Trading Futures | John McNichol | 4-19-21 | Energy and Gold Defined Risk Spreads
good morning everyone john mcnichol and welcome to another fantastic week of education with td ameritrade you have reached trading futures and our topic is commodity futures options and we'll take a look at oil and metals so stick around [Music] all right hey it's great to see those you that are live with us today on a monday morning hopefully you enjoyed your weekend we have john galt les medipen frank vijay marcelo clark ricardo swing big doors and everybody else appreciate those you listen in the archive session as well as we start off another week of education you can see my twitter handle on the screen at j mcnichol underscore tda if you wish to follow myself along with other fine instructors here at td ameritrade let's take care of disclosures folks and we'll get into our topic here today a little too quick there uh in order to demonstrate the functionality of the platform we'll be looking at actual symbols keeping in mind td ameritrade does not make recommendations or determine suitability of any security or strategy for individual traders any investment decision you make in your self-directed account is solely your responsibility presentation is for education purposes only futures and futures options trading is speculative not suitable for all investors please look at the risk disclosures that are provided for you here as well as on the website and futures and futures options train services are provided by td ameritrade futures and forex llc those trained privileges are subject to review and approval not all clients will qualify options not suitable for all investors spread straddles other multi-leg options strategies often involve greater more complex risk in single-leg option trades along with transaction fees and those commissions should be considered when evaluating any trade also back testing of any particular strategy used in historical data hypothetical did not actually occur and no guarantee that the same strategy implemented today would produce similar results this is what we're going to learn a little more about today some of the characteristics of various options on commodity futures the impact understanding some of the economic government reports that may have on energy and metal futures and as we'll do kind of a theme over the next couple of weeks as we look at different option strategies or correction different commodities and commodity options is utilize the fine risk option spreads and position sizing we'll discuss about potential entry exit and trade management techniques now if you have any questions feel free to put those in the chat i will keep an eye uh open uh for that usually we have someone backing us up on the chat uh i haven't seen that salutation but uh we'll keep an eye open there so for those of you that are new uh futures uh let me know on the chat you know one if you're new to futures and or new uh to this webcast do appreciate you being here and uh this topic uh discussion here today is with a bit of you in mind you know comparing the difference between trading options on futures uh versus options on equities now it would be helpful uh for those of you that are looking considering this is being familiar with options on equities we teach a lot of that we do have an options workshop starting this evening and we also have our options course available for you on the education tab so it'd certainly encourage you to spend time on that before considering exploring the futures options realm so but the difference options on futures versus on equities where options on equities have an emphasis and for some reason all right looks like i lost my drawing tool here today let me see if i can go ahead and reset that i get a lot of comments on how people uh enjoy my drawing tools as they're able to be able to focus on what's happening on the chart let's see if i'm able to get there we go we got it back uh options on equities a lot of you are familiar that we can trade options on companies uh in different sectors as well as different indices uh but that does uh focus on one area of the market on equities companies it looks like miguel's new uh thank you miguel vj's new to futures and i've seen you quite a few times vijay appreciate you one of the attractions as far as with options on futures is uh a little more diversification in the different asset classes if one is looking for that exposure keep in mind uh diversification does not alleviate risk those asset classes not only include stock indices which we've highlighted in some of our technical trading but also energy interest rates i.e bonds if one wants exposure to interest rates metals currencies agricultural uh are some of the bigger groups within that and we'll uh we'll touch on these over the next couple of weeks our emphasis will be a little more on energy and metals here today as far as capital efficiency you know there's reg t as far as with equities [Music] margin on futures is a little more dynamic based off of a risk-based model you can see margins rise when markets are more volatile you can see them fall when they are less volatile so a little more dynamic another approach uh is virtually 24 hours trading uh whereas yes the equities market uh you know has been expanding uh and does have at times after hours trading but on a 24-hour basis uh futures and futures options have a greater access another attraction and you know not saying that this is a a big a big play here but