Different Styles of Commodity Options Trading

Commodity options trading can be undertaken in a number of different styles. In short these include:

The Day Trader

The day trader is someone who buys and sells commodities during the course of a day in the hope that the price of the commodity is going to fluctuate and thereby make a quick profit. Pure day trader will always settle their account at the end of any given day and will resume their options trading in commodities the following day. Doing this they avoid any overnight risk they have in the commodity.

The Swing Trader

Like a day trader, a swing trader takes a short-term position in a commodity, but does not restricted his options trading activity to one day. Normally, however, swing traders are reluctant to hold onto an option for more than a few days. By holding onto their options for more than a day, swing traders give themselves the chance of gaining higher profit returns than day traders. On the flip-side, swing trader have to assume an overnight risk position.

The Position Trader

The position option trader will take a position in a commodity in the belief that they'll be movement in that commodity. Most, if not all, position traders have come to the conclusions they have about the commodity, and thus taken the option, based on a technical analysis of the commodity in question. Nonetheless, it is unlikely that the position trader will take a position for more than a few weeks. In most cases the position trader is unfazed by the overnight risk factor as this has been calculated in their investment strategy (although certain overnight risk, such as bad news, cannot be factored in).

The Online Trader

The online trader is the newest form of option trader and can trade in options in any of the styles set out above. This is because online trading has less to do with the style of trading as it has to do with the medium by which the trader is trading in commodity options.

The Long-Term Trader

Actually, as all options have an expiration date, the long-term options trader is non-existent – you simply can not take a long-term investment strategy style in a product that is going to expire at some time in the nearish future!

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