Index Options Trading (Part I)
Now for options buyers this option unlike futures limits their maximum liability to the option premium they had paid at the time of buying the options contract. The options market has caught the fancy of many investors and this is not surprising. The beauty of options is embedded in its very name. You have the options but not the obligation to buy or sell stocks at a given price by a given time.
In’78, Chicago Board Options Exchange (CBOE) began options trading on popular stock indexes such as the S&P 500 Stock Index. The CBOE options trades in multiples of $100 per index point. This is much cheaper than the $250 multiple per index point for the S&P futures contract.
So how do the index options work? Let’s take an example. Suppose the S&P 500 Index is at 1100 points. You have a bullish opinion of the market and are of the opinion that the S&P 500 Index will go further up. An index option allows the investor to buy the stock index at a set point within the given time period. Options premiums is one of the most important concept that you need to grasp before you actually start trading options.
Now what this means is that if any time for the next three months you decide to exercise your call option, you will get $100 for each point the index is above 1150. So you decide to purchase a call option at 1150 for three months for 50 points. In other words you paid an option premium of $5000.
Now, 1150 is the strike price of the index option. In case the S&P 500 Index does not rise above 1150, you can simply decide to not exercise your call option. In that case you will only lose the premium of $5000 that you had paid to buy the call index option.
Contrast this with S&P futures. In case of S&P futures, the downside risk is unlimited whereas in index options the downside risk is limited to only the premium that you had paid for the options contract. Call options are considered to be bullish. So for you to make a profit with this call option, the S&P 500 Index will have to rise above 1200 point within the next three months otherwise you will lose your premium.
A Put Index Option works in exactly the same way as a Call Index Option except that you make profit when the stock index goes down. If you had bought the put index options instead of the call index option in our example above, every point below the strike price of 1150 would have given you a profit of $100. In case the S&P Index had fallen to 1100 point, you would have recouped your options premium. Put options are considered to be bearish.
But the most important factor is the expected volatility of the market. Now the option premium that you pay is determined by the market and it depends on many factors like interest rates and dividend yield.
Mr. Ahmad Hassam has done Masters from Harvard University. Try these cash printing Forex Signals from heaven. Discover a revolutionary Forex Robot System! Get a totally unique version of this article from our article submission service
Commodities Mutual Fund
If you have been following the breaking news that you might have come across the news that gold prices have reached historically the highest level! Recently gold broke the price barrier of $1000 per ounce. This might be the best time to invest in commodities. Some expert of the opinion that the secular bull market started in the commodity market a few years back and may continue for the coming decade! If you want to invest in commodities than you have many options like trading commodity futures, commodity ETF, commodity stocks or commodity mutual funds. A mutual fund is a fund managed by an investment professional on behalf of the fund investors. Now, mutual funds by law are constrained to follow conservative trading methods. Mutual funds cannot engage themselves in such sophisticated and risky trading techniques like arbitrage trades, long short strategies and distressed asset investing.
There are many different mutual funds like stock funds, bond funds, currency funds and even country specific mutual funds. But there are a number of mutual funds that specialize in investing in commodities or commodity related products. If you want to have a low risk investment in commodities than you should think about buying shares of a commodity mutual fund.
The rate of return all depends on the investment strategy of the fund manager. You will have to minus your management fees and the different loads from this rate of return to arrive at the rate of return hat would reach you! These commodity mutual funds use different investment strategies. Some of these commodity mutual funds invest in derivates based on commodities such as futures contracts and options based on futures contracts traded on the major exchanges in New York, Chicago and so on.
So how can you invest in these commodity mutual funds? After doing your research on these commodity mutual funds, you can select one that you consider to fit your investment objectives, simply write a check and purchase the shares of that commodity mutual fund either through your broker or directly through the fund providers. There are commodity mutual funds that may invest in companies that process these raw commodities such as energy companies and mining companies. So you will have to do your research in find the right commodity mutual fund for your objectives.
