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Options Blueprint Series [Intermediate]: Optimal Options Strikes I. Introduction Options on futures offer traders a flexible way to participate in market movements while managing risk effectively. The Japanese Yen Futures (6J) market provides deep liquidity, making it a preferred instrument for options traders. In this article, we will explore how to optimize Bull Call Spreads in Yen Futures (6J) by understanding price equivalency and strike selection. One of the most critical aspects of trading options on futures is recognizing that continuous futures charts and contract-specific charts display different prices. This discrepancy must be accounted for when setting up trade entries and exits. Additionally, strike price selection significantly impacts the reward-to-risk ratio, breakeven price, and probability of profitability. By identifying key support and resistance levels (UFO), we will define trade setups that likely align with market structure, targeting precise entry and exit points. We will also compare different Bull Call Spread variations to understand how adjusting the strike selection impacts risk and potential reward. II. Understanding the Japanese Yen Futures Contract Before diving into the options strategy, it is essential to understand the specifications of the CME-traded Japanese Yen Futures (6J) contract: Contract Size: Each futures contract represents 12,500,000 Japanese Yen Tick Size: 0.0000005 USD per JPY (equivalent to $6.25 per tick) Trading Hours: Nearly 24-hour trading cycle with short maintenance breaks Margin Requirements: Currently $2,900 (varies through time). For this article, we focus on December 2025 Yen Futures (6JZ2025). Since the market price displayed on continuous charts (6J1!) differs from contract-specific charts, we need to establish price equivalencies to align our trade analysis. III. Price Equivalency Between Continuous and Contract-Specific Futures Futures traders commonly use continuous charts (such as 6J1!) for analysis, but when trading options, it is crucial to reference the specific futures contract month (such as 6JZ2025). Due to roll adjustments and term structure variations, prices differ between these two charts. In this setup, we identify key UFO-based support and resistance levels and adjust for contract-specific price equivalency: Support Level Equivalency: 0.0066325 (6J1!) = 0.0068220 (6JZ2025) Resistance Level Equivalency: 0.0069875 (6J1!) = 0.0072250 (6JZ2025) These adjusted price levels ensure that the trade is structured accurately within the December 2025 contract, aligning option strikes with meaningful technical levels. IV. The Bull Call Spread Strategy on Yen Futures A Bull Call Spread is a vertical options spread strategy used to express a bullish outlook while reducing cost and limiting risk. This strategy involves: Buying a lower-strike call (gaining upside exposure) Selling a higher-strike call (reducing cost in exchange for capping maximum profit) This setup provides a defined risk-reward structure and is particularly useful when targeting predefined resistance levels. Given that we identified 0.0068220 as support and 0.0072250 as resistance, we will structure multiple Bull Call Spreads to compare strike selection impact. Now that the trade structure is established, let’s explore how different strike selections affect risk, reward, and breakeven prices. V. Strike Selection and Its Impact on Risk-Reward Ratios Selecting the appropriate strike prices is crucial when structuring a Bull Call Spread, as it directly affects the breakeven price, maximum risk, and maximum reward. To illustrate this, we compare three different Bull Call Spread variations using December 2025 Yen Futures (6JZ2025). 1. 0.00680/0.00720 Bull Call Spread Breakeven: 0.006930 Maximum Risk: -0.00013 Maximum Reward: +0.00027 2. 0.00680/0.00750 Bull Call Spread Breakeven: 0.0069789 Maximum Risk: -0.00018 Maximum Reward: +0.00052 3. 0.00680/0.00700 Bull Call Spread Breakeven: 0.006879 Maximum Risk: -0.00008 Maximum Reward: +0.00012 Observing these variations, key insights emerge. The 0.00680/0.00750 spread offers the highest potential reward but comes with the highest breakeven and greater risk. Meanwhile, the 0.00680/0.00700 spread minimizes risk but provides a lower profit potential. Strike selection, therefore, becomes a balance between profitability potential and probability of success. A wider spread (such as 0.00680/0.00750) has a higher reward-to-risk ratio, but it requires the price to move further before generating profits. Conversely, a narrower spread (like 0.00680/0.00700) has a lower breakeven price, increasing the probability of profitability but limiting potential upside. VI. Trade Plan for a Bull Call Spread Based on the analysis of strike selection, a balanced trade plan can be structured using the 0.00680/0.00720 Bull Call Spread, which offers a favorable reward-to-risk ratio while maintaining a reasonable breakeven price. Market Bias: Bullish, expecting a move toward resistance Selected Strikes: Long 0.00680 call, short 0.00720 call Breakeven Price: 0.006930 Target Exit Price: 0.0072250 Maximum Risk: -0.00013 Maximum Reward: +0.00027 Reward-to-Risk Ratio: 2.08:1 This setup capitalizes on the previously identified UFO support to define the entry