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What are commodity options?

There are two types of commodity options: calls and puts. A call gives the buyer the right, but not the obligation, to buy futures contract at a specific price (the strike or exercise price) for a specific period of time. A put gives the buyer the right, but not the obligation, to sell futures contract at a specific price for a specific period of time.

The buyer of a call has the possibility of making money when the price of the futures goes up. The buyer of a put has the possibility of making money when the price of the futures goes down.

There are also many other strategies combining futures and options on futures that an investor can use to take advantage of price volatility, e.g., spreads, and straddles.

Commodity trading is not suitable for everyone. The risk of loss in trading can be substantial. This material has been prepared by a sales or trading employee or agent of Van Commodities, Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Van Commodities, Inc. Research Department. Please view our Risk Disclaimer.

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