21 lines
1.6 KiB
Plaintext
21 lines
1.6 KiB
Plaintext
Chapter 35: Futures Option Strategies for Futures Spreads 721
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Futures spreads fall into two categories - intermarket and intramarket. They
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are important strategies because many futures exhibit historic and/or seasonal ten
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dencies that can be traded without regard to the overall movement of futures prices.
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Options can be used to enhance these futures spreading strategies. The futures
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calendar spread is closely related to the intramarket spread. It is distinctly different
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from the stock or index option calendar spread.
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Using in-the-money long option combinations in lieu of futures can be a very
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attractive strategy for either intermarket or intramarket spreads. The option strategy
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gives the spreader two ways to make money: ( 1) from the movement of the underly
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ing futures in the spread; or (2) if the futures prices experience a big move, from the
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fact that one option can continually increase in value while the other can drop only
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to zero. The option strategy also affords the strategist the opportunity for follow-up
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action based on the equivalent futures position that accumulates as prices rise or fall.
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The concepts introduced in this chapter apply not only to futures spreads, but
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to intermarket spreads between any two entities. An example was given of an inter
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market spread between futures and a stock sector index, but the concept can be gen
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eralized to apply to any two related markets of any sort.
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Traders who utilize futures spreads as part of their trading strategy should give
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serious consideration to substituting options when applicable. Such an alternative
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strategy will often improve the chances for profit. |