point, while the UFO resistance provides a target for exit. The breakeven price remains at a reasonable level, ensuring a greater probability of the spread moving into profitability. VII. Risk Management Considerations While the Bull Call Spread limits risk compared to outright long calls, proper risk management is still necessary. Traders should consider the following: Using Stop-Loss Orders: If price breaks below the UFO support level at 0.0068220, traders may exit the position early to avoid excessive losses. Hedging with Puts: If volatility spikes or market sentiment shifts, a put option or put spread can serve as a hedge against adverse movements. Position Sizing: Adjusting contract size ensures that total exposure remains within acceptable risk limits based on account size. Time Decay Considerations: Since time decay negatively impacts long call options, traders should monitor the spread's profitability as expiration approaches and adjust positions accordingly. By implementing these risk management techniques, traders can optimize their Bull Call Spread strategy while mitigating unnecessary exposure. When charting futures, the data provided could be delayed. Traders working with the ticker symbols discussed in this idea may prefer to use CME Group real-time data plan on TradingView: www.tradingview.com - This consideration is particularly important for shorter-term traders, whereas it may be less critical for those focused on longer-term trading strategies. General Disclaimer: The trade ideas presented herein are solely for illustrative purposes forming a part of a case study intended to demonstrate key principles in risk management within the context of the specific market scenarios discussed. These ideas are not to be interpreted as investment recommendations or financial advice. They do not endorse or promote any specific trading strategies, financial products, or services. The information provided is based on data believed to be reliable; however, its accuracy or completeness cannot be guaranteed. Trading in financial markets involves risks, including the potential loss of principal. Each individual should conduct their own research and consult with professional financial advisors before making any investment decisions. The author or publisher of this content bears no responsibility for any actions taken based on the information provided or for any resultant financial or other losses.

Options Blueprint Series [Intermediate]: US Election Oil Play 1. Introduction The 2024 US Presidential Election could have a significant impact on global markets, especially energy sectors like crude oil. With key policies and geopolitical tensions hinging on the outcome, many traders are eyeing a potential price surge in WTI Crude Oil futures. Our prior article (linked below) presented a potential opportunity for crude oil prices to rise by over 40% within a year following the election. This could bring WTI Crude Oil Futures (CLZ2025) from its current price of 67.80 to around 94.92. To capitalize on this potential opportunity, a strategic options play can be used to leverage this potential move, providing not only a chance to profit from a bullish breakout but also some protection against downside risk. This article explores a Breakout Booster Play using options on the December 2025 WTI Crude Oil futures contract (CLZ2025), designed to benefit from a possible post-election oil price surge. 2. Technical Overview In analyzing the December 2025 WTI Crude Oil Futures (CLZ2025), a strong support level is identified. The 61.8% Fibonacci retracement level aligns perfectly with a UFO support zone at 55.62, suggesting a significant area where buying interest could emerge if prices fall to this level. The current price of CLZ2025 is 67.80, and the technical analysis points to the possibility of a substantial bullish move following the 2024 US Presidential Election. The projected price increase of 40% could push crude oil prices up to 94.92 over the next year. However, even a more conservative target of 20% (around 81.36) could offer considerable upside potential. This analysis provides the foundation for constructing an options strategy that not only takes advantage of the potential upside but also offers a buffer zone against downside risk by capitalizing on key support levels. 3. The Options Strategy The options strategy we'll use here is a Breakout Booster Play designed to take advantage of the expected rise in crude oil prices. Here's how the strategy is constructed: 1. Sell 2 Puts at the 55 Strike: Expiring on November 17, 2025, these puts are sold to collect a premium of approximately 3.27 points per contract. By selling 2 puts, we collect a total of 6.54 points. This creates a buffer zone, allowing us to take on some downside risk while still profiting if prices remain above 55. 