Commodity Options Trading

Commodity Options Trading Main Page

Commodity options trading is associated with the huge commodities market where physical goods like corn, wheat, pork bellies, gold, silver, crude oil and natural gas are traded, while stock option trading is a market derived from the price movements in company stocks. You may have thought that options were only related to the stock market. Well, if you did, you’re in for a surprise!

It all works in a similar way to the share market, only a different product – commodity futures. The trading process is the same – there are commodity exchanges where goods are traded in public auction style similar to the stock market. The largest exchanges on the planet are:

New York Mercantile Exchange – USA – turns over about $19 million per month.

Tokyo Commodity Exchange – Japan

NYSE Euronext – European Union

Multi Commodity Exchange – India

Dalian Commodity Exchange – China

Because people are less likely to hold physical goods for a long term investment (as opposed to company shares), the commodities market and therefore commodity options trading tends to be more speculative and therefore, volatile. But if we apply the right option trading strategies to these conditions, huge gains can be made.

commodity options tradingIf you have an interest in commodity options trading, you will need to find yourself a commodity option trading broker with access to the commodity futures exchange of your choice. You will also find that, unlike stocks, where all option contracts cover a set number of underlying shares – for example, in the USA, one option contract covers 100 shares – the commodity options market allows a somewhat unique relationship between each commodity and its respective options contract. Let’s take crude oil – one option futures contract covers 1,000 barrels of oil. But an option futures contract for Natural Gas covers 10,000 units … and so forth.

You may also need to decide how you will analyze the future price movements of the underlying in order to implement the best option trading strategy. For example, will you use charting and technical analysis only, or take other factors into consideration such as seasonal fluctuations inherent with agricultural and resource supply and demand?

Commodity Options Trading – Contents

What Are Commodities
So what are commodities and what is the best way to trade them?

Commodity Option Trading System
The best commodity option trading system is one that suits the kind of market environment in which you are trading. Choose one that fits well with the kind of price action typical of the commodity..

Commodity Option Software

Commodity Futures Options Trading Course
So what should you want from a commodity futures options trading course? Here is a “wishlist” of desirable features and some course recommendations.

Commodity Options and Futures
– here we explain the difference between options contracts and futures contracts.

Commodity Futures Options
– commodity options are not derivatives of the commodities themselves, but of the futures contracts associated with them.

Trading Commodity Options
– more efficient than trading commodity type stocks.

Futures vs Options
– more on the difference between options contracts vs futures contracts.

Oil Futures Options
– all about trading oil futures using options contracts vs futures contracts.

How to Trade Futures Options
– futures options contracts are more complicated than stock options. Here’s why …

Currency Futures Options
– more flexible, less risky than currency futures contracts

Gold Options Trading
If you’re into gold options trading, you have a choice of alternative methods for doing it. Gold futures options, gold ETFs or binary options on gold. Each have their own unique features and risks.

Precious Metals ETF
Looking to Trade Precious Metals ETF Options? They are a much easier alternative to going with futures options. You can benefit from all price moves in the underlying precious metal.


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