Using options to trade futures

Alright folks. So in yesterday’s video, we talked about trading this euro currency set up here using micro contracts the micro futures, which is m six E. Now, what I did tell you or mentioned to you is that there’s also a way to trade using options on futures in this case options on the euro currency. So we have a chain here, this is the this is the option chains on your currency futures. And you notice that we’re trading the June contract. We have all these expirations here all the way out to June, until we roll into the next month, which will be September. Now one thing that I don’t think a lot of people take into account, or maybe they’re not aware of is that you can use options as your stop. Now, remember, we talked about yesterday that our potential target was up here around 114 31 1440. It’s about 300 points from our entry of around 111 30. It’s about 300 points that we’re looking for. That’s about $3,700. Now, if you put your risk down here below the number one point on the daily, that’s also about a $3,000 risk, that’s pretty rich is pretty rich stop there on the euro currency, well, what you can do instead is come out and buy a put option against your long so let’s assume that you are long. The contract here, you’re long the futures market, rather than putting in a hard stop on the market. 300 points below or $3,700. Down here below, you can buy a put option on the market, you can see right here we’re trading 111 86. Basically, the add the monies are 27 by 30. Let’s assume that we paid 30 ticks for that 30 times 12.5 30 times 12.5 is about $375. So instead of risking $3,000, if the market rolls back over and stops you out, you are putting an outlay of about $375. To for protection below below 111 75. Now keep in mind that these will expire on Friday. So if you’re still in position Friday afternoon, and you’re above 111 75, these are going to expire worthless. Now, that’s not a bad thing, because you’ve only paid 375. If your expire worthless, that means that you are likely going to be up on your euro currency position. Now what you’ll want to do, you have to, quote unquote, options heading into the following week, if you’re still long, you can either move your stop up and protect your long position or you can go out and purchase next week’s expiration. And that will protect you to the downside, if we have any adverse movement against our position now that one other little twist to add to this is that in addition of being long the contract and being long a put option, which is essentially called a married put, we can add a little bit of a twist and go out and sell a call against our position, which will bring in premium against our long position. So we’re basically now have a covered call against the long we have a long put to protect downside. And that premium is being brought in helps cover the cost of our insurance ie our stop there on the euro currency. So there’s many ways that we can use options to trade futures rather than trading the futures outright. We talked about trading micros, we talked about a married put strategy. And what we did. What we also did cover is if you’re bullish position, you go out and sell a bull put credit spread just like you would in the equity options market.