Payday Loan in New Kensington

OK. Let's start at the beginning. Options and Futures contracts are what's called "fungible" (soft g). That means that any contractual obligations and rights as enumerated in the contracts can be sold on the open market, and any inability to close out the contract by either side is dealt with by the "clearing house" which guarantees the liquidity. With Forward contracts, some are private-party contracts residing solely between the two parties to the contract (let's say two farmers in Iowa), and some are not. A forward contract acts in many ways like a Futures contract, in that it represents an actual obligation by both parties to perform in the future by delivering a commodity for a locked-in price by a sppecific time (varies too much by commodity to be more specific). In certain cases the Forward/Futures contract can be settled by actually delivering the underlying commodity, known as "physical", such as wheat, gold, pork bellies, etc. But most traders do not do that because they are speculators and not actually engaged in the business itself; hedging (buying and selling against real commodities owned) is done by large corporations such as Cargill. Speculators are primarily engaged in trying to determine market direction and then profiting by implementing several different strategies, such as straddles (trying to make money in either direction, providing the market move is large enough) by combining long futures contracts with long Put options. (I'm getting to that). Hedgers use the sale or purchase of futures to hedge their own physical ownership - much like Cargill does, to plan better for the future against some unexpected occurence, such as drought in South America. Futures can either be bought or sold, and no previous ownership is required to sell one. But there is a "good faith" requirement, so that if a commodity moves too much against you, you must put more "good faith" money into the commodities account or else liquidate your losing position - if you don't respond quickly enough they will do it for you. Most people get carried away with leverage, for example, 98% credit (a close analogy comes to mind in the 10% down typically found in real estate) which is why most lose their shirts in commodities. But if you went on 100% cash, you'd be subject to about the same risk as if you owned a stock, except seasonally commodities can show some very interesting spiky behavior, so study would have to be part of the process. A very good trade in the last decade would have been a single $25,000 contract on Platinum 100% paid for, no leverage at all. Now let's move to Options. The buyer of an option is granted the right but not the obligation to either BUY pennsylvania SELL a certain stock, a stock index, the S&P mini, a commodity such as sugar, etc., for a specified price (such as $55 per share of stock) WITHIN a certain time period (such as by the 3rd Friday of the month of October), after which the option expires if not exercised. The seller, however MUST deliver - either BUY a stock that has gone up/down, or SELL it to the other party, or in the case of Futures Options, pay the difference or receive it in cash. So the option "writer" (the person who sold the rights to buy or sell the stock to the other person in the first place) in this transaction has an obligation to perform, whereas the buyer could walk away. A buyer might walk if there was no value to the option on expiration - which depends on how far the stock has moved - with a Call option, a holder (long) will profit if the stock is above the Strike Price (the one agreed upon in the first place), but the buyer can walk if it is "under water" that is, if the stock is way below the strike price, because in that situation the Call option has no value - you could just go and buy the stock on the open market without any reason to own the Call. With Puts, it is "almost" the reverse. A Put seller hopes the stock will go up, a Put buyer hopes it will go down. Why? Because the person who now owns the Put hopes to lock in an obligatory re-sale to the Put "Writer" for a high sales price in expectation of a dip or crash. For example if a certain stock crashes and you owned a Put prior to the crash, you can now sell the Put back at expiration for an amount equal to the amount the stock has gone DOWN from the previously-agreed upon strike price. The Put "writer" on the other hand (the one who sold it at the Open of the transaction), hopes it will expire worthless (that is, the stock would go up) so the "writer" could keep at the "Close" the "premium" the writer earned for engaging in the contract at the "Open". There is no way to actually get margin to buy options - most brokerages want all cash except for LEAPs - they're much longer options going out 2-3 years - in some cases. There are further differences between Options and Futures. With Options, if you buy one the worst that can happen is it loses 100% value. If you sell one "naked", that is, without owning the underlying stock, your loss could be unlimited because there is no limit to how "bad" the "trade" could go - but practically a Stock can only go to zero, so there is a limit to the loss a "writer" of a Put could feel - but no limit to the loss a naked Call writer could feel for a stock that's gone up the way some like CME (Chicago Mercantile), etc. have done. Most naked call writers have 1 million or two in T-bills and use that as collateral. Getting back to commodities, either party (but not at the same time) could suffer an infinite loss if they were using too much leverage, rather than just the "writer" in Stock Options. In addition, for commodities there is what's called "Limit Days" - that is, a commodity by law may only go up or down so much per day to avoid panic in the market. This means that if you are on the wrong side of the trade, being short a Futures contract (having sold one without any of the actual commodity in your possesion) when the market is surging upward, you may be locked in without possibility of "covering your shorts" (buying a sufficient number of contracts to close-out to a net zero position). This means you may get good faith calls until you pay back the deficit due the commodities "house" where you have your account, even when everyone in the world by now would know that your position is totally incorrect. Now you know why some during the Great Depression jumped out of windows. They used extreme margin there too. There are further differences involved, such as the Black-Scholes versus Rubinstein Options pricing models, volatility, Beta, Theta, Vega, etc. but I think this is enough for now. The main thing to realize is that most options expire worthless, so if you are serious about this, try to identify stocks that seem to go up and down a lot without reason and that also have high liquidity in the stock (200k shares per day) and high liquidity in the options (you'll need to do your own research there - things change too fast), that are high priced. Why, because when they go up even a slight percent, they move a lot in dollar terms.Then time the sale of Calls to when a Stock seems to have made a run-up and everyone "knows" it's going to keep going - if you previously bought the Call yourself, sell the contract "To Close" that is, get out. If not, buy the stock BEFORE the run up and sell the Call "to open" at the peak - just before it rolls over and wait for the Call to expire worthless, buy it to "Close" (liquidate your short position) and do this whole thing again. When it hits the bottom either buy another call for yourself ( to open) on the open market, or or wait for another runup to sell another Call (to open). Puts don't exactly work that way because sometimes you get stock "Put" to you so you need to cough up a lot of money to buy shares if things go wrong. Most people get a brain cramp from Puts, but it's almost just the reverse of Calls (like a double negative). There is also the difference in "contract specification" For example in stock a Put and a Call both control exactly 100 shares unless the stock has split after the initiation of the contract. With commodities it may be a certain amount (which is different for all) plus they have those nasty "mulitpliers" which tell you that at .055 cents each Orange Juice contract going the wrong way is costing you $250, etc. There are also differences in expirations. For stocks there are three different expiration cycles so that not all contracts for each month are avaiblable for all stocks. That can be researched at cboe.com. Commodities also expire at various different times and have the further difficulty that futures options expire before the contracts do - so to keep sharp on it you have to study hard. Not only that, but the symbols used to indicate precicesly the strike price and month being referred to are different for each industry. Hope this helps and YES I used to trade a lot (have another business now).