there's no pattern day trading rule uh when it comes to uh futures uh unlike on the equities market now traders should always be well capitalized before they consider trading just because you have a smaller account and may be able to uh you know do very active trading on futures doesn't mean one should you need to look at your own situation as well as defining risk now there is a difference uh when we talk about expiration uh it could get a little confusing with commodities uh in the case of equities uh the settlement of those uh of those contracts uh will uh typically be an underlying equity in a stock option or if it's an index option would settle in cash in the case of the futures market many of these contracts or [Music] contracts would settle uh the underlying contract itself uh would be physically settled now td ameritrade doesn't allow physical settlement of different commodities meaning taking delivery of of gold or silver or energy now when we trade the option contract the option contract could settle into the underlying contract versus the actual commodity itself and that needs to be managed and that can also increase the risk that one may have originally taken on just like in the case of equity options uh we we've taught you know consistently on managing those trades prior to expiration and closing them out there by alleviating the risk of assignment or an automatic automatic exercise the other thing to keep in mind is there could be a relatively small window between when the option expires as well as the underlying contract now fortunately as we'll look at these you can see the days of expiration uh on these different contracts now i got a little fact sheet uh on a couple of these uh not all inclusive probably need to update this as you know we have uh had uh options available for uh some other commodities i just haven't been able to update the slide on that but as we look at some of the energy contracts the root symbol it's going to be a forward slash and we have cl for crude futures now one of the considerations just as we've looked at the index uh futures in previous sessions one needs to understand the multiplier uh what is you know the essentially the leverage of that uh contract in this case you know the multiplier is a thousand so you know if one had a a contract you know that showed say a contract that was three dollars what would be the the dollar value of this contract if you have a multiplier of a thousand now you can go ahead and type that in the chat if you have the answer i know we have a little bit of a lag there so may answer that before i see that answer come across the chat but that would be the premium multiplied by the multiplier so that would be 3000 or 3k okay now also uh understanding uh you know how it moves so there is a tick size and a tick value in the case of crude futures futures options uh it is penny increments and as you can do the math based off of that thousand multiplier one penny is ten dollars so consider that think about that leverage that one has uh where one is controlling something of greater value with a relatively smaller amount of money looking at the trading hours you can see you know almost 24 hours from sunday evening into friday afternoon another important note to consider with uh with futures on when they settle they don't necessarily settle at the same time as the equities market uh and uh in this case on these energy contracts the settlement is going to be somewhere between uh just shy of about 1 30 pm central time so consider that wherever you live and if you are trading these understand uh when that settlement is even though the prices may continue trading you know up till a certain point before there may be a brief break uh you know the daily settlement you know which should appear on the chart um as well as a settle of accounts uh would occur at that time hey folks got my good friend pamela lowly on the chat pat welcome so if uh any questions i am unable to get to uh make sure you let pat know pat's very familiar with the topic appreciate you pat now when it comes to end to trading i.e kind of get as getting an expiration uh this is also where commodities may get a little confusing you know when does it actually stop trading you know in this case trading terminates three business days before the termination of trading for the underlying contract at 1 30 p.m central time so you notice right here you know if one is you know trading these uh futures options uh there's not a lot of time between when the option expires versus the underlying contract and you know if one has a an exercise or an assignment with a an automatic exercise or an assignment you know that can uh you know create a little uh management issue and i.e you know why we need to understand when they expire and manage in those trades well before that time uh what happens at settlement and options exercise will be a position in the underlying futures contract okay and that underlying futures contract if one is exercised or assigned would need to go ahead and um take care of that okay and again one way of alleviating this uh is to close out the option prior to the end of trading now there's some news that can impact some of these uh the api american petroleum institute report comes out every tuesday at 3 30 p.m uh the eia and i'm just uh let's see uh energy i'm not even gonna guess uh but we'll go to the website uh i did get my caffeine this morning and after a military weekend i get a little tired of uh abbreviations and acronyms uh so but petroleum report comes out at 9 30 a.m
