Trading Small with Futures Options

Futures are very large principal products and the underlying value of a single futures contract can be anywhere from $23,000 for natural gas /NG and up to $160,000 for US Treasuries /ZB. This means that for many accounts trading them is prohibitively expensive. However fortunately there are options on these underlying futures, that provide a good amount of leverage. Using futures options it is possible to create trades that only risk a hundred dollars or less to make a few hundred dollars or more. These can have a risk reward of for example 1 to 3 (risk $100 with max profit of $300). This means that you can easily construct trades to work within a portfolio of smaller size for example $50,000. using futures options also allows you to benefit from time decay and also high implied volatility on the underlying (similar to standard equity options). this gives you a lot more flexibility than just trading the futures out right long or short.
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