Archive for July, 2010

The commodity concern was the target of a long call spread

The commodity concern was the target of a long call spread
Traders gravitated toward call options on Allied Nevada Gold Corp. (ANV) and Garmin Ltd…( Read More )

Read more on Schaeffers Research

Forex Course

When it comes to choosing a forex course you may be overwhelmed by the number of choices there are to choose from on the market today. DVD’s that are produces by professionals in the trading industry are one of the most readily available tools. The basics involved in trade have to be learned to be successful in the trading of forex and this is where a forex course comes in.

There are books and tutorials based on text but the DVD is preferred for those seeking the forex course. Insight into beginning the forex trading as well as all the advantages of trading are presented in a forex course.  The amount of tutorials available is numerous and you have the advantage of being able to watch them and re-watch them as many times as you need in order to learn the basics involved.

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You can even find a forex course online that you can use when your time allows. A forex course makes it possible to trade a little at a time when you first start out. Sometimes access to online brokers comes with a forex course making it even more beneficial to you when you are trading. These brokers will trade on your behalf no matter how active or inactive you are in the trading that you are performing.

A forex course can even be home based. These courses do not require you to have a special degree or skill level to understand them. An explanation is given for ever tool shown on the tutorial to help you gain a full understanding of them. Charts, graphs and numerous other interactive applications come with these forex courses as well as the fact they are supported by audio so that you hear the details of what you are looking at.

A forex course will take you through the basics of the forex currency exchange market and allow you to learn them at whatever pace you are comfortable with. On average it can take someone with lots of time to dedicate to learning up to two weeks to gain a full understanding with a forex course.

Live instructions, strategies, video tutorials and areas to receive support are all normally included in a forex course along with numerous other options to allow you to learn trading at your own pace. A forex course will give you the knowledge that you will need to obtain in order to trade successfully. There should also be some sort of support provided to you during those first crucial months of trading.

When looking for a forex course to meet your needs you will have to take a look at the features offered with it. You will want multiple strategies for trading, charts and graphs that are in color to see what you are comparing and techniques to manage the risk that you take. A forex course should also teach you to recognize indications that you are going to make a profit or loss in order for you to become a successful trader.

I hope you enjoyed the post, for even more check out my Forex Trading (Currency trading) Winning Trading strategies NOW!

Foreign Exchange Trades – An Introduction to Exchange Traded Currency Futures

Foreign Exchange Trades

With the turmoils in the global economy, Indian Rupee exchange rate has seen huge volatility against USD and other major foreign currencies during the last three years. In the past, Indian financial markets offered very few options such as currency forwards, swaps and options (traded on OTC – over the counter market) to Indian investors for hedging their currency risks. Cash Forex or OTC Forex trading was not easily accessible to small investors and even more, it was suitable to only large participants due to various factors that acted as deterrent to retail investors.

Although trading forex on exchanges is not a new concept in the international currency markets, Chicago Mercantile Exchange being one of the top exchanges for foreign currency futures and currency options, but in India, trading in currency futures is relatively new. However, after having commenced Currency Futures trading from August 2008, Indian Currency Markets have witnessed huge growth in terms of turnover and number of contracts. At present, three recognized stock exchanges NSE, MCX and BSE offer trading in four currency pairs USDINR, EURINR, GBPINR and JPYINR and very soon the market regulator SEBI is likely to allow trading in Currency Options. Foreign Exchange Trades

Exchange traded currency futures have come as a blessing not only to large participants but also to retail traders and investors. Here is a quick guide to the basics of currency futures.

What is Currency Future?

Currency Future is a legal contract or a commitment to exchange one currency against another at a fixed price and at a fixed date with the contract tradable on any recognized exchange.

What are the advantages of