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TFC Commodity Trading Forum

So, since I know nothing about options....

All my trades now, are straight up naked futures contracts. So, since I know next to nothing about options, other than the most basic strategies, I decided it's time to try and figure them out. Whow, what a pain these things are!

The last time I did an options trade, I had like $800.00 in my account. so I bought a way, way out of the money option for almost nothing, in a way back, back month and held it for 6 months.

Since my system is fractal, instead of using intra day charts to day trade a futures, I called the over all trend using the monthly, and weekly charts (same signals just larger time frames). So the option did come close enough to the money to profit me....eventually....however, my profit was only like $50.00.

Of course, after the commissions, and 6 months of a 70 a month charting service, it really just bought me a few extra weeks of the service to paper trade Futures in sim trading mode but....

I did this, because I had been trying to use out of the money options to get into a market cheaper than the margin on a naked futures contract, only to discover the wonderful action of "Time decay", which had my option value go down, even though the futures had gone up...Because of that, I figured if my option was almost worthless to begin with, it had nowhere to go but up, and I was confident in my call of the long term trend I'd try the above idea that made me $50.

I have also tried to stretch highly under margined accounts by selling calls when I thought the market would go down, and selling puts if I thought it would go the other way. That was working, till I hit a statistical failed set up in the underlying futures and the market went the wrong way. Not that the loss was all that great, but back in those days, with 800 or less in the account, any loss blew the account out.

The other thing I have done, is buy an out of the money put, to protect a long futures contract, and vica versa. This was back in the mid 90s, when I had no idea what I was doing, and my guy at Alaron suggested the strategy. It seemed a good idea on paper, but the futures never seemed to move enough to cover the options premium and I ended up breaking even on trades that would have made money if the futures was just naked. Not that I could call a trend with any more accuracy than a break out of a 1-2-3 formation then anyway.

So, with that clustered mess of an options history, anyone have any advice on where to start?