Copper call options are purchased by traders who are bullish about copper prices. Traders who believe that copper prices will fall can buy copper put options instead.
Buying calls or puts is not the only way to trade options. Option selling is a popular strategy used by many professional option traders. More complex option trading strategiesalso known as spreadscan also be constructed by simultaneously buying and selling options.
Copper Options vs. Copper Futures Compared to the outright purchase of the underlying copper futures, copper options offer advantages such as additional leverage as well as the ability to limit potential losses.
Copper Options Explained
However, they are also wasting assets that has the potential to expire worthless. Additional Leverage Compared to taking etherium review position on the underlying copper futures outright, the buyer of a copper option gains additional leverage since the premium payable is typically lower than the margin requirement needed to open a position in the underlying copper futures.
Limit Potential Losses As copper options only grant the right but not the obligation to assume the underlying copper futures position, potential losses are limited to only the premium paid to purchase the option. Flexibility Using options alone, or in combination with futures, a wide range of strategies can be implemented to cater to specific risk profile, investment time horizon, cost consideration and outlook on underlying volatility.
Time Decay Options have a limited lifespan and are subjected to the effects of time decay. The value of a copper option, specifically the time value, gets eroded away as time passes. However, since trading is a zero copper options game, time decay can be turned copper options an ally if one choose to be a seller of options instead of buying them.