Commodity Futures Trading Blog

Commodity Brokers Want Futures Trading Investors to Understand Why so Many Options Purchases Lose Money

Port St. Lucie, FL (PRWEB) August 20, 2006

T & K Futures believes that the two greatest enemies for futures traders who are option buying investors, besides themselves, are time decay and volatility premium. It amazes the company that many people have never heard of these key components of option value. Options are by their very nature a wasting asset. Given a flat market scenario, they lose premium value daily. The only way for an option purchaser to make money is for the value of the option premium to increase more relative to the time decay of that option.

What is volatility premium? When one buys and option (call/put), they are buying the right to buy or sell from an option grantor. They collect the premium that one pays for the option. They hope that the person loses because if that happens they win. This is the whole zero sum investment thing people have heard about. The option grantor takes on the lion’s share of the financial risk because while people are only liable for the premium that one pays for the option they are liable for the value of the contract.

So they increase the price of the option premium to offset their risk relative the volatility of the market. The more price movement in the futures market where people purchase an option, the more volatility risk the grantor is taking. In other words, the chances to reach strike price objectives are more attainable so the grantor charges more.

Past performance is not indicative of future results. Futures trading and option investments are risky and people can lose money. Use only risk capital when investing in futures or options.

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T & K Futures and Options Believes that the Current Inflation Rate Will Rise Dramatically Because of the Recent Rate Cut

Port St. Lucie, FL (PRWEB) September 26, 2007

T & K Futures and Options believe that the recent interest rate cut by the US Federal Reserve Bank and monetary interventions by many central banks around the world will lead to a dramatic rise in the current inflation rate. These central banks added liquidity to offset the negative effects that the sub-prime US mortgage collapse may have on the stock markets around the world. However, this excess liquidity might also cause extreme monetary inflation and drive many commodity futures prices much higher.

When the supply of a currency goes up the value of that currency usually decreases. When this happens, it takes more of the currency to purchase the same amount of a commodity. This is called inflation. Some examples are the rising costs for fuel, fertilizer, feed and pesticides faced by US grain and livestock producers. Each dollar purchases less of these necessary commodities which in turn drive the costs of grain and livestock production higher. Consumers are then forced to pay more for the commodity and their dollars buy less. Now consider that the world’s energy and food demands are increasing exponentially because of population growth and a higher quality of living that is being experienced around the world but especially in India and China. Commodity futures prices and the current inflation rate may very likely increase dramatically over the next few years.

We believe that commodity futures prices will continue to rise and the current inflation rate will rise dramatically over the next few years as higher demand for commodities continues. In the meantime, we expect volatile commodity futures prices and many opportunities for commodity futures trading. Interest rate futures, currency futures and stock indices can expect extreme volatility over the next few months. We also believe that commodity futures prices for energy and food will be very volatile for the next few years. Volatility is a double edged sword and can work against you as well as for you so make sure that you are not undercapitalized and manage you risk effectively before beginning any commodity futures trading campaign. Visit http://www.tkfutures.com/education.htm to learn more about the mechanics and risks involved in commodity futures trading.

The author of this article is a 14 year veteran of the commodity futures trading and commodity options market and the president of T & K Futures and Options Inc.

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©Copyright 1997-

, Vocus PRW Holdings, LLC. Vocus, PRWeb, and Publicity Wire are trademarks or registered trademarks of Vocus, Inc. or Vocus PRW Holdings, LLC.

T & K Futures and Options Announces Managed Futures Funds Trading

Port St. Lucie, FL (PRWEB) September 10, 2008

T & K Futures and Options, Inc. now offers clients access to a multitude of federally registered and licensed Commodity Trading Advisors. Managed futures funds are professionally managed futures accounts run by commodity trading advisors. These managed futures funds are for investors searching for greater market diversification into the various commodity sectors without having to take the time necessary to actively manage the investments on a day to day basis.

“There are many reasons why managed futures funds may be a good investment for risk tolerant investors.” Managed futures trading allows for the opportunity to reduce overall portfolio volatility and risk because they can fluctuate independently of the stock, bond and real estate markets. Managed futures accounts can also deliver the potential for higher overall portfolio returns than a strictly stock and bond portfolio. Professionally managed futures funds have the ability to profit in any economic environment because of the ease of shorting or going long any of the various futures markets that are being traded. Managed futures trading also gives investors the ability to invest in virtually all areas of the global marketplace. Visit http://www.tkfutures.com/managed-futures-trading.htm to view some of the various managed commodity funds that are available to choose from.

There is substantial risk of loss involved in managed futures trading. Many managed futures funds will cease trading if the assets devalue by 50 percent but investors should read carefully through and futures fund’s prospectus before investing any risk capital. Past performance is not indicative of future results and only risk capital should be used when investing in any high risk investment. There is substantial risk of loss in managed futures trading and this type of investment may not be suitable for many investors. Visit http://www.tkfutures.com/risk_disclosure.htm to learn more.

There are many different managed futures funds to choose from. Some focus on only one sector of the commodity markets such as grains or metals while others trade just about every sector. This allows investors to tailor fit a fund into their overall portfolio that specifically meets their needs to have a certain missing commodity sector or asset class as part of their investments. Visit http://www.tkfutures.com/education.htm to learn more about the basics of commodity trading and see the various sectors involved in commodity investing.

Managed futures trading should be considered by investors as a speculative investment and at most should only make up 20% but probably less of the total assets in a portfolio. Managed futures funds are very similar to a managed stock mutual fund but the extreme volatility may be too much for some investors to take. Unlike a stock mutual fund, futures funds often require a minimum investment of ,000 or more to begin trading.

The author of this release is a 15 year veteran of the commodity markets and the president of T & K Futures and Options, Inc. Managed futures funds to some degree may be appropriate for many investors but should be implemented sparingly based on the investor’s risk tolerance.

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©Copyright 1997-

, Vocus PRW Holdings, LLC. Vocus, PRWeb, and Publicity Wire are trademarks or registered trademarks of Vocus, Inc. or Vocus PRW Holdings, LLC.