trading futures vs options reddit Futures vs options: which should you trade and why?

When investing, many are aware of the basic financial instruments available for trading such as stocks and bonds. However, to truly maximize your profits and diversify your portfolio, you should consider adding managed futures into the mix. An increasingly popular investment type, managed futures aim to prevent a portfolio from experiencing large losses as well as provide investors with the potential for greater gains. But how do managed futures differ from stocks and other financial instruments?

Benefits of Managed Futures: Potential Enhanced

Graph showing the comparison between a stock-only portfolio and a diversified portfolio including managed futures

Managed futures can provide investors with an additional layer of protection. The graph above shows the comparison between a stock-only portfolio and a diversified portfolio including managed futures. Notice how the diversified portfolio shows decreased volatility when compared to the stock-only portfolio. This means that by including managed futures in your portfolio, you have the potential for enhanced protection against losses.

But not only are you provided with protection from losses, you can also potentially experience greater profits. Managed futures offer investors exposure to global markets and economic events that individual stocks cannot, thus providing for greater flexibility and better diversification. This often provides investors with new avenues for profits that other investment instruments don’t grant.

Options vs. Futures Advantages

Graph highlighting the advantages of options and futures contracts trading

Options and futures are two investment instruments often considered as alternatives to managed futures. One key difference between them and managed futures is the type of exposure they offer. Futures contracts provide investors with exposure to physical commodities and financial securities, while options trading offer investors the flexibility to control the cost of entering a position. Options can be considered a lower-risk derivative of futures.

The graph below shows the difference in cost and the amount of risk involved between options and futures contracts. Notice the stark contrast between the two. As a result, investors looking for lower-cost financial instruments may find futures contracts to be more attractive. On the other hand, for investors willing to take on more risk, options trading may be a more suitable option.

As one can see, managed futures have the potential to provide investors with enhanced features not offered by stocks and other financial instruments. Whether you are looking for higher profits, greater flexibility, or more protection, managed futures may be the best choice for you.

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