uh central time we'll show you how you can bring this up on the calendar and then baker hughes rig count on friday uh these are all uh energy related reports that point towards supply and demand uh you know there may be some insights as far as future expectations uh as far as supply and demand and we can bring them up on those reports a couple resources for that is one right on the thinkorswim platform by the way as uh you can see here there's my twitter handle at j mcnichol underscore tda if you wish to follow and you know if you like this content here today you know make sure you click like this webcast is part of the trader talks uh channel so you're encouraged if you don't already to subscribe uh and you can turn on notifications being alerted to our other fine webcasts to include a webcast taught by pamela like advanced technical analysis and uh options trading and as we glance at the market too uh you know markets are uh a bit back and forth uh primarily down and those of you when we talked about uh pivot points uh last week uh looks like the market's uh trying to get back above its pivots there you know possibly setting a low or traders maybe keep an eye on that low in the overnight i think it's somewhere around the 1460 area or so if you go to the market watch tab and uh right on the market watch tab you can bring up some of the various events you know we are in the midst of earning season but i do have that unchecked uh kind of focusing on these econo day events it's where you can see economic reports from around the world and if we go ahead and go on some of these days uh let's see we've got wednesday up here right now you can see there is the eia petroleum status report you can click on it and you know you get a little snapshot as far as the time of the report you'll get some information uh on uh previous reports uh for instance in uh this case uh there was uh looks like more of the draw on those inventories being negative which may point towards greater demand although keep in mind it's it's a two-way street it's supply and demand you know if there's less demand there could be a greater supply in this case uh more of a draw making assumptions that whether not as much as being produced uh but uh there is more being drawn on and you can see things such as gasoline inventories as well as distillates looks like more of the draw on distillates as well if i click on friday there's a base baker hughes count and uh the baker hughes rig count what it is is basically a weekly report on the rigs that are in operation uh in north america and it even has broken down by the u.s the gulf and canada idea being is if there are more rigs that's more production uh which can translate into more supply uh could also uh you know be meeting healthy demand uh whereas if rig counts go down uh that can have an impact on supply and as well as traders may be looking at that corresponding demand uh i detect liberty as well too um and we can see what the uh what the survey says oh i missed the i think it was the api coming out on tuesday uh which also is on the calendar but uh you know other resources you can do is going direct to the government website or the organization uh so here's a uh api american petroleum institute uh this is one of the things and challenges uh when it comes to uh commodities is we're talking about a different asset class something that one may not be as familiar with and so it does require uh potentially more study on your part hopefully beyond technical analysis uh to uh learn about how these parts of the market work and again some insight on some of these weekly reports potentially can be helpful all right and so uh you know if we uh go ahead and you know click on the uh drop down here sometimes even i forget about uh maneuvering through so you know under products and services you know you can get information on some of the statistics if that comes up here and you can get an idea of the weekly release schedule which is right here and schedule releases and also get uh links to some of those reports here as well again they'll typically come out on the thinkorswim platform as well um the other one eia which is a government website that is the energy information administration there we go um and you can go ahead and get access to those reports here as well it looks like they're provided for you in in quite a few uh formats here all right uh going uh back to the slides uh so the ones that we're looking at here these are all ones that are optional and available for trading at td ameritrade uh futures and forex you know other contracts you have a ng for natural gas you'll notice a multiplier is similar but when we look at the quotes the tick size is going to be a little different it is a 10 000 premium but the increments natural gas is priced in about uh a uh looks like a uh a thousandth of a cent i got that right or a hundredth of a cent and uh that's a multiplier of about ten dollars per tick uh trading hours very similar the termination of trading notice in this case it's actually a business day so again the importance of understanding uh as far as the different option contracts and when they expire uh there's also uh a financially settled contract uh that's available that you know enables uh traders that have absolutely no intention even though td ameritrade does not physically settle they'll automatically terminate or close out those contracts prior to settlement