Archive for May, 2010

Trading Index Call Options?

I bought an IShares Canada Index Call Option and would like to know if anyone has traded these with good results? Mine is EWCFN June ’07 Call Strike prce $28.00 IT IS AT THE MONEY. Do Index Options tend to have UPWARD trends? It would seem to me this would be good for a CALL option on one of these? Thanks

Be a Money Spinner with Call Option Trading

You could be a money spinner with call option trading. Several traders in the market try to make a difference by adopting complex call option techniques. However, at times when you look around for complex solutions, the solution may actually be one that is absolutely simple.

Similarly sometimes it is the simple or the basic call option trading that is just right for the prevailing market trends. The below mentioned guidelines would be of great help to make a good profit with call option trading:

The secret to success with call option lies with understanding the pulse of the market. You should be able to correctly understand and predict the direction in which the market would move. Call option trading is actually playing with the direction of the market although your money meter would start ticking only if the market moves upwards. It is being able to predict the movement of the market and capitalizing on the upward movement.

There are many key indicators that can be used to predict an upward movement like for instance the market news, fundamental information like a rise in the dividend of a company, charts and graphs like reverse head and shoulder, upside price breakout to name a few. Some traders use a combination of indicators to understand the market trends. You must be able to predict or estimate the target where the price movement is headed.

The time factor is another important element. You should be able to estimate the time when the upward movement would take place and how long will it take to reach your target price. Deciding your call option expiry would depend on these factors. Your broker can be of great help in providing information regarding the options chains and other market news.

You must be clear about details like which stock exchange you want to deal at. Being able to decide the expiration date is very important. For this you should be able to estimate the time in which your price movement would take place and by when would your target price be achieved.

Study the market scientifically. Make proper comparisons of the Delta, Gamma, Theta and Vega for different target prices in the same expiry.

Keeping a track of the open interest and also the volumes in the market is very important. Choosing the best call option is another important factor. You must be able to rightly estimate the exit point and also the stop loss. Looking at the market dispassionately and scientifically is essential.

Close the position on time keeping track of the market trends. For making a good profit it is very important to monitor the market on a regular basis and understand call option trading perfectly before making any deal. You must not be carried away by the sudden ups and downs and make impulsive decisions.

Will Strong GDP Figures add onto the BOC’s Scope to Hike Rates?

Will Strong GDP Figures add onto the BOC’s Scope to Hike Rates?
Fundamental Outlook

Read more on Daily FX via Yahoo! Finance

Fundamentals and the Week Ahead

Fundamentals

Concern over Greece’s debt crisis and its potential spread through Europe continued to influence global markets. As leaders intensified negotiations, Evolution Securities stressed that the country’s request for a $60 billion bailout does not reduce the risk of default next year and a debt restructuring will be a necessity without even more aid.

Standards & Poor’s lowered its credit rating for Greece andwarned bondholders they would recover just 30 percent of their initial investment if the country restructures its debt. S&P also reduced Portugal’s rating by two steps as well as Spain’s. Ignis asset Management further warned that Portugal may follow Greece in having its debt downgraded to junk.

German Chancellor Angela Merkel said Greece needs to show its budget is on a sustainable path and a full German agreement to a bailout may take a few days, while Greek finance minister George Papaconstantinou said money will be available soon adding that the country won’t restructure its debt.

Reports, meanwhile, indicated that Greece may need as much as EUR 120 billion, rather than the initial EUR 45 billion promised. German Chancellor Angela Merkel added that negotiations with Greece over financial aid must be accelerated as the stability of the euro-zone was at stake, while European Central Bank President Jean-Claude Trichet and French President Nicolas Sarkozy added their voices to the urgency of the matter.

In the U.S., assistant Treasury secretary Michael Barr told bankers the U.S. is “more vulnerable than ever” to another crisis. That concern may have propelled Federal Reserve officials to restate their intention to keep the benchmark interest rate near zero for an extended period. The Fed’s preferred inflation gauge climbed at the slowest pace on record giving officials scope to keep interest rates low and encourage hiring.

The Labor Department reported that initial jobless claims fell by 11,000 to 448,000 in the week ended April 24, signaling a slight improvement in the jobs market as the number of people receiving unemployment insurance and those getting extended payments decreased.

The Commerce Department showed that U.S. gross domestic product (GDP) grew 3.2 percent in the first quarter boosted by higher household spending

The U.S. Senate questioned Goldman Sachs executives about their role in marketing financial products that contributed to the financial crisis, as federal prosecutors weigh fraud charges against the firm.

Japan’s consumer prices fell for a 13th month in March, indicating that deflation was still weighing on the economy despite signs of growing exports and a recovery.  Japan’s unemployment rate rose to 5 percent in March, slightly above expectations.

Binary Option Strategy for all your market news

The Week Ahead

In the U.S., the labor Department will present its April unemployment report, while first quarter productivity report will give further indication to the state of the economic recovery. April auto sales and March factory orders are also due for release in the coming week.

Europe will likely be preoccupied with negotiating Greece’s bailout package as leaders will seek to calm investor nerves about the euro-zone. Retail sales in the euro-zone for March may give some indication of whether the Greece crisis is impacting the consumer. The European Central bank will also announce its interest rate set for May.