Now I said, after doing your research. The first step in your research should be to compile a list of questions like what is the fund’s investment objective, what securities does the fund invest in, who manages the fund, what kind of strategy does the fund uses, what type of people invest in this fund, what are the risks involved in investing in this fund, what is the funds track record, what is the funds fees and expenses and so on.
Once you have your list of questions, see if the fund prospectus answers these questions satisfactorily. The good thing is that most of the mutual funds send their fund prospectus free! Now the two main commodity mutual funds are the PIMCO Commodity Real Return Strategy Fund and the Oppenhiemer Real Asset Fund. Now PIMCO Commodity Real Return Strategy Fund (PCRAX) is the largest commodity mutual fund in the market with $12 Billion of assets under its management. PCRAX tries to mimic the performance of Dow Jones-AIG Commodity Index by investing directly in commodity linked instruments like futures contracts, forwards contracts and options on futures.
Now as always Morningstar website is a very good resource for doing your research on commodity mutual funds. It can give you a lot of information about these commodity mutual funds such as the latest news, updates, load charges, expense ratios and other useful key data. Morningstar also have got a five star rating system that can be really helpful to you in picking the best commodity mutual fund.
Mr. Ahmad Hassam is a Harvard University Graduate. Trade Dow Futures . Learn Commodity Trading ! Click here to get your own unique version of this article with free reprint rights.
Commodities ETF
If you are interested in investing in commodities than you can invest in a commodity mutual fund! Many people are not aware that commodities as an asset class has a lot of potential especially in the 21st century. It is being predicted that the 21st century belongs to the commodities.
There are many mutual funds that invest in commodities. Just visit the Morningstar site and you can get the list of such mutual funds that invest in commodities. Just buy the shares of the commodity mutual fund and let its NAV appreciate before you can sell for a capital gain. This is the simplest way for you to get involved in investing in commodities as the mutual fund portfolio management will be done by a professional manager and you have to do nothing. But are mutual funds the best investment vehicles for your wealth building objectives.
Now, you must have heard about the Exchange Traded Funds (ETFs). ETFs are really hot investments these days. ETFs started off some three decades back but became highly popular as investment vehicles in such a short time.
ETFs have many benefits. They trade like stocks but have the diversification advantages of a mutual fund. Now the good thing about investing in ETFs is that they give you the diversification benefits of a mutual fund with very low fees something like 0.7% as compared to 2-4% of the mutual fund. Driven by the growing demand of commodities by the investors many financial institutions are now offering Commodity ETFs.
ETFs have the added benefit of being able to trade like stocks giving you the powerful combination of diversification and liquidity. So unlike a mutual fund whose net asset value is calculated at the end of the day and the shares of mutual fund cannot be traded during the day, you can go both long or short on ETFs all the time. Something you cannot do with a mutual fund!
Now, you can find thousands of ETFs in the market on different market sectors, stock indexes, currencies, commodities and so on. This diversification plus liquidity benefit makes an ETF a better investment tool as compared to the mutual fund and the stocks.
The first Commodity ETF in US was launched by Deutsche Bank in the start of 2006. The Deutsche Bank Commodity Index Tracking Fund is listed on AMEX and tracks the Deutsche Bank Liquid Commodity Index. This index is based on a basket of six commodities: light sweet crude oil, heating oil, gold, aluminum, corn and wheat.
Now, every month a new ETF gets launched. There are a number of Commodity ETFs that track individual commodities like crude oil, gold and silver. Do your research on Commodity ETFs, you may find a good investment. This ETF invests directly in the commodity futures contract. Now one of the downsides of investing in this Commodity ETFs is that it can be fairly volatile as it is based on commodity futures contracts that get rolled monthly. Another downside to this Commodity ETF is that it is based on a basket of six commodities only.
Mr. Ahmad Hassam has done Masters from Harvard University. Trade Dow Futures . Learn Commodity Trading ! You are welcome to reprint this article – but get your own unique content version here.
