Quote:
Originally posted by HardDrive
Ok....so these a just standard commoditys futures, yes?
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No, a warrant is more like an option, your risk exposure is usually limited to what you pay for the contract. If you are trading a commodity future you are holding a position to actually buy or sell that commodity and your risk exposure depends on how much the commodity changes in price -- which could be extreme since most futures contracts are purchased on margin.
Specific to Beepbeep's comment: I've traded penny stocks before (crazy risk) but actually haven't traded options. Last night though, I was just looking at the puts on Google -- Google looks to me like it's some sort of "mini internet bubble" that has to come crashing back to reality at some point. The challenge is determining the time-frame when it is likely to crash and buying the puts with the right expiration date at the right strike price to actually make money. Betting against the investing public's irrationality can be a dangerous thing to do...
As for natural gas, I don't follow the supply/demand news, but know its fallen dramatically off its highs; that could reverse itself with a blast of Canadian air dropping the temperatures for a few weeks -- the expected up-tick in demand could push prices up again. I like the idea, when considering whether to hold or sell a position in an investment, to ask yourself whether, if you had the cash that that investment represents, would you spend it to buy your current position? If you say "no," it's probably best to sell; if you say "yes," then hold.
I also like the philosophy of "You never will go broke taking a profit."
I just used that idea yesterday when I took a $40 profit on a penny stock I had purchased the previous day, rather than seeing if it would run farther where I might have made a few hundred dollars on the trade instead. I may say "aw, shucks" if I see this penny stock run higher next week, but will still be satisfied that I made a few dollars on the trade.