2. Buy 1 Call at the 71 Strike: Also expiring on November 17, 2025, the call is purchased for 6.28 points. This call gives us the potential for unlimited upside if crude oil prices rise above 71. Net Cost: The net cost of this strategy is minimal, with the collected premium from the puts (6.54) offsetting most of the cost of the call (6.28). The result is a credit of 0.26 points, meaning the trader gets paid to enter this position. Break-Even Points: The position would lose money only if crude oil falls below 54.87 (factoring in the premium collected). Profit potential becomes significant if crude oil rises above 71, with large gains expected if the projected move to 81.36 or 94.92 materializes. This strategy effectively positions the trader to profit from an upward breakout while maintaining a buffer against downside risk. If crude oil drops, losses are limited unless it falls below 54.87, at which point the trader would be required to take delivery of 2 crude oil futures contracts (long). 4. Profit and Risk Analysis Profit Potential: The key advantage of this options strategy is its profit potential on the upside. If crude oil prices rise above 71, the purchased call will start gaining value significantly. If crude oil reaches 94.92 (a 40% increase from the current price), the long call will be deep in the money, resulting in substantial profits. Even if the price rises more conservatively to 81.36 (a 20% increase), the strategy still allows for meaningful gains as the call appreciates. Since the net entry cost is essentially zero (with a small credit of 0.26 points), the potential profit is high, and it becomes especially powerful above 71, with unlimited upside. Risk Management: This strategy comes with a 19% buffer before any losses occur at expiration, as the break-even point is 54.87. However, it is important to note that if the trade is closed before expiration, losses could be realized if crude oil prices have dropped, even if the price is above 55. Risk Pre-Expiration: If crude oil prices fall sharply, especially before expiration, the trader could face significant losses. The risk is theoretically unlimited because, as the market moves against the sold puts, their value could rise dramatically. If a trader needs to close the position early, those puts could be worth significantly more than the premium initially collected, resulting in losses. Potential Margin Calls: If crude oil drops far enough, the trader may receive a margin call on the short puts. This could happen well before the price reaches 54.87, depending on the speed and size of the drop. If not managed properly, this could force the trader to close the position at a significant loss. While there is a built-in buffer, this trade requires active monitoring, particularly if crude oil prices start to decline. Risk management techniques, such as stop-loss orders, rolling options, or hedging, should be considered to mitigate losses in case the market moves unexpectedly. 5. Contract Specs and Margins WTI Crude Oil Futures (CL) Tick Size: The minimum price fluctuation is 0.01 per barrel. Tick Value: Each 0.01 movement equals $10 per contract. Margin Requirement: Approximately $6,100 per contract (subject to change based on market volatility). Micro Crude Oil Futures (MCL) Tick Value: Each 0.01 movement equals $1 per contract. Margin Requirement: Approximately $610 per contract, offering a lower capital requirement for smaller positions. Why Mention Both? Traders with larger capital allocations may prefer using standard WTI Crude Oil futures contracts, given their greater exposure and tick value. However, for smaller or more conservative traders, Micro Crude Oil Futures (MCL) provide a more accessible way to enter the market while maintaining the same exposure ratios in a smaller size. 6. Summary and Conclusion This options strategy provides a powerful way to capitalize on a potential post-election rally in crude oil prices, while offering downside protection. The combination of selling 2 puts at the 55 strike and buying 1 call at the 71 strike, all expiring on November 17, 2025, creates a structured approach to profit from a bullish breakout. With current analysis based on machine learning suggesting a potential 40% increase in crude oil prices over the next year, the long call offers unlimited profit potential above 71. At the same time, the sale of the puts at the 55 strike gives the strategy a 19% buffer, with the break-even point at expiration being 54.87. When charting futures, the data provided could be delayed. Traders working with the ticker symbols discussed in this idea may prefer to use CME Group real-time data plan on TradingView: www.tradingview.com - This consideration is particularly important for shorter-term traders, whereas it may be less critical for those focused on longer-term trading strategies. General Disclaimer: The trade ideas presented herein are solely for illustrative purposes forming a part of a case study intended to demonstrate key principles in risk management within the context of the specific market scenarios discussed. These ideas are not to be interpreted as investment recommendations or financial advice. They do not endorse or promote any specific trading strategies, financial products, or services. The information provided is based on data believed to be reliable; however, its accuracy or completeness cannot be guaranteed. Trading in financial markets involves risks, including the potential loss of principal. Each individual should conduct their own research and consult with professional financial advisors before making any investment decisions. The author or publisher of this content bears no responsibility for any actions taken based on the information provided or for any resultant financial or other losses.