Trading And Seasonality In The Markets
The day before the Presidents day is the worst day and the day after the Easter is the worst day after. However, you should keep in mind that a lot of other factors also come into play and you have a lot of room for error. The next best holiday bets are the Labor Day and the Memorial Day because they fall before the first day of trading in September and June respectively.
You must have heard about the Santa Claus Rally? Most of the folks usually feel fairly good about themselves around this time of the year. The best time of the year to own stocks is the Santa Claus rally which for all practical purposes is the 17 day stretch from December 21 to January 7. This is the best time of the year.
There is a low trading volume which tends to exaggerate the trend. If the economy is not doing good and is slowing down, FED tends to lower interest rates during holidays in order to go into the new year with less of a worry. However, when you are dealing with seasonality, you should keep these facts in your mind:
1) The market is not longer static. Money has no borders now. With one mouse click money is transferred from one locality to another. The seasonal effect may get interrupted by other events. More and more people have real time access to information and larger amounts of capital than at any time in the past.
2) At the end of the year, institutional investors want to make their results look as good as possible to their shareholders and tend to buy the stocks and so on. Institutional investors like mutual funds, hedge funds and insurance companies have become important players in the markets. So in case of an event free environment, seasonal tendencies may hold up fairly well.
3) These are the times for day traders and swing traders. With fewer people willing to hold stocks for longer periods, it is very difficult to predict seasonality. The days of long term investing or what you call buy and hold are dead! Frequent market crashes have taught the investing public that investing for the long term is fairly risky. So there is more short term trading going on.
4) A lot will be written about the recent stock market crash. What were the actual causes of the recent stock market crash? Why so many big banks went belly up in matter of days. What was so special that made this liquidity problem contagious with banks all over the world? The recent market crash was the result of CMO and Default Swaps bringing down the banks and Insurance companies in ways that had not been anticipated or foreseen by the analysts. Many had assumed that derivate securities are safe. Infact they have highly unpredictable tendencies. Derivates and outside the market trading activities can result in highly unpredictable patterns.
Many things are changing. The world is always changing. There is a change in demographics also taking place. With the aging of the population, the overall trend will be towards more income producing investments. So with everyone talking about the seasonal tendencies in the market, it reliability becomes less diminished.
Mr. Ahmad Hassam has done Masters from Harvard University. Try This 1500 Pips A Day Forex Signal Service! Know These Candlestick Patterns! Get a totally unique version of this article from our article submission service
Understanding Spot Forex Market (Part II)
The worlds big banks are the main players in the spot forex market. These big banks make an exclusive club where most trading activities take place. This club is known as the Interbank Market.
Down the hierarchy in the spot forex market are the smaller banks, big multinational companies, hedge funds and other institutional investors or speculators and the retail forex brokers. The wealthier you are and the more money you have or are able to get credit for, the more chances you have of accessing this big boys club.
These players conduct currency transactions in the interbank market if they have large capital and have credit standing with the large banks. The independent retail traders lie at the bottom of the market structure.
The retail forex traders trade through their forex brokers. They generally trade in much smaller lot sizes. Central banks are also occasionally involved in currency transactions. So there is no central exchange in the spot forex market to set the prices. Then who sets the currency prices?
Market makers make the bid and ask prices based on the currency movements that they anticipate will take place. Without a central exchange, the currency prices are set by the market makers. For example, in some emerging countries a Citibank or UBS may be the only bank in town so anyone wanting to trade that currency is forced to accept their terms. With no central exchange it may become very difficult for the nonprofessionals to come up with an accurate view of the forex market.
Big banks are involved in currency speculations in a big way. Many banks have professional traders solely dedicated to trading forex for speculation. Largest banks are the major market makers and they handle billions of dollars worth of forex transactions on behalf of their clients like the other institutions and companies and also for themselves. 90% of the spot forex trading is speculative in nature. However, most of the big currency transactions take place between the big banks. Daily there is huge flow of money between the different banks globally.
