Carley Garner, an experienced commodity broker at DeCarley Trading, was published in the September issue of Modern Trader!
A simple Google or Amazon book search will likely reveal a nearly unlimited number of option trading resources. Unfortunately, most of these sources cater solely to stock option traders. Those assuming they can simply apply the same concepts to commodity options might be in for a surprise.
It is true, that the fundamental characteristics and mechanics of options in all arenas are identical. Both options on stock and options on futures are derivatives (meaning that their value is derived from the value of something else). In both trading venues, there are two types of options (calls and puts), they both have strike prices, expiration dates and mathematically the payoff diagram will be identical. Yet, there are two very important differences; the nature of the underlying vehicle and the logistics of market execution. There are also some peripheral differences that you should be aware of such as tax treatment, regulators, and margining.
Throughout this article point out a few aspects of commodity trading that are commonly overlooked by those hoping to transition from stocks to futures options, but can make a significant impact on the bottom line of a trading account.