This page explains how to read and
use our option charts for commodity option trading
We are now set up to make 3 -D charts on almost any strategy!
See first example below
How to read and use our commodity option charts.
Our charts show the daily average of the
"OSCC Relative Normalized
Total Dollar Option Premium" or "NTDOP"
values of current contracts, assuming there are enough strike prices with values
to make the calculation. The charts enables a trader to see our opinion of how
option premiums are changing. Option premiums change for two basic reasons. The
risk that the future is going to move up or down because of market factors (this
is market risk or "OSCC Real Risk") and the risk the trader takes for the amount of the
change in the value of the future itself.
We, of course, are not responsible for any
decisions a trader may make using these charts.
Option Chart Explanations
A quick Overview.
A trader should look at our charts as a time table for when premium decay
speeds up or slows down. That is when the OSCC Max Premium is rising, time
decay is slowing down (the rate of loss of premium has slowed). When the OSCC "Max Premium"
is falling, time decay is being accelerated ( losing premium at a faster
rate than expected). Return to
main chart
page
How to
use.
An actual
typical chart used as an example.
An example of how to use these commodity option charts can be found by looking at the
2010 Soybean Contracts chart. On the left side of the chart the yellow squares for the
September 10 contract are higher then red diamonds representing the November 10 contract. This means that in general the
Sep 10 options, adjusted for time, are
relatively overvalued when compared to the Nov 10 options. This imbalance will
almost always even out. This can be seen in the center of the chart where
the Sep contract comes down to the same value as the Nov contract. It can
be seen that the spread apart would have allowed for
relatively safe arbitrage. They almost crossed . A good broker can easily construct a strategy
using the overvalued contract for a short option and the undervalued option for
a long option. Whether these are calls or puts will depend on the brokers
outlook on the direction of the future. Of course not all strike price values
conform to our model all the time, therefore the broker must make a final decision
on the validity as to whether options are over or under valued.
Typical differences
between Commodities.
This chart shows how some contract Total option
Premiums can start high or low and move all over the place irregardless of what
the future is doing. Of course the premium can be relative stable like the
Canadian dollar is.
This chart also shows how OSCC "Max Premiums" can differ between
commodities in general.
Typical differences between
Contracts.
This chart shows how OSCC "Max Premiums" can differ between contracts
in the same commodity. This chart has values all over the place. The only idea
of the chart is show how much variation there can be between contracts. This
chart is laid out by days to expiration. Our regular charts have these values
laid out according to date so you can compare the different values of each
contract for the same day. This basically tells you the relative value of the
OSCC "Max Premium" for that day. of course some individual strike prices
can vary wildly from the rest of the strike price values. That is why our charts
are only a general guideline and we are not responsible losses or profits for
decisions based on our charts. You should consult with other option evaluation sources
and your broker before making a decision.
We are mathematicians and not writers so if you have comments
(good or bad), requests, questions, or need an explanation of our charts Please
contact us at:
Go to: Forums visited list and contact
information. We
do not redistribute email address.
We also have a new
"chart explanation page" to help explain
what these charts show and how to use them.
For a better understanding of what we do please read these
pages.
--- About Us What we found
that prompted us to develop our option program.
--- The OSCC overview of option trading.
---
--- Products
--- The Accuracy of the OSCC Option Model.
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