although that doesn't alleviate your responsibility on managing the trades but there are examples of in this case what we call european style which those contracts cannot be uh exercised or assigned until expiration and in this case they are financially settled once again even though with that one would potentially look to basically close out these positions prior to expiration all right so if we uh you know go and take a look at the uh the chart uh on uh both of these here now we can go to the charts let's bring up a daily chart and let's see we got here i'm going to plug in forward slash cl and uh those you may have followed us several weeks ago i think i did a presentation on fibonacci uh applying it to various asset classes and you know we we may see a theme here on some of these commodities uh you know this is just a run-up from february 1st going in the beginning of march on this last move up you know relatively shorter but sharp run up in in these commodities uh you know prices had sold off uh in the first part of march and then kind of based out a bit um here on crude you know prices uh seem to hold around that 61.8 retracement you know what some traders would refer to as a make or break point you know with the existing trend uh you can see that being supported i have a 55 day moving average a little fibonacci tweak on the 50 day uh 55 day exponential and you can see how that price has been supported there and looks like more recently from last week uh seeing a breakout uh of this previous base uh that you know prices had been trading okay now uh you know when we look at it from a bigger picture you know we can see the uh the big drop from last year you know if we go ahead and take a look at things you know pre pandemic notice how crude you know fairly stayed in a range um you know on the lower end around 50 on the upper end around 64. so kind of some technical levels there and as we uh are attempting uh to put covid behind us you know as we kind of look at those uh ranges now you'll notice uh crude you know has kind of pushed back into that previous pre-covid range you know in that 50 to the mid 60s so the question is you know are we gonna see a new range form um you know as things reopen you know will demand continue or and or restrictions on supply and uh prices you know continuing to keep with a trend you know either of those are our different scenarios now this is probably a a good introduction as well uh although uh it may or may not apply to all commodities uh you have the ability uh on the thinkorswim platform to uh bring up seasonality charts uh where uh one can see from a historical perspective uh typically over i believe the last five year cycle on you know what prices have been doing in previous years uh you know for instance grains agriculture could be relatively cyclical um you know we may see some of these same cycles that may appear in other areas and we can do those comparisons so let's actually do that i'm going to go ahead and on the thinkorswim platform on the charts right up at the top there's a gear we'll go ahead and click on that gear there's two there's two ways of doing this one we can go on to gear and go to the appearance and under the appearance uh there is a a chart mode right now it says standard and if i go ahead and actually click on that standard there is a seasonality chart so i'm going to go ahead and click on that it's also in this area here you can manipulate it looks like the default setting uh is bringing up uh the um the current chart as well as a average over the last five years if you want more information you can click on that drop down and you can bring up the yearly and the average or ju or just bring up the yearly and you should see multiple charts for each of the preceding five years so let's go ahead and apply this and click ok and what one can do is uh you know this is looking at things over a 12-month period is uh going back uh we're in the april time frame so you know if one was let's say looking at a position you know in april going into may or june then we can kind of focus on this part of the chart now maybe a little bit harder to see uh with some of those lines and unfortunately i'm slightly colorblind um but trying to uh bring up the different years and you can actually see up at the top these are different years now remember there may be some outliers you know as uh particularly when you go back into 14 and 15 where the oil market uh you know dropped considerably but looking at some of these uh other periods you know what was kind of more of the bias you know over that period of time so you know here's an example of this year more of an upward bias uh we're seeing a little more of a sideways bias on this year you know one more sideways to potentially down um and in this case you know kind of up in may but you know looks like you know a little more of it a taper in in that june period you know and if you're going further out you know looks like during the summer months you know kind of a little more neutral there someone with an upward bias all right now there's no guarantee that once again past performance non-indicative future performance but some traders may you know look at those uh different cycles and red sox fan uh brings up a good question and uh which is something that needs to be uh discussed uh can the commodity go negative uh i think you may know the answer to that uh short answer is yes i believe that happened last was was it last march i believe um where just with