Options Blueprint Series: Swap Strategies for High Volatility Introduction CME Group Gold Futures have always been a cornerstone in the commodities market, offering investors and traders a way to hedge against economic uncertainties and inflation. With the current market environment exhibiting heightened volatility, traders are looking for strategies to capitalize on these fluctuations. One such strategy is the Straddle Swap, which is particularly effective in high volatility scenarios. By utilizing the Straddle Swap strategy on Gold Futures, traders can potentially benefit from price swings driven by news events, economic data releases, and other market-moving occurrences. Strategy Explanation The Straddle Swap strategy is designed to capitalize on high volatility by leveraging options with different expirations. Here’s a detailed breakdown of how this strategy works: Components of the Straddle Swap: 1. Buy one call option (longer expiration) This long call option benefits from upward price movements in Gold Futures. 2. Sell one call option (shorter expiration) This short call option generates premium income, which offsets the cost of the long call option. As it has a shorter expiration, it benefits from faster time decay. 3. Buy one put option (longer expiration) This long put option benefits from downward price movements in Gold Futures. 4. Sell one put option (shorter expiration) This short put option generates premium income, which offsets the cost of the long put option. It also benefits from faster time decay due to its shorter expiration. Rationale for Different Expirations: Longer Expirations: The options with more days to expiration provide a longer timeframe to capture significant price movements, whether upward or downward. Shorter Expirations: The options with less days to expiration decay more quickly, providing premium income that reduces the overall cost of the strategy. This helps mitigate the effects of time decay on the longer-dated options. Market Analysis Using TradingView Charts: To effectively implement the Straddle Swap strategy, it’s crucial to analyze the current market conditions of Gold Futures using TradingView charts. This analysis will help identify optimal entry and exit points based on volatility and price trends. The current price action of Gold Futures along with key volatility indicators. Recent data shows that the 1-month, 2-month, and 3-month Historical Volatilities have all been on the rise, confirming a high volatility scenario. Application to Gold Futures Let’s apply the Straddle Swap strategy to Gold Futures given the current market conditions. Identifying Optimal Entry Points: Call Options: Buy one call option with a 100-day expiration (Sep-25 2024) at a strike price of 2370 @ 64.5. Sell one call option with a 71-day expiration (Aug-27 2024) at the same strike price of 2370 @ 53.4. Put Options: Buy one put option with a 100-day expiration (Sep-25 2024) at a strike price of 2350 @ 63.4. Sell one put option with a 71-day expiration (Aug-27 2024) at the same strike price of $2350 @ 52.5. Target Prices: Based on the relevant UFO support and resistance levels, set target prices for potential profit scenarios: Upper side, target price: 2455. For put options, target price: 2260. Potential Profit and Loss Scenarios: Scenario 1: Significant Upward Movement If Gold Futures rise sharply above 2370 within 100 days, the long call option will generate a potentially substantial profit. The short call option will expire in 71 days, limiting potential losses. Scenario 2: Significant Downward Movement If Gold Futures fall sharply below 2350 within 100 days, the long put option will generate a potentially substantial profit. The short put option will expire in 71 days, limiting potential losses. Scenario 3: Minimal Movement If Gold Futures remain relatively stable, the premiums collected from the short options (71-day expiration) will offset some of the cost of the long options (100-day expiration), minimizing overall losses. Further options could be sold against the long 2350 call and long 2350 put once the shorter expiration options have expired. Specific Action Plan: 1. Initiate the Straddle Swap Strategy: Enter the positions as outlined above following your trading plan, ensuring to buy and sell the options at the desired strike prices and expirations. 2. Monitor Market Conditions: Continuously monitor Gold Futures prices and volatility indicators. Adjust or close the strategy if necessary based on significant market changes. 3. Manage Positions: Use stop-loss orders to limit potential losses. If the market moves favorably, consider exiting the positions at the target prices to lock in profits. 