Options Trading: How To Profit From Inflation Options Trading

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When inflation is on the rise, option traders want to hold real assets like commodities. This is because commodities are seen as a hedge against inflation.

In this blog, we'll talk about the tight correlations in the metals complex and share trades so options traders can profit when correlations breakdown between copper, silver and gold.

These options trades use a fixed amount of risk and position the trader for potential unlimited rewards. So, if you're looking to trade options and profit from trading options, this is the blog for you!

Why Trade Options?

When it comes to trading, there are many different strategies that can be employed. But if you're looking to make money from inflation, then options trading is the best strategy for you. This is because options trading gives you the ability to profit from both rising and falling prices. And when inflation is on the rise, commodity prices usually follow suit. So, by trading options on commodities, you can position yourself to profit no matter which way the market moves.

What are Commodities?

Commodities are natural resources that are used in the production of goods and services. Gold, silver, and copper are all examples of commodities. And when it comes to commodities trading, these three metals are known as the "metals complex." The reason why they're called this is because they tend to move in similar directions. When one metal goes up in price, the others usually follow suit. However, there are times when these correlations break down and metal prices move in opposite directions. And when this happens, there's a great opportunity for profits!

The Best Options Trades for Profiting from Correlation Breakdowns One of the best ways to profit from correlation breakdowns is with a call ratio backspread. A call ratio backspread is an options strategy that involves buying call options and selling more calls than you buy. For example, let's say that you buy 10 call options on gold at the $1,700 strike price and sell 20 call options on gold at the $1,750 strike price.

If gold goes up to $1,755 per ounce, then your trade will make a profit. But if gold falls below $1,700 per ounce, then your trade will lose money. However, because you sold more calls than you bought, your maximum loss is limited to the difference in strike prices multiplied by the number of contracts multiplied by 100 (since each contract covers 100 ounces of gold).

In this case, your maximum loss would be $5 per ounce multiplied by 10 contracts multiplied by 100 ounces equals $5,000. So even if gold falls below $1,700 per ounce (which would mean that your long call options would be worthless), you would still have some remaining value in your short call options. And as long as gold doesn't fall below $1695 per ounce (the breakeven point for this trade), you will make a profit!

Video Length: 00:05:26


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