uh you know a lot of the supply uh some interruptions but actually more of a concern about supply since everything shut down supply was still coming in that supply had to be stored somewhere and unfortunately there wasn't many places to store uh crude when the entire economy shut down a lot of crude was left on ships and they they stayed offshore uh others were you know trying to find storage capacity what happened is the cost to store those commodities greatly increased and where it got to the point uh that basically uh traders are were willing to pay uh people to take the oil uh for essentially free as long as they were able to store it so that's why the cost went negative it was a very uh [Music] obviously a pretty shocking event there were restrictions that were put in place uh with uh on td ameritrade i believe some of those restrictions have now been lifted uh but that is always a concern that's why it's very important to attempt to define risk in each and every trade uh as well as you know when prices and these things don't happen overnight but when prices do go against one is you know consider closing out those positions okay but very good uh let's go ahead and uh bring up uh on the platform again now if i want to go and switch these charts around i can simply right click and do go to the chart i believe we can go to the style and then you can see the chart mode so right click on the chart go to style go to chart mode this is where we can go ahead and change it back to a a standard chart and likewise if you want to bring up a seasonality chart you can bring it up and close that out okay um so you know there's crude uh let's go ahead and take a look at our other commodity and then we'll go ahead and we'll do a practice trade i'll go ahead and also bring up forward slash ng or natural gas bring that up and have a little trouble with my keyboard all right come on let's do it there we go so here's natural gas uh natural gas is basically showing a a similar pattern to what we saw with crude and we may see this with a lot of commodities you know question is is this more of a double bottom uh natural gas did get below its uh 55 day moving average in this case and is breaking above it right now and then uh another uh commodity we wanted to uh highlight here today uh is gold uh gold futures uh forward slash gc uh you can see there is a multiplier that multiplier is a hundred so it would be a hundred times uh the premium uh notice as we look at trading hours uh you know similar again almost 24 sunday to friday daily settlement uh knows the time is a bit different 12 30 p.m central and you know once again as we look at the expirations it could look a little convoluted the nice thing about this folks is uh when you are on the thinkorswim platform and you go to the trade tab much as you would a a stock or bringing up a an equity option you know there is an option chain and as you look at the option chain you can see the days to expiration and very important look at the days of expiration because notice this uh in the case of and this is natural gas we're still looking at so natural gas may contract expires in nine days okay expires in nine days now if i look at my calendar today is april 19th um so it looks like that that contract is going to be expiring well in the month of april okay so just because it says may doesn't mean it expires in may that is the contract as being tied to that settlement which is the may contract it is eight days june contract it's 36 days that'll be expiring sometime into may okay so keep that in mind uh you can see also examples that based off of those stats on natural gas both the financial versus the physical contract okay if i bring up gold forward slash gc you can see the underlying contracts may contract expires in 10 days so you can see the same thing with gold and looking at some of these other contracts now this one's kind of odd uh with that april one there oh yeah this is actually one of the weekly uh options you know may have different expirations as well all right okay so let's go back to the slide here and you know gold's been you know having uh you know i guess an identity crisis uh when compared with bitcoin uh you know gold's been considered to be a store of value uh however uh you know a bit of divergent on what we've seen what bitcoin's done although in in some of these cycles though uh it'd be interesting to see in previous years uh around this time going in the summer there has been some correlation with bitcoin not sure why but just seems to happen at least in the relatively short history of uh bitcoin versus gold now whether that continues we'll see but other impacts such as economics think about interest rates economic strength inflation the idea is that gold typically would have a tendency of rising in a more inflationary environment and so you know any type of uh economic reports uh you know may uh have an impact whether directly or indirectly as far as with gold and its relationship with other asset classes uh if we look at gc people didn't talk about it last week but gold was up about two percent i believe last week whereas the equity indices i think on average weren't up much more than a percent and change also gold miners uh were up about four percent now we're seeing gold backing off a little bit today but trying to get above its moving average and again there's that you know potential you know double bottom you know if the previous highs hold an idea of a bullish reversal okay now