Is an options or futures trader struggling because of misled mechanics or fundamentals? Here are some questions you can answer to help me on

(Last Updated On: January 23, 2015)

Is an options or futures trader struggling because of misled mechanics or fundamentals? Here are some questions you can answer to help me on

After digging into this learning on future and options.a couple questions came up:

1. It seems these ‘educated’ futures or options traders don’t believe pricing is driven by intertemporal pricing theory. It is basic supply and demand with inventory costs factored in for deliverable storage of commodities (like oil) or financial including T-Bonds. Check out:

http://www.wcas.northwestern.edu/csio/Papers/2011/CSIO-WP-0113.pdf

 

One did not know what this is? He was educated by Options Pit which sounds like a crock. The other does not factor this into their trading strategy which I would expect impact your future pricing on contracts you buy.

2. I don’t think they even know what a speculator or hedger truly is or let alone who they are when they participate in these markets. Do they fail because they just don’t understand these basic mechanics and fundamentals on how the real futures/options markets are driven?

3. Do you calculate your risk premium when you take on calls as a speculator?

4. Are futures basically an underlying for options trading? Some seem to argue this.

Maybe this is why they fail as a futures or options traders? Who knows, help me out here huh?

Thanks

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