John Bartleman is the President of TradeStation Group, Inc.
In volatile financial markets with limited alpha in equities, investors often reevaluate buy-and-hold strategies and seek upside opportunities that may capitalize on trading volatility. Opportunistic traders may choose the same tactic even in quieter markets to capitalize on market inefficiencies.
That’s where alternative asset classes may come in—financial products that fall outside the traditional stocks and bonds categories. Although alternative assets generally come with higher risks, we’ve seen a shift over the last few years: The Commodity Futures Trading Commission (CFTC)’s Office of the Chief Economist has estimated that retail trading volume in futures contracts now averages about 50% higher than during the pre-pandemic period.
Why Some Traders Are Moving Beyond Stocks
Alternative assets are reshaping the trading landscape, giving modern-day traders new paths for potential profit and diversification. Once considered niche, derivatives-based options and futures have become increasingly common in the investment world, valued by astute traders for their precision in risk management and market exposure. Both futures and options trading come with their risks, but four factors driving the shift to them include:
1. Sophisticated Institutional-Grade Tools
Once reserved for hedge funds and asset managers, sophisticated trading tools are available to active retail traders, leveling the playing field with institutional investors.
2. Abundant Educational Opportunities
Ranging from free trading seminars and digital training software, reputable organizations such as the CME Group and the Institute for Financial Markets offer accessible training, led by seasoned instructors.
3. Substantial Opportunities In Complex And Quiet Markets
With the Cboe VIX Index at five-year record highs in April 2025, traders may be frustrated by limited alpha in volatile stocks. A Greenwich study found 82% of derivatives professionals believe political instability will drive derivative volume growth into 2027, with half citing interest rate volatility will also fuel growth in the derivative market. Yet options trading offers ample opportunities in calmer markets, allowing investors to design strategies for a wide array of market environments.
4. Tax Treatment
Certain alternatives are taxed differently compared to traditional asset classes. Most U.S. futures and index futures options fall under IRC Section 1256, which generally treats any gains or losses as 60% long-term and 40% short-term capital gains or losses, regardless of how long the position was held.
Strategic Flexibility With Alternatives
Futures and options can be riskier investments, and they are not meant for every investor; those who choose them should understand their risks. Yet when used appropriately, alternative assets may help address key investor concerns—flexibility, income generation and risk management.
In particular, futures and options strategies potentially allow traders to tailor positions to market trends, clarify and protect risk levels and support their portfolio goals in several ways:
Playing With The Parameters
Leverage provided by options and defined risk strategies, such as spreads, straddles and covered calls, can help traders grasp the parameters surrounding potential market gains and losses.
Spreading Risk
The knowledgeable use of trading spreads may help investors to rack up gains via directional strategies with limited risk.
Straddles: Used To Manage Chaotic Markets Better
Traders can deploy market straddles to potentially help curb risk from intense trading volatility.
Calls For More Defensive-Oriented Strategies
Some financial products enable traders to turn uncertainty into potential income opportunities. For example, consider a covered call strategy, where a trader who owns a stock sells a call option on that stock, providing a way to earn income from the stock even if the price doesn’t rise.
Futures For Precision And Leverage
Futures traders seek leverage to control and improve their trading positions. One key advantage is access to markets six days a week, 24 hours a day, even when major stock markets are closed—known as 24/6 trading. Futures markets also offer greater liquidity during trading hours, primarily due to widespread investor participation in global markets. These expanded trading hours can benefit options investors as well, providing more flexibility to enter and exit option positions.
However, leveraged futures may come with expanded loss risk, particularly in volatile markets, and investors can lose more cash than they invested. That’s a risk investors must accept to gain the benefits of trading with more leverage and less capital. Investors should never put at risk more capital than they can afford to lose.
Blending Assets For Diversification
Derivatives may offer a healthy dose of portfolio diversity, as the futures market provides access to unique alternative assets, such as trade indexes, interest rates, commodities, currencies and cryptocurrencies.
Historically, traders have used derivatives to hedge risk, speculate on price movements and gain exposure without owning underlying assets. Futures and options can also help diversify portfolios as a potential risk management strategy by spreading positions across different investment classes, industries and indexes.
The Takeaway On Leveraging Alternative Assets
Alternative asset classes are reshaping the trading landscape, helping to offer modern traders new avenues for diversification and performance, but they also generally come with higher risk than traditional products.
Options and futures are no longer niche—they are often central to sophisticated trading strategies, potentially enabling more precise risk management and market exposure while balancing additional risk of loss. Simultaneously, institutional-grade tools are increasingly accessible to active retail traders, leveling the playing field for those traders who understand the risks and know how to effectively incorporate these products into their portfolios.
As interest grows in assets beyond traditional equities, so often do the risks and complexities. For today’s trader, navigating the markets means embracing innovation while managing risk with discipline and clarity.
The information provided here is not legal, investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation. See www.TradeStation.com/DisclosureOptions. To obtain a copy of the futures risk disclosure statement, visit Investment and Trading Disclosures Booklet—Futures.
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