another contract that we have on the metal side uh that is available and more recently available i don't have a data sheet for it but let's talk about some other resources that we have is if we go to too simply td ameritrade.com forward slash futures you don't even need to log in and i will go ahead and take the liberty of pushing this on the chat for those of you that are looking at the archive session you can see it here over in the left hand side by the way folks uh probably a good idea as we are getting towards the end of our session i see there's a survey uh on the chat so if you have an opportunity to fill out that survey we'd love to get some feedback from you hopefully you're learning something new as we educate you on uh some of the uh the basics and the framework of some of these different commodities with their focus being on energy and metals today so please click on that survey and provide some feedback i'm sure pat will push it out a couple of times while we're here but if we go to td ameritrade dot com forward slash futures you can see a link where it'll say available products and under available products this will illustrate for you the contracts that are available for trading and since we're talking about uh more defined risk trades in this series uh for the next couple of weeks on these contracts we're looking for ones with tradable options and uh since we are talking about uh energy and metals you can go ahead and see that if we go to energy uh the ones that have tradable options available is going to be forward slash cl and natural gas those two that we highlighted uh if we go to the metals we have uh gold which is forward slash gc and more recently uh silver options have been available for trading as well that's going to be forward slash c i you can see the multiplier for silver here which is 5000 but notice the tick size is also smaller again you know looking at that leverage there you know that's about a half of a cent likewise you can see the trading hours there as well um now there have been some more recent products as well too we showed you the micro contracts for some of the indices in past sessions now it's not optional but if someone's more actively trading or you know looking at the underlying contract you know there is uh potentially a a lower um multiplier entry into some of these commodities these micros are basically a tenth of the value of the other contract okay all right so let's take a quick look at the silver chart forward slash s i and again you know from our uh fibonacci analysis from you know previous run-ups here uh you know silver again you know trying to hold you know so it's a fib levels there a little more of an inverse head and shoulders here and depending on how one looks at it again very similar patterns to uh some of these other commodities where we've had a a downward slide prices basin out and some of them already break into the upside potentially reversing others in the case of silver you know kind of staying in the same way um let's see if uh i'll take a look at trade here we haven't done a practice trade on silver and you know we may look at the options and you know maybe get a a view now keep in mind liquidity uh can be important there and you know notice when we look at silver there's not a lot of uh expirations to look at uh you know we got may june july you know if we look at like a 30-day period which is very typical as far as which spreads and this is what uh myself and ken rose teach in our spread classes every wednesday and thursday at 3 p.m eastern
you know look at the difference between the you know bit and the ask you know let's say i was looking for an example of you know maybe like a put spread and looking to sell a uh you know a 30 delta you know may want to look at you know the difference between the bid and the ask you know the smaller the spread you know the more liquidity look at things such as volume and open interest and you know you can see that there's not necessarily as much trading here whereas let's say if we look at something like gold keep in mind too that commodity options are not necessary at least at this point and could be for some time you know not necessarily as liquid uh or as uh as much volume as uh equity contracts here you can see a lot of single contracts on some of the open interest but once certainly encouraged to practice on some of these tools and seeing if your results vary although i probably should need to scroll down a little bit let's go more at the money at the 1770. uh let's go ahead and bring up uh volume and open interest and you can see notice as you get you know closer to where the current price is you know you can see more open interest you know not necessarily heavy volume but if you're trading you know one or a couple of contracts you can see that you know there is uh contracts available okay and again as far as contrast if i look at silver si and kind of look at that same scale you can also if you have a lot of strikes come up here and go ahead and change that so you don't have as many strikes being displayed and let's see if i can bring this over as you can see you know not as much going on on the silver front so let's go ahead and do one for gold then we'll bring up gc now gold is you know potentially reversing as price again broke above some of those previous highs uh you know let's say a trader uh may make an assumption that they believe you know gold will whether stay where its price is or maybe uh drift higher you know we