Trading the Same Thing in Different Markets
By Alex Dixon, YouCanTrade
Whether options, futures, stocks or crypto, there are multiple ways to trade, so traders are not limited to one strategy or style. For example, most commodities can be traded using Electronically Traded Funds (ETFs) which are available on the stock, options and futures markets. ETFs may also be moving double, triple or even opposite of what the underlying product is moving.
Take the S&P 500 for example, there are many ways to trade it and take advantage of price changes. If a trader wants to have a bullish S&P 500 position, traders have the choice of:
1) Buying the S&P index fund
2) Buying an ETF based on the S&P index
3) Buying an ETF based on 2X the S&P index
4) Buying an ETF based on 3X the S&P index
5) Buying an Options Call on any of the S&P based index funds
6) Buying S&P Micro Futures Contract(s)
7) Buying S&P Mini Futures Contract(s)
8) Buying S&P Standard Futures Contract(s)
9) Buying S&P Micro Futures Options Call(s)
10) Buying S&P Mini Futures Options Call(s)
11) Buying S&P Standard Futures Options Call(s)
12) Buying an Options put on any of the inverse S&P based index funds
13) Selling an inverse ETF based on the S&P index
14) Selling an inverse ETF based on two times (2X) the S&P index
15) Selling an inverse ETF based on three times (3X) the S&P index
16) Selling an Options put on any of the S&P based index funds
17) Selling S&P Micro Futures Option Put(s)
18) Selling S&P Mini Futures Option Put(s)
19) Selling S&P Standard Futures Option Put(s)
Of these ways to place bullish trades on the S&P 500, they are all a little different. For example, the reputable ETFs usually have a very close price action to the underlying asset, but they may be slightly off. The ETFs of 2X and 3X leverage are typically based on percentage gains and losses of the underlying asset. So, in the case of these ETFs for the S&P, if the S&P goes up 10%, the 2X ETF will go up 20% and the 3X ETF 30%. Options and futures are leveraged too and have expirations. Futures have delivery dates.
Most stocks and futures can be traded with options, and most futures are mimicked by ETFs so they can trade in the stock market. Some products, like gold, that trade internationally can also be traded in multiple countries or even on the Foreign Exchange (Forex) market. The Forex market allows traders to exchange national currencies against each other like the US Dollar against the Japanese Yen.
As a trader, it is important to know what type of trader you are. All these choices trade differently and have different goals based on a bullish position. Learn what works best for you by journaling possible trades or testing them in a simulated trading account. Build, or rebuild, your trading career from the ground up with the Trader’s Transition Program. You’ll start by learning several effective, rules-based swing and day trading strategies then move into how to properly record and evaluate your trading. Learn more.