This big money laden network is knows as the interbank market. Interbank market is where large banks deal with one another. The resulting massive flow of money handled by these big banks is what primarily drives the currency markets.
The transactions carried out by these big banks like the Citigroup, Barclays, UBS, Deutsche Bank, Bank of America, Merrill Lynch etc amounts to the greatest bulk of the total daily forex volume. Most of the trading activity takes place in the interbank market.
How do the big banks deal with one another in the interbank market? The banks deal directly with one another through the electronic brokering platforms like the Electronic Brokering Services (EBS) or Reuters Dealing 3000 Matching. These brokering services get the best available rates for the various currency pairs. Products from EBS, Currenex, FXAll etc enable banks to reach a larger client base while still maintaining control over their risk. The reality is that a small group of banks control the forex market.
A forex transaction is not the exchange of cash for another asset like the stocks or oil but rather the exchange of cash today in return for the acceptance of cash at a later date. In order to do this the banks need to know that the counterparty is of highest credit standing. The banks establish specific credit lines with one another in order to deal with one another in the forex market as there is no exchange to serve as each banks counterparty. These brokering systems match buying and selling requests from the bank dealers. Between these two competitors they connect at least 1000 banks together.
Smaller banks that also trade forex also get access to these brokering platforms. Next large companies come. As the main market makers, these big banks constantly quote bid and offer prices to one another thereby making the market.
Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in day trading stocks and currencies. Try These 1500 Pips A Day Forex Signals From Heaven. Develop Your Own Forex Trading System!
What Are Stock Indexes? (Part I)
There are 100s of Exchange Traded Funds (ETFs) and HOLDRS covering key industry benchmarks such as the various Standard & Poor (S&P) Indexes, Russell Indexes or the Dow Jones Products. There are other ETFs that cover the other less well known narrow based sectors.
You should know the major indexes that are either key benchmarks or have ETFs tied to them. For example SPY tracks the Standard & Poors 500 Composite Index and is the largest of the ETFs.
Standard & Poor: Standard & Poor (S&P) is the financial services segment of the McGraw Hill companies and has been providing independent and objective financial information, analysis and research for nearly 140 years.
It is also the provider of equity indexes. Investors around the globe use S&P Indexes for investment performance measurement. These indexes are also used as the basis for wide variety of financial instruments such as Index Funds, Futures, Options and ETFs.
S&P 500 Composite is one of the most popular indexes in the global financial markets. Hundreds of companies around the world have licenses with the Standards & Poors for their index products and the influence and name recognition of S&P 500 is unparalleled. S&P 500 is also used as a key benchmark for money manager performance.
S&P 500 represents more than 75% of the capitalization of the entire US Stock Market. The S&P 500 is a capitalization weighted index that tracks the performance of 500 large capitalization issues. Each year thousands of money managers have the single minded goal of outperforming the S&P 500.
Over the years, the complexion of S&P 500 has changed. 30 years back most of the stocks were from the Industrial Sector. By 1970s, six of the top companies were from the Oil Sector. In 2000s, technology composed about one third of the capitalization of the index. The stocks in the S&P 500 are determined by a nine member committee in accordance with the general guidelines.
The other Standard & Poors indexes are the S&P Midcap 400 Index and it is based on 400 chosen domestic stocks. It is also capitalization based and measures the performance of the midsize companies of the US economy.
S&P SmallCap 600 is also capitalization weighted index and is of interest to institutional and retail investors. The S&P SmallCap 600 Index consists of 600 smallcap domestic stocks and these stocks are chosen for market size and liquidity. There are also sub-indexes based on these S&P Indexes.
NASDAQ: You will often hear the Nasdaq market being up or down on a given day in the media. NASDAQ Composite Index contains more than 4500+ companies representing a market capitalization of trillions of dollars.