can do an example possibly of a put spread a short put spread where we'll sell and out of the money put and buy a cheaper put to define that risk and make the assumption that price would stay above a certain level so let's see we can go ahead and construct that and we'll finish our session here today so i'm going about a minute over here folks so we're going to go ahead and uh and notice here on the gold there are a greater selection of expirations uh we'll still focus on the 36 day out and we'll go ahead and look for a delta that is 30 between 30 and 40. so i have to bring up a few more strikes go let's start off uh with the 1735. we go and look at the chart for 1735 that would be right about here ideally if one's selling a a put spread would like to see that constructed at or below support so if we're doing the 1735 the assumption is is that the price would stay above that previous high and hopefully preferably above that moving average and then sell a cheaper option to define that risk so we'll go ahead and go back on that so for focusing on 1735 i'm just going to go ahead and right click on that and we'll do sell vertical and what it'll do it'll default uh to the uh the next strike uh one would confirm that strike to make sure you know they they have the spread that they want so this is a five dollar wide um market price around a buck 25 mid price around a buck 40 uh changing as we speak i'll go ahead and we'll put it in for that buck 40 and see if we can get that filled then this will basically give us a defined gain and a defined risk trade notice it's a five dollar wide times the multiplier of a hundred that's a hundred bucks so we potentially can make a hundred forty dollars uh risking 360. uh that would be a return on risk i think of closer about 40 percent if we're able to get that we'll take 140 divided by 360. that'd be about 38 percent uh generally on our short verticals uh you know we're looking for examples of around 30 percent so that may fit the bill for us so i'm going to go ahead and and as far as position sizing we do on the spreads is position size to a maximum loss so you know let's say i'm willing to risk a thousand dollars on the next trade uh this would be at least two contracts three contracts would put us over a thousand so i'm going to go ahead and edit this and we'll go ahead and make that two hit confirm and send a risk in 740. and what a target would
be for us is to try and capture about 70 to 80 of that maximum gain so from a profit management standpoint uh if uh this contract which is about a buck 30 uh let's say drops down to about 25 or 30 cents what you can do is you can take that credit that we're losing on that credit as we speak times like times it by 20 you know if this spread drops below 30 cents or closer to 25 we can buy it back and close out the trade that does two things one it basically locks in a potential gain two by closing out the contract we remove the obligation or the automa or the exercise if those contracts end up going in the money so would close out that trade well before that expiration now if we don't hit that target before expiration then we need to consider in the last week to basically close it out for whatever gain or loss that's associated with it so hopefully you learned a little something new with that folks we'll go and we'll send this through um looks like we have to may settle for a buck 30 versus a buck 40 so that'll impact our uh our gain there a little bit but let's get this through for illustrated purposes it didn't fill right away so we'll have to see if it gets filled or not and we'll go ahead and we'll follow up with that next week so some final thoughts here folks you know if you're already trading options on equities uh you can use some of the same strategies that you learn in our webcasts uh to go ahead and trade futures uh an option is an option regardless of that underlying asset you can review the economic calendar for government reports we showed you some of that here this evening and also keep in mind that similar to equity options they are americanist style they can be exercised or assigned at any time not likely but they can um and so you know if they are you know in the money uh you know they can whether it be closed out we can roll them uh similar as we do with equity options i shared you some of the resources for contract specifications you can also go to the exchange website cmegroup.com which provides more detail on the latest and greatest and this is what we covered here folks and we're going to do this each and every week for about the next four or five weeks on some other asset classes as well so we'd encourage you to join us thank those who they're listening to the archive session as well click on the survey for those that are here live and for those of you that are listening to the archive session as well as here live as well you have an opportunity to vote as well by clicking like for the video there appreciate that appreciate pat helping out on the chat and remember folks in order to demonstrate the functionality of the platform we did have to use actual symbols keep in mind td ameritrade does not make recommendations or determinability of any security or strategy for individual traders any investment decision you make in your self-directed account is solely your responsibility have a great day folks coming up at the top of the hour getting started with technical analysis with cameron may we'll see you soon folks bye now you
2021-04-25 03:21
