Advisors option stock trading
A strategy that has become more popular over the last 10 years in the managed futures space is something called option selling. Commonly known as selling options, option writing or selling premium, commodity trading advisors employ this technique in hopes of generating a profit for their investors.
For many new investors coming into the managed futures space they are instantly drawn to these strategies because of their consistent positive returns month over advisors option stock trading and year after year. Although these types of strategies have proven to do well in periods of trending markets, investors should be cautious of option selling strategies for a few specific reasons.
How much you may ask? One of the best components of an option selling strategy is their consistent advisors option stock trading. These strategies can go months with positive performance without having any drawdowns past performance is not indicative of future results. With option selling strategies many investors fail to realize its downside.
One of the most noticeable negative attributes of an option selling strategy is its high margin usage. With this, option selling strategies tend to have a very low return on margin What is Return on Margin? Option selling, on the other hand, has a high correlation to sharp moves in the market being traded.
There really is only one ugly truth about option selling strategies and that is that they have the probability to have a large drawdown even if it has not happened in the track record.
This is usually not a big deal if accounts are fully funded, however many investors choose to utilize notional funding What is Notional Funding? In short, option selling strategies do have a place in advisors option stock trading futures portfolios and should be incorporated in most circumstances.
However, prior to making an investment it is important to consider all that comes with these types of strategies the good, the bad and the ugly! The Bad With option selling strategies many investors fail to realize its downside. The Ugly There really is only one ugly truth about option selling strategies and that is that they have the probability to have a large drawdown even advisors option stock trading it has not happened in the track advisors option stock trading.
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