There is another Nasdaq Index called the Nasdaq-100. NASDAQ-100 is composed of the top 100 nonfinancial companies in the Nasdaq Stock Market like Microsoft etc. It is a modified capitalization weighted index. The QQQ is based on the Nasdaq-100 Index.
Cash Gifting A New Way To Create Wealth
I bet everyone has already received or has already given a gift. But I bet that not everyone has earned more through giving gifts. Yes, earning through giving is real. Through being kind in giving gifts to others, you get rewarded with a larger sum.
Giving gifts generously and getting better things from it has been attributed to a lot of things and beings such as Energies, Secrets, God, and the sort. It is also attached to the Attraction and Manifestation process that says that if you give freely with consciousness, love, and gratitude, anything that you desire is attainable.
A lot of people are making this method of intentional gifting their habit since they can see that this opens the flow of the giving and receiving process. In the system called “pay it forward”, for example, purchasing food from a fast food chain charges you an extra fee to cover the cost of food that the stranger behind you in line would buy, and then the same would be done to him. With this, one can actually feed the homeless and the hungry in the urban areas!
When I joined a cash gifting program, it was with this same awareness that prosperity and wealth are attracted by willingness to gift. I found that cash gifting was aligned with my desire to bring more wealth not only to myself, but also to many others. The structure of the program allows me to receive mentorship, and then support others who seek to attract wealth.
The cash gifting system also has posted a new challenge for me: how to use my newly earned money. Well spending $250, $1500, or even $7500 a week is a challenge on how to use them. That is weekly! What would I do with the money? This question helped me solve this challenge. Through answering this question often, I get to visualize the things that I want and then I pursue those things of my dreams.
There are also other keys to success, and these are determination and success which is almost necessary in everything. Attention is also necessary for success even with a “passive” system. I am very thankful to my team, who supported, guided, and exerted effort, which has greatly helped me by reducing the effort I had to exert in order to get web presence in the world of cash gifting.
I possess optimism and determination that this piece of information will open the doors of many people to wealth that everyone wants. I also hope that this would be their new freeway of riches.
Cash gifting is an opportunity to cultivate consciousness that attracts wealth, while providing the vehicle for the cash to arrive.
Know How To Gift Cash And Get More Cash
Cash gifting is both an age-old practice and a popular internet opportunity. Legitimate and legal when properly done, cash gifting systems include the Magnetic Cash Gifting System, TLC 2003, and The Overnight Cash System.
Cash gifting brings together two concepts that can seem contradictory. Cash is used in exchanges where each party is obliged to give in order to receive. For many, cash is related to thoughts of fear and lack. Gifting occurs free of obligation, and is linked to joy and pleasure.
Cash gifting also unravels different opportunities that can make you money which are freely given, freely received, and plentiful money. This method can be your “money magnet”, or the one who draws money to you. It is a very powerful and profitable tool, and is also associated with the Attraction and Manifestation process and its core aims: ease, dedication, and joyful envisioning.
Ease – Never be a pessimist with regards to money matters. Quit thinking about how scarce money is or how hard it is to get. This will lead you nowhere. Cash gifting can provide you money without the scarcity, and without the hard effort you exert.
Joyful Envisioning – Our wants are achieved when we are relaxed and enjoying what we are experiencing at the moment. We are drawn nearer to the thing we desire most, even if what we are thinking of is in the mind’s eye. When I joined the Magnetic Cash System, I already bore in mind and expected that money is sure to come, no matter what. I thought about where I would spend my first $250 check, my third week’s $1000 check, and my $5500 on my seventh week. Ever since I had this positive outlook, more money has been drawing nearer to me.
Dedication – It is dedication that makes cash gifting easy. The task of making yourself visible to those who would gift you cash is impossible without the clear intention of success. Establishing oneself in the sea of the web through search engine optimization and web promotion can be tedious and overwhelming. Those of us who do not have expertise, or even interest in learning about these areas, will appreciate the training center and promotion support options available at prosperitygift.com. Whether you choose to promote yourself or to use support, you must be dedicated that cash gifting is going to give you results.
