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Strike Price: This is the price at which you could buy or sell the underlying futures contract. The strike price is the insurance price. Think of it this way: The difference between a current market price and the strike price is similar to the deductible in other forms of insurance. As an example, a December $3.50 corn call allows you to buy a December futures contract at $3.50 anytime before the option expires. Most traders do not convert options to futures positions; they close the option position before expiration.
When you buy an option, the risk is limited to the premium that you pay. Selling an option is the equivalent of acting as the insurance company. When you sell an option, all you can earn is the premium that you initially receive. The potential for losses is unlimited. The best hedge for an option is another option on the same asset as options act similarly over time.
For years, the preferred method of trading options was to use a live broker with a securities firm because you would receive all the research you would need to make a judgment. But with the advances made by online brokerage companies in being able to provide you with that information, more people are trading commodity options online than ever before and they are paying a fraction of the commissions they would otherwise pay to a live broker. Since you will have more trades than you would if you were simply buying stock, you will have more money in your account.

Options are contracts giving the owner the right to buy or sell an asset at a fixed price (called the “strike price”) for a specific period of time. That period of time could be as short as a day or as long as a couple of years, depending on the option. The seller of the option contract has the obligation to take the opposite side of the trade if and when the owner exercises the right to buy or sell the asset. For more information, check out the Ally Invest Options Playbook here: https://www.optionsplaybook.com/


For example, if you bought a long call option (remember, a call option is a contract that gives you the right to buy shares later on) for 100 shares of Microsoft stock at $110 per share for December 1, you would have the right to buy 100 shares of that stock at $110 per share regardless of if the stock price changed or not by December 1. For this long call option, you would be expecting the price of Microsoft to increase, thereby letting you reap the profits when you are able to buy it at a cheaper cost than its market value. However, if you decide not to exercise that right to buy the shares, you would only be losing the premium you paid for the option since you aren't obligated to buy any shares. 
Because options prices can be modeled mathematically with a model such as the Black-Scholes, many of the risks associated with options can also be modeled and understood. This particular feature of options actually makes them arguably less risky than other asset classes, or at least allows the risks associated with options to be understood and evaluated. Individual risks have been assigned Greek letter names, and are sometimes referred to simply as "the Greeks."
Still other traders can make the mistake of thinking that cheaper is better. For options, this isn't necessarily true. The cheaper an option's premium is, the more "out of the money" the option typically is, which can be a riskier investment with less profit potential if it goes wrong. Buying "out of the money" call or put options means you want the underlying security to drastically change in value, which isn't always predictable. 
As an example, let's say an initial margin amount of $3,700 allows an investor to enter into a futures contract for 1,000 barrels of oil valued at $45,000—with oil priced at $45 per barrel. If the price of oil is trading at $60 at the contract's expiry, the investor has a $15 gain or a $15,000 profit. The trades would settle through the investor's brokerage account crediting the net difference of the two contracts. Most futures contracts will be cash settled, but some contracts will settle with the delivery of the underlying asset to a centralized processing warehouse.
In the case of perishable commodity, the cost of storage is higher than expected future price of a commodity (For ex: TradeINR prefer to sell tomatoes now rather than waiting for 3 more months to get a good price as a cost of storage of tomato is more than price they yield by storing the same). So in this case, the spot prices reflect current supply and demand, not future movements. There spot prices for perishables are more volatile.
There is a concert of Coldplay happening in an auditorium in Mumbai next week. Mr X is a very big fan of Coldplay and he went to ticket counter but unfortunately, all the tickets have been sold out. He was very disappointed. Only seven days left for the concert but he is trying all possible ways including black market where prices were more than the actual cost of a ticket. Luckily his friend is the son of an influential politician of the city and his friend has given a letter from that politician to organizers recommending one ticket to Mr.X at actual price. He is happy now. So still 6 days are left for the concert. However, in the black market, tickets are available at a higher price than the actual price.
For example: A steel manufacturer importing coal from Australia currently and in order to reduce the volatility of changes in prices he always hedges the coal purchases on a 3 monthly forward contract where he agrees with the seller on day one of financial quarter to supply coal at defined price irrespective of price movements during quarter. So in this case, the contract is forward/future and buyer has an intention to buy the goods and no intention of making profit from price changes.
There is a concert of Coldplay happening in an auditorium in Mumbai next week. Mr X is a very big fan of Coldplay and he went to ticket counter but unfortunately, all the tickets have been sold out. He was very disappointed. Only seven days left for the concert but he is trying all possible ways including black market where prices were more than the actual cost of a ticket. Luckily his friend is the son of an influential politician of the city and his friend has given a letter from that politician to organizers recommending one ticket to Mr.X at actual price. He is happy now. So still 6 days are left for the concert. However, in the black market, tickets are available at a higher price than the actual price.
So, call options are also much like insurance - you are paying for a contract that expires at a set time but allows you to purchase a security (like a stock) at a predetermined price (which won't go up even if the price of the stock on the market does). However, you will have to renew your option (typically on a weekly, monthly or quarterly basis). For this reason, options are always experiencing what's called time decay - meaning their value decays over time. 
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