Trading Commodities and Financial Futures: A Step-by-Step Guide to Mastering the Markets, Third Edition

Covered option writing

The advantage and attraction of buying options is that your risk is limited and pre-determined, with the profit potential unlimited. Be aware, however, that most options expire worthless, and the premiums eventually disappear. Therefore, buying options is generally a losing proposition. This is not to say you cannot make good money in a major bull or major bear market, but be advised that most professionals primarily sell options (generally to the public). They might hedge these sales with a ratio of long or short futures, but the public generally likes to purchase premium. The advantage of selling options is that you can capitalize on the time decay of options. Because the premiums that people pay for options eventually ...