Overlooked Trading Opportunities
by David L. Caplan
Option strategies are, unquestionably, one of the most under-used and overlooked opportunities available
to the trader. Properly used, option strategies can provide the trader with significant new trading
opportunities and advantages. However, option strategies are currently used only by a small minority of
traders. There are several reasons for this.
First, option trading is relatively new—options on stocks have been exchange traded for twelve years and
options on commodity futures and cash indicies for less than three. Secondly, most traders are unfamiliar
with the mechanics of option trading and their associated strategies. Third, most brokers do not
recommend option strategies because (1) they are also not familiar with them and (2) it takes extra time
to research the opportunities available. Finally, the most prevalent reason for the non-use of option
strategies is the "time and effort" necessary to learn the numerous option strategies and how and when to
To be a successful futures trader one must, of course, learn as much as possible about the markets one is
going to trade and generate a successful trading plan. To make profitable use of option trading strategies,
one must not only learn about the underlying market as does the net futures trader, but one must also
learn all the mechanics of option trading, the relation of options to the underlying commodities, and the
available option strategies and when to use them.
This may seem like an overwhelming task, but, since the option strategist uses many of the same methods
as traders of stocks and commodities (technical and fundamental analysis, the risk/reward ratio, money
management, diversification, etc.), experienced futures traders can readily learn this type of trading.
Further, the advantages of using option strategies are sometimes so great, that it is well worth the
necessary time and energy needed to master them. Some of the advantages include: