ETF Interest Rate Strategies

Exchange-traded funds provide a good way of trading economically sensitive interest rates Few products are as costly and complex as interest rate futures. For retail traders looking for interest rate exposure, Treasury ETFs are a much better place to start. But before buying a bond ETF, take the time to understand a few basics about … Continued

Leg Up on Futures Calendar Spreading

Learn the idiosyncrasies of intramarket spreads—trades where an investor simultaneously buys and sells the same futures contract in different expiration months Professional traders seeking commodity exposure often make futures their preferred investment vehicle because of their capital efficiency, exactness in tracking an underlying spot market and deep liquidity. But unlocking the benefits of futures can … Continued

Calling on Commodities

Just when investors need diversification in the most volatile markets ever, traditional equity products are failing as hedges and diversification tools  With the coronavirus sweeping the globe, equity markets are careening from highs to lows and back again with more volatility than ever before. During the last three years the average daily move in the … Continued

Pairs Trading with Futures

For a pairs trade, find two highly correlated assets that have recently diverged in performance Pairs trading involves buying and selling related markets to capitalize on performance disparities. Traders can use the strategy to reduce outright risk, diversify a portfolio and find new trading opportunities when markets seem recalcitrant. To structure a pairs trade, look … Continued

ETFs Move Over: Smaller Futures are Here

That’s the greatest financial innovation of the last 20 years? Weekly options? Digital currencies? Zero commissions? It may come as a shock that many consider exchange-traded funds (ETFs) the biggest and most important change. After trading ETFs for so long, it’s easy to forget how capital markets used to look—illiquid and expensive. But it’s important … Continued

Spreading for Risk Reduction

Traders can spread risk with calendar spreads, pairs trades and options Short naked options are a preferred strategy among experienced traders because of their high probability of profit, ease of management and positive theta. But these strategies also have a significant drawback: large buying power requirements. Because of their large theoretical risk, selling naked options … Continued

The Myth of the Protective Put

Buying an expensive “portfolio insurance policy” hardly ever works In Chicago, the weather can seem as volatile as the market. A day that begins with a 5% chance of rain can end with a torrential downpour. In a similar way, buying put options to protect a portfolio against a downturn seems a lot like grabbing … Continued

News-Driven Trading

Basing trades on public announcements and earnings reports can generate profits without a major investment of time Investors always have something to trade, thanks to a six-and-a-half-hour equity trading day, extended hours for futures and weekend crypto markets. But not everybody has time to trade. It’s impossible to stay glued to the screen because other … Continued

Why Millennials Should Love Futures

Simple access to low-cost, pure plays on commodities resonates with a new generation of investors As a member of the millennials, the age group now in our 20s and 30s, I can attest to the accuracy of at least one generalization about our generation: We prefer “access,” not costly and cumbersome “ownership.” And we value … Continued

The (Broken Wing) Butterfly Effect

Trading a BWB at price extremes affords the trader room for the trend to continue and zero risk, if the trend reverses. When markets reach price extremes, either higher or lower, what’s the best move—trade the trend or risk the reversal? If markets are truly memoryless, then either choice may be a 50-50 shot. But … Continued