Caplan, Profiting with Futures Options

For those who are impatient with long-winded explanations David L. Caplan provides welcome relief. Profiting with Futures Options (Center for Futures Education/Traders Press, 1994) is a pamphlet under 50 pages long that nonetheless provides a wealth of information.

Caplan is writing for futures traders, or at least those familiar with futures, who could profit from either supplementing or replacing their futures trading with trading options on futures. He outlines cases in which options should be used in place of futures contracts. For example, when a commodity is overvalued and overbought, the trader can sell an out-of-the-money, overvalued call. The options trader is also the only one who can profit in a flat commodity market. Limited-risk options strategies insulate the trader against “limit” days and can be used to prevent being stopped out on a trade that turns around and becomes profitable.

Caplan outlines a series of strategies, all spreads, that provide the trader with a significant advantage. Most of the strategies are familiar, but Caplan sometimes develops these strategies in novel ways. All in all, for anyone who trades futures this pamphlet will open the door to new opportunities for both profit and risk management.