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Commodity Trading Strategies, Currency Spread Trading and Carry Trading

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When done correctly, options trading can yield high profits. Many different assets can be covered by options contracts, such as currencies and commodities. You can spot-trade these markets or use options. The relationship between several commodities and currencies, such as copper and gold, is very strong. When you notice that the correlations among these commodities and currency are not in sync, this option trading strategy is a good choice. If you want to learn a very powerful trading strategy that brings a lot of profit, you should know about unusual options activity

South Africa for instance is the biggest gold exporter on earth. Rand’s value is directly correlated with the price of gold on international exchange markets. You can trade gold calls and rand puts if you see that there is a wide spread between RAND prices and gold.

Option trading is also possible if there’s a widening of the spread between Australian Dollar prices and Gold. This will cause it to be out-of-synch with their historical relationship. You can also buy options when there is a widening spread between Reuters Commodity Index and the Australian Dollar. Reuters commodity index provides a general view of the prices for commodities. This is a bet on the belief that spreads are wider than their historical average and will eventually narrow back down to the norm.

Carry trading is a popular strategy. It is used by many traders. Try it yourself. Hedge funds have mastered carry trading. Carry trading has become a popular strategy for hedge funds. Everyone wants to make money, and no one is willing to let their cash sit unused. Carry Trading is an easy way to take advantage of the spread in interest rates. Search for a pair of currencies where the one offers a significantly higher interest rate than the other. The high-interest rate currency is bought and the low-interest rate currency sold.