The Lead-Lag Report: Anthony Crudele on Futures Trading Evolution and Risk Management Tactics
All trading requires strong discipline. That’s because several trades in a row can be losers. And if that happens, it can lead to needless stress.
As long as traders follow a plan and stick with it, they can build a system that can profit over time. Even if any individual trade doesn’t work out. In essence, good trading is treating the market as a marathon, not a sprint. Although any individual trade can often feel like one.
Options trading can add in an additional layer of complexity. The rise of daily options trading over the past two years makes it easy for any investor to day trade. However, the trades used within the context of an overall portfolio matters.
Investors can use options and futures to hedge against a long portfolio position. That’s similar to investors who sell covered call options against their existing stock position.
Both options and futures can allow investors to use high leverage. Instead of buying 100 shares of a stock outright, a futures or options contract can get that control. And at a fraction of the price.
Traders should consider the total value of their options holdings if they were stock positions. That ensures that they won’t overtrade on options.
But adding in such trades can help boost your overall portfolio returns and reduce your risk. So it may be worth including such options in your trading account.