Put contract, and is still a long trade, even though the trader wants the price to go down. The following chart may help explain this further:
When buying a call option, the strike price of an option for a stock, for example, will be determined based on the current price of that stock. For example, if a share of a given stock (like Amazon (AMZN) ) is $1,748, any strike price (price of the call option) that is above that share price is considered to be "out of the money." Conversely, if the strike price is under the current share price of the stock, it's considered "in the money." 
Speculation is a wager on future price direction. A speculator might think the price of a stock will go up, perhaps based on fundamental analysis or technical analysis. A speculator might buy the stock or buy a call option on the stock. Speculating with a call option—instead of buying the stock outright—is attractive to some traders since options provide leverage. An out-of-the-money call option may only cost a few dollars or even cents compared to the full price of a $100 stock.
When buying a call option, the strike price of an option for a stock, for example, will be determined based on the current price of that stock. For example, if a share of a given stock (like Amazon (AMZN) ) is $1,748, any strike price (price of the call option) that is above that share price is considered to be "out of the money." Conversely, if the strike price is under the current share price of the stock, it's considered "in the money." 
Time Value: All options contracts have an expiration date, after which they become worthless. The more time that an option has before its expiration date, the more time there is available for the option to come into profit, so its premium will have additional time value. The less time that an option has until its expiration date, the less time there is available for the option to come into profit, so its premium will have either lower additional time value or no additional time value.
Just like many successful investors, options traders have a clear understanding of their financial goals and desired position in the market. The way you approach and think about money, in general, will have a direct impact on how you trade options. The best thing you can do before you fund your account and start trading is to clearly define your investing goals.
Whether the economy is hot or not, an investor can make money trading commodity options, regardless of the condition of the market. Briefly, a commodity option allows its owner to either sell or buy a commodity like corn or wheat at a future date. You will buy a so-called “put option” if you think the price of the commodity will go down and a “call option” if you think the price will rise. And never will you have to take possession of the commodity itself.
Remember, a stock option contract is the option to buy 100 shares; that’s why you must multiply the contract by 100 to get the total price. The strike price of INR 300 means that the stock price must rise above INR 300 before the call option is worth anything; furthermore, because the contract is INR 10 per share, the break-even price would be INR 310(INR 300 + INR 10).
Whereas price extremes have no boundaries, they don't last forever, eventually commodity market supply and demand factors will bring prices back to a more equilibrium state. Accordingly, while caution is warranted at extreme levels it is often a good time to be constructing counter trend trades as it could be one of the most advantageous times in history to be involved in a market. For instance, similar to the idea of call options being over-priced when a market is at an extreme high, the puts might be abnormally cheap. Once again, your personal situation would determine whether an unlimited risk or limited risk option strategy should be utilized. Please realize that identifying extreme pricing scenarios is easy, it is much more difficult to predict the timing necessary to convert it into a profitable venture.

Similarly, if you believe the company’s share price is going to dip to $80, you’d buy a put option (giving you the right to sell shares) with a strike price above $80 (ideally a strike price no lower than $80 plus the cost of the option, so that the option remains profitable at $80). If the stock drops below the strike price, your option is in the money.
The world of commodity options is diverse and cannot be given justice in a short article such as this. The purpose of this writing is to simply introduce the topic of options on futures. Should you want to learn commodity options trading strategies in more detail, please consider purchasing "Commodity Options" published by FT Press at www.CommodityOptionstheBook.com.
Options on futures contracts are exactly what the name implies, they give traders "options". They are capable of being used in nearly every commodity market scenario and with variable risk and reward profiles. Too many traders fail to tap the true potential and flexibility of option spreads due to their seemingly complex nature; however, things aren't always as they appear. We strongly believe that you owe it to yourself to overcome your fear of trading commodity options and open your mind to the possibilities.
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• Put Options – Give the buyer the right, but not the obligation, to sell the underlying at the stated strike price within a specific period of time. The seller of a put option is obligated to deliver a short position from the strike price (accept a long futures position) in the case that the buyer chooses to exercise the option. Keep in mind that delivering a short futures contract simply means being long from the strike price.

Whereas price extremes have no boundaries, they don't last forever, eventually commodity market supply and demand factors will bring prices back to a more equilibrium state. Accordingly, while caution is warranted at extreme levels it is often a good time to be constructing counter trend trades as it could be one of the most advantageous times in history to be involved in a market. For instance, similar to the idea of call options being over-priced when a market is at an extreme high, the puts might be abnormally cheap. Once again, your personal situation would determine whether an unlimited risk or limited risk option strategy should be utilized. Please realize that identifying extreme pricing scenarios is easy, it is much more difficult to predict the timing necessary to convert it into a profitable venture.

For instance, it is possible to construct an option strategy in the futures markets that is affordable without sacrificing the odds of success...but with the convenience comes theoretically unlimited risk. This is easier than it sounds, similar to the way you would borrow money to pay for a house or a car, you can borrow money from the exchange to pay for long commodity option trades. There are an unlimited number of combinations of self-financed trades but they are typically going to involve more short options than long options, or at least as much premium collected on the sold options than that paid for the longs. In essence, the money brought in through the sale of the short options goes to pay for the futures options that are purchased. The result is a relatively close-to-the-money option with little out of pocket expense but theoretically unlimited risk beyond the strike price of the naked short options.


The contract specifications are specified for one contract, so the tick value shown above is the tick value per contract. If a trade is made with more than one contract, then the tick value is increased accordingly. For example, a trade made on the ZG options market with three contracts would have an equivalent tick value of 3 X $10 = $30, which would mean that for every 0.1 change in price, the trade's profit or loss would change by $30.
For example, a plastics producer could use commodity futures to lock in a price for buying natural gas by-products needed for production at a date in the future. The price of natural gas—like all petroleum products—can fluctuate considerably, and since the producer requires the natural gas by-product for production, they are at risk of cost increases in the future.
With this strategy, the trader's risk can either be conservative or risky depending on their preference (which is a definite plus). For iron condors, the position of the trade is non-directional, which means the asset (like a stock) can either go up or down - so, there is profit potential for a fairly wide range. To use this kind of strategy, sell a put and buy another put at a lower strike price (essentially, a put spread), and combine it by buying a call and selling a call at a higher strike price (a call spread). These calls and puts are short.  
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