Diversifying the portfolio is one of the main reasons for many to take a step and move into commodity markets; more than 80 % of the new commodity traders have a history with stock options, who feel to take the next level of trading in commodities could harness a lot of power which might not be the case in case of still sitting on the equity options for good, veering into the commodity market is lucrative than garnering all the investment into equity options where the risk level is always high.
In an economic scenario where markets are a highly volatile diversion in the portfolio is essential to take the jolt from the sudden losses from equity markets in the commodities market. Though advantages are not limited to any markets, there is, however, the ease to trade in:
- The margin requirements for equity options are less and hence with a higher return on investment it becomes a key factor in attracting stock option traders into futures. The minimum of at least one and half times of the profit can be booked in short stock options which results in a marginally high returns
- futures options are always sold at a one is to three times strike price, as the premium collected can straight out form the profits expected during the short span of time, making it more lucrative than the equities which have to consider the volatility in the market and absorb the price erosion during the short term
- liquidity options are difficult when it comes to equities and traders often feel it, making it difficult to exit and enter again, in case of commodities like oil, natural gases, sugar, have a good volume and open interest to offering a high number of strikes per contract
- depending on the index of the stock markets the equity stock option holders have to move around at the mercy of the index, which makes the investors money to be locked in as there are correlated effect once one company share falls, similar industry shares go haywire, diversifying in the commodities market gives investors a scope to maintain an correlated impact on the pricing like the price of grains have nothing to do with the price of bullion, gold , silver it is more or less diluting the risk factor and setting an internal limit like trading in the Ethereum Code software platform and gain a high winning ratio on the investment made.