One can really grow in cash gifting. People’s relation to money has been given a new meaning with this system. In this system, you are also about to find ease, joyful envisioning, and dedication. Cash gifting is not all bout the more riches you can get, but it also serves as a training ground which can hone your attitudes and skills.
MACD Divergence Explained
Interpreting a MACD divergence can be very useful in your trading. What does a MACD Divergence means? Just that the current price trend is running out of steam. It may not happen right away. But a MACD Divergence is a powerful hint that the market is changing. Spotting a MACD divergence correctly will only come after practice. It is easy to spot MACD crossovers and dramatic rises but not so a MACD divergence.
What you are looking for is when the price action and MACD do not agree. For example, if the price is making a series of higher highs and MACD is making a series of lower lows, something is wrong between the two.
Most probably the traders are getting nervous. They are slowly fading out of their trades. No one is trading against the trend and yet fewer and fewer traders are in the trend. MACD divergence is seen as a sign that fewer and fewer traders are in the trend.
The only traders in the trend are nervous. They are likely to exit their trade at the first sign of trouble. So if MACD is diverging from the bullish trend. As soon as the bears muster up enough guts to short, the bulls will exit and the bears will take over.
There are two powerful keys in locating times when MACD divergence is likely to represent a reversal in the price action. This is exactly why MACD divergence is so powerful. It takes time to setup. However, when it works, it often works well.
Suppose the price action is at the double tops or double bottoms. MACD divergence can be powerful. You spot MACD divergence at this point. This is known as Exhaustion Pullback. You are making your trading plan based on the bounce/reversal or breakout of the support and resistance (S&R).
This is a sign that the price action is running out of steam. This would indicate that there are not enough committed traders to break the support and resistance. You should trade now based on rejection reversal.
MACD is also used as an overbought/ oversold indicator. When you see that it has reached its overbought/ oversold range and the price action is turning normal, this is a signal that you should avoid trading at this time.
Dont get confused and think that the currency pair is overbought and everyone is buying. When the price action reaches its extreme, you will see price exhaust and the MACD line drop back into normal zone. Dont confuse the overbought/ oversold MACD zones as trade opportunities. Avoid trading at this time.
It is also important to note that divergence can not only be found on the MACD line and the signal line, it can also be found on the histogram. These two situations along with your other technical indicators can provide excellent trading opportunities.
Forex Megadroid The Truth
It seems as if theres always a new trading robot in every corner. And all these trading robots have the same goal and that is to provide their users with accurate stock picks. The newest trading robot to hit the websites is Forex Megadroid. Every trading robot that gets released always has distinct benefits for its users.
But is Forex Megadroid just another one of those general trading robots or is it finally different?
One distinction that it has from the others is that it operates by gathering information on the present foreign exchange market conditions so that it can make it can change its trading patterns based on what its assessments. This all results to coming up with trading picks that are more reliable and accurate than those of the others.
What past trading robots did was to collect past information about the stock market and then deduced trading patterns from there. Because of this, the stock picks that the trading robots came up with had a large margin of error.
Foreign exchange experts John Grace and Albert Pierre lent their 30 years of experience in trading to the creation of Forex Megadroid.
Forex Megadroid is the only trading robot that uses RCTPA (Reverse Correlated Time and Price Analysis) technology. Because of this, it is noted to be more accurate than the other trading robots in the market and boasts of 95% accuracy.
But just because it boasts of the newest technology available to trading robots, it doesnt mean that it is only for those with advanced computer skills. In fact, Forex Megadroid is one of the few trading robots that have a user friendly interface. You only need to follow the simple instructions to start running the program.
To top it all up, Forex Megadroid offers a virtual money account for all of its users who wish to test the program but not want to risk losing money. The virtual cash amounts up to $100 so that users can really see if the software does live up to its promises.
For all that it only costs $97 and you can have a refund within the first 60 days if you think you wont make profits with the program.
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