4. Reevaluate Periodically: Periodically reevaluate the positions as the options approach their expiration dates. Make any necessary adjustments to the strategy based on updated market conditions and volatility. By following this type of trade plan, traders can effectively implement the Straddle Swap strategy, taking advantage of high volatility in Gold Futures while managing risk through careful monitoring and the use of stop-loss orders. Risk Management Effective risk management is crucial for success in options trading, particularly when employing strategies like the Straddle Swap. Here, we will discuss the importance of risk management, key techniques, and best practices to ensure that traders can mitigate potential losses and protect their capital. Importance of Risk Management: Minimizing Losses: Trading inherently involves risk. Effective risk management helps minimize potential losses, ensuring that a single adverse move does not significantly impact the trader’s overall portfolio. Preserving Capital: By managing risk, traders can preserve their capital, allowing them to stay in the market longer and capitalize on future opportunities. Enhancing Profitability: Proper risk management allows traders to optimize their strategies, potentially increasing profitability by avoiding unnecessary losses. Key Risk Management Techniques: 1. Stop-Loss Orders: Implementing stop-loss orders helps limit potential losses by automatically closing a position if the market moves against it. For the Straddle Swap strategy, set stop-loss orders for the long call and put options to exit positions if prices reach predetermined levels where losses would exceed the desired trade risk set by the trader. 2. Hedging: Use hedging techniques to protect positions from adverse market movements. This can involve purchasing protective options or futures contracts. Hedging provides an additional layer of security, ensuring that losses in one position are offset by gains in another. 3. Avoiding Undefined Risk Exposure: Ensure that all positions have defined risk parameters. Avoid strategies that can result in unlimited losses. The Straddle Swap strategy inherently has limited risk due to the offsetting nature of the long and short options. 4. Precision in Entries and Exits: Timing is crucial in options trading. Ensure precise entry and exit points to maximize potential gains and minimize losses. Use technical analysis key price levels such as UFO support and resistance prices, and volatility indicators to identify optimal entry and exit points. 5. Regular Monitoring and Adjustment: Continuously monitor market conditions and the performance of open positions. Be prepared to adjust the strategy based on changing market dynamics, such as shifts in volatility or unexpected news events. Additional Risk Management Practices: Diversification: Spread risk across multiple positions and asset classes to reduce the impact of any single trade. Other liquid options markets could be WTI Crude Oil Futures; Agricultural products such as Wheat Futures, Corn Futures, or Soybean Futures; Index Futures such as the E-mini S&P 500 Futures; and even Bond and Treasury Futures such as the 10-Year Note or the 30-Year Bond Futures. Position Sizing: Carefully determine the size of each position based on the trader’s overall portfolio and risk tolerance. Education and Research: Stay informed about market conditions, economic indicators, and trading strategies to make well-informed decisions. By incorporating these risk management techniques, traders can effectively navigate the complexities of options trading and protect their investments. Ensuring more precision with entries and exits, using stop-loss orders, and implementing hedging strategies are essential practices that contribute to long-term trading success. When charting futures, the data provided could be delayed. Traders working with the ticker symbols discussed in this idea may prefer to use CME Group real-time data plan on TradingView: www.tradingview.com This consideration is particularly important for shorter-term traders, whereas it may be less critical for those focused on longer-term trading strategies. General Disclaimer: The trade ideas presented herein are solely for illustrative purposes forming a part of a case study intended to demonstrate key principles in risk management within the context of the specific market scenarios discussed. These ideas are not to be interpreted as investment recommendations or financial advice. They do not endorse or promote any specific trading strategies, financial products, or services. The information provided is based on data believed to be reliable; however, its accuracy or completeness cannot be guaranteed. Trading in financial markets involves risks, including the potential loss of principal. Each individual should conduct their own research and consult with professional financial advisors before making any investment decisions. The author or publisher of this content bears no responsibility for any actions taken based on the information provided or for any resultant financial or other losses.