Using Options in a Managed Futures Account

Managed futures accounts are a great way for any investor to diversify a portfolio. Most experts agree that up to twenty percent of an investment portfolio should be allocated to risk capital. Options portfolios would be considered risk capital that is suitable for this allocation.

Now, with options investment managers or professional traders can use a great number of different strategies. The major strategies are as follows:

  • Options selling
  • Dispersion portfolio
  • Buy a basket of options

Options selling is one of the more risky types of investing. The manager will write (sell) options to capture a short term profit from the time value decay of options. Since options lose their value very quickly near time of expiration, so long as the market does not make a major up move the options selling is ideal.

Dispersion portfolio is best in times when the options in a market index are implying a lower volatility then the market is actually experiencing. To perform this strategy the manger will buy a basket of options that replicate the market index while selling the market index.

Managers can use different strategies or a mix of different strategies according to the disclosure document that is filed with national futures association.

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