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Using Futures Options To Hedge Your Loss (02:01)

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 2, No. 1 on January 7, 1993. 

The real value in being able to use the options when a future is locked limit up or limit down, of course, is to be able to hedge one's position. Simplistically, if a trader came in long the August soybean futures and they were locked limit down as in the above example, he could use the puts and calls to effectively close out his position.