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There are some different difficult strategy of simultaneous trade by futures and options, and I have started to flounder in them. The first my experience — options for beef. I had an idea that the prices for beef will grow. It partially was based on the information of my friend working in wholesale meat business. I have decided to buy it — 2 000 contracts — approximately for $25 000, having acquired the right to be long under futures for beef at the price of 65 cents. With my hopes the market steadily grew in exact conformity, while the price for beef has not come nearer to my price of execution for 0,20 cents. If I knew then that I know now! I would sell futures when the market was on 64,80. Following this strategy, in case of a rise in prices I would become in a long position on beef at the price of 65 by execution of koll-options. If the prices have fallen, I would appear in a short position, since the price 64,80. Unique my risk — that difference in 20 points between koll-options and by the future. It approximately corresponded to an investment $61 000 — to expenses for options and my potential loss under the future transaction that repeatedly would be compensated by possible profit under the transaction.Instead I remained in the options, hoping that my price of execution 65 will be reached. But the Department of agriculture of the USA in the report has informed on higher offer of beef in comparison with the previous estimations. The price of beef went five days downwards on a limit, and my options have expired the useless. If I have sold future contracts on 64,80, by my estimations, the profit under that transaction would make a round sum in $750 000.
The second case when I tried to play options, took place six weeks prior to a trip to Europe. Eurodollars went on 92, when I have bought 1 000 options it on these contracts to be in a long position on 94. But the scenario for which I hoped — decrease in short-term interest rates, — was not going to to come true. When I have left Chicago, eurodollars have gone down to 91,50. Interest rates should will decrease for two and a half basic point that the price of my strike has been reached.
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