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Olga's Options. Lesson 2. 6/4/22

Olga has Master’s Degree in Mechanical Engineering and she was smart enough to marry me, so she is not a person of low intelligence.

None-the-less, she had to study off-and-on long hours for 3+ years to understand futures markets and the two methods of market analysis, namely technical and fundamental, before she felt she was ready to start trading futures. At the time, she did not know there was such a thing as options on futures contracts. In part, that was by my design because if one does not understand how the futures market works, there is no way to understand how options on futures contracts work.

After she had been trading futures for a year or so, on March 3rd, 2022, I explained options to her. Since she thoroughly understood the ins and outs of the futures market, she quickly grasped the benefits and opportunities of options. When I say “quickly,” I mean about 20 minutes.

She pretty much shut me off and began to look for the put option quotes of wheat since she was bearish CBOT wheat. She took no more than 5 minutes to get the May and July wheat put strike prices and premium values recorded on her scratch paper and looked closely at the relationship of the futures price, strike price and the premium.

She was like a kid in candy shop. She instantly recognized the benefit of being able to profit from the futures price moving up or down without any concern for a margin call.

The buyer of an option has limited loss potential and unlimited profit potential.


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