Back To Futures For Market Options

2021-11-23

Simpler’s traders sometimes step out of their comfort zone and look to alternative trading strategies.

One option with the overall market is futures trading.

Trading futures, such as agricultural commodities, metals, currencies, and even interest rates, is a broad market. By purchasing derivative financial contracts on these assets, traders purchase or sell the asset at a predetermined future date and price. 

The futures market presents opportunities to find trades based on the direction of a security, commodity, or currency. Futures traders are not even required to own, or even buy, the commodity itself. Traders can focus on where price is going and work setups in either direction.

When Simpler’s traders find futures setups, they work to keep trading costs and risk relatively low by asking, “How much will I lose, multiplied by how many contracts, if I’m wrong?”

Simpler’s traders often hone their trading skills for stocks and options while trading the futures market.

Stock or options traders can develop a tendency to fall in love with a few tickers while missing others within an index or sector. Trading futures can open up a broader view of the market and offer opportunities to look for trading potential within the indices themselves.

Futures traders look within the Dow Jones Industrial or the S&P 500 for opportunities in the futures market. Traders can ask, “Is crude ready to roll over? Is demand greater than supply?” Or similarly, “Is the housing sector in-the-books or is there still room for more growth?”

Opportunities from an exchange traded fund (ETF) for countries, such as the EWC of Canada which comprises energy, lumber and crude oil, allow futures traders even more room to play.

This time of year futures traders are following an historically holiday season trend in the market.

The Santa Claus rally, which arrives as early as during the Halloween season, historically begins to chop in November and then makes a quick move lower in December. Simpler’s traders prepare for this seasonal event by being ready for the inevitable pullbacks in the market.

Why not test the futures market for a seasonal change to close out this year?