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Crush the Market in the Next Decade With These Stocks

Crush the Market in the Next Decade With These Stocks
Think small.

Read more on The Motley Fool

how can individual traders do option arbitrage or do strategies with minimum risk ?

I am looking forward to do options trading. strategies like delta netral trading, butterflies but would like to do strategies with minimal risk.

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Option Trading Software: What Will It Really Do for You?

Option Trading Software

With all the problems involved with option trading, a lot of traders are on the look out for an automatic remedy to the rat’s nest of complex calculations involved with accomplishing a money-making trade. Forex traders nowadays have forex robot software on hand that makes their trades for them. Now, option traders are longing for some form of forex trading software application that will do the same thing for them. Now there is such a device that makes option trading a whole lot easier however it’s not exactly the same as the forex robot.

So what does option trading software do?

The number one challenge of accomplishing a money-making trade is figuring out what the implied volatility of that option is. The option might appear to be heading in the right direction but when you actually perform the trade, you still lose capitol. Why? Because the option was was either under priced or inflated and the killer is that you had no way of knowing whether an option is over or under priced. It’s not listed anywhere. It’s a total shot in the darkand this is what shoots down the majority of option traders. What option traders require in an option trading software platform is the power to determine the real historical volatility in relation to what it is presently selling for. Because, presented with this knowledge, the option trader would immediately be able to execute a successful trade a large amount of the time. Luckily, for option traders, option trading software that does excactly that has finally become available.

Below, there is a link to a resource to where you can ge a hold of this sort of option trading software, however, first, let’s look at what it can do for the option trader. First of all, it’s super uncomplicated to use. There is no steep learning curve or monster training manual to get stuck in. All you need to do is run an option through the software and and before you can get another cup of coffee, it lets you know if the option is over priced or under priced. It simply turns out a graph with volatility lines. There is a red dot representing the option itself. If the dot is higher than the lines, it is over priced. If the dot is underneath the lines, it is under priced. It’s a total no-brainer.

Now it sounds like this would add on some monthly fee for the data feed necessary to make this option trading software  run. But this is not the case. The  software uses a entirely free of charge data feed so there is no data feed fees at all. And as you would expect, it allows you to store all of your charts and even has a zoom feature to get even more detailed readings.

In essence, what this option trading software delivers, is it notifies you very rapidly whether an option is over priced or under priced which informs you when it is time to buy or sell. Super simple but super powerful. Hoever, the best way for you to grasp what it delivers is to follow the link below and find out for yourself.

UFC 2010 Undisputed (Xbox 360)

UFC 2010 Undisputed (Xbox 360)
Inside the octagon, there really wasn’t a lot wrong with UFC 2009 Undisputed, which makes it all the more impressive that the combat in UFC 2010 Undisputed is so much better. New features and improvements aren’t confined to the cage, either.

Read more on CNET

Ringgit May Fall 2.8% as Volatility Rises: Technical Analysis

Ringgit May Fall 2.8% as Volatility Rises: Technical Analysis
May 25 (Bloomberg) — Malaysia’s ringgit may fall 2.8 percent to its 2010 low by early June as a volatility gauge used in pricing options showed traders anticipate wider swings in the exchange rate, according to Bank of Tokyo-Mitsubishi UFJ Bhd.

Read more on Bloomberg

OTC Currency Options Explained.

OTC (Over the Counter) Currency options are defined as bilateral contracts, the value of which is derived from the value of some underlying asset or security. A Derivative covers any transaction where there is no movement of principle, and where the price performance of the derivative itself is driven by the price of the underlying asset.

It is especially this aspect (the no movement of principle) that makes Derivatives such useful instruments to hedge other exposures and to do specialized risk management.

Foreign exchange derivatives are the following: • Currency Options • Forex Futures • Swaps and Forwards

Foreign Exchange derivatives can be traded over the counter or on organized exchanges – On organized exchanges fixed and prescribed contracts are bought and sold. An OTC derivative instrument is tailored to customer’s specifications regarding the specific dates, currencies and total amounts involved.

One of the main differences between exchange traded currency derivatives and OTC currency derivatives is the credit risk. In the OTC Market each party takes on the risk of the other party – On an exchange, the exchange’s clearinghouse covers the parties’ risk. In the OTC Market, because of the very specific contract details, liquidity may be very low, i.e. it may not be easy or possible to trade with such an instrument if the right party cannot be found.

A Currency option gives the holder the chance to fix the rate of exchange that will apply to a future exchange transaction. The Option writer (the seller of the option) must guarantee the rate chosen by the holder. For this guarantee a fee is charged. The holder of the option has all the rights implicit to the option but only one obligation – he must pay the fee.

The Option writer or seller has all the obligations, but no rights. In return for the fee he must have the underlying currency on hand (in stock) in case the holder chooses to exercise his option.

Currency Options can also be exercised at expiry or they can be sold back or sold on at any time during the duration of the transaction for fair value, which depends on the underlying currency price movements. Alternatively they can be physically delivered.

Currency Options is more flexible than a traditional forward outright foreign exchange transaction and gives the holder several alternatives:

• Whether, to exercise the option?
• When to exercise the option?
• How much to exercise?
• At what price to exercise?

This is a very simple and concise explanation of what is OTC Currency Options.