PE, >While I haven't traded commodities futures,
You havent' fully lived than man! :) >I have fiddled around with >options (which >apply to equities) To be clear options can apply *to any contract*. For instance --- say I am thinking of buying your house. I tell you, "Parker, I'll give you $1000 cash now for you to keep, if you give me the option of buying your house on christmas day for $750,000" ie, you cant sell it to anyone else before then, and you have to sell it to me - if I want to buy it - on christman day. It is literally an "option". > and my uderstanding is that options are essentially >the same thing >as futures --"a contract giving you the 'option' to buy or sell >something at a specified >'future' date". Actually that is absolutely incorrect, PE!!! Literally, nothing could be more different that options and futures. It would be like saying "buying and renting are the same thing!" or it would be like saying "interest rates and tax are the same thing!" A future ****IS A CONTRACT****, it's that simple. ie the deal is done. Say we sign a deal for you to sell your house to me --- the price is $750,000 and we will exchange on christmas day. That is a "future". "Future" is just another word for buying or selling --- nothing, whatsoever, to do with options. In the example, you MUST give me the house on christmas day, and I MUST give you the $750,000 bucks. It's a done deal. That's exactly what you do when you trade pork bellies. Another word for "futures" is just "contracts", ie, you might say "I am trading pork belly contracts today". > >You can actually buy options on futures, That's quite true -- you can buy options on any contract. > which is like buying an option >of an option. That is absolutely incorrect! You can't buy an option on an option BTW -- it would be meaningless. It would be like saying "I'll give you $500 now so that if I want to I can give you $1000 in 4 weeks so that if I want to I can give you $750,000 for your house on christmas day" >I hear in some commodities circles that they feel the futures system >should be done >away with and replaced with the options system that has evolved -- >thereby creating a >common lingo and more uniform standards. This is not correct. They must have been talking about something else man! They are utterrly different things. The raison detre of OPTIONS is that your risk is LIMITED --- you pay a certain amount, say, "$150", and that $150 is gone ... AND YOU CAN NOT LOSE ANY MORE MONEY. The raison detre of futures is that your risk is absolutely unlimited. When you trade stocks (or futures .. same thing), your risk is unlimited . the price can move any amount in any direction. > >Another thing. While it is possible to set up private futures/options >that may not cost anything >upfront, it does cost to deal in the publically traded options/futures Well it costs a commission. But you don't "pay" anything for a future contract, it's just a contract. You just say "give me three long" or "give me 5 short". JP! >-- and if you're shrewd, >you can make a lot starting with very little (I'm still working on the >shrewd part . . . :-) ) > >PECB --- You are currently subscribed to e-gold-list as: archive@jab.org To unsubscribe send a blank email to [EMAIL PROTECTED] http://www.e-gold.com/stats.html lets you observe the e-gold system's activity now!
