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Why not using futures options for hedging a futures contract?

(2021-05-21 22:44:58) 下一個

Please use the following link for a real example of using futures options for the hedging of futures contracts. The fact that using the futures options' hedging could reduce the margin requirement for each futures contract speaks of its effectiveness in reducing the risk of futures trading. Furthermore, using the futures option for hedging is more straightforward than two-way trading of the multiple indexes. For instance, Dow rises and Nasdaq falls today. If you long Nasdaq and short Dow, you are wrong on both sides although you are trading in two-way. In contrast, either you long Nasdaq and buy Nasdaq's PUT or short Nasdaq and buy Nasdaq's call for hedging, you will have limited loss and unlimited gain in both cases. That is exactly the point of a futures option.  YMYD.

https://finance.zacks.com/hedge-futures-contracts-options-5761.html

 

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