Why have commodity options on futures become such an increasingly
popular investment?
Commodity
options make it possible to realize a potentially substantial profit, in a short period of time, with a limited-risk investment.
Under no circumstance, can the loss exceed the cost of purchasing the option including transaction costs. Other advantages
include:
- The leverage inherent in options.
- The liquidity provided by established competitive option markets.
- The
flexibility to respond rapidly to market opportunities.
- The ability to follow
the value of your investment on a day-to-day basis.
- They staying power to weather
temporary price setbacks without incurring additional risk or cost.
- Freedom
from the margin calls that many other leveraged investments are subject to.
- Strict
federal and industry regulation to which options trading is subject.
- The ability
to buy and sell quickly due to market liquidity.
- There is no guarantee that
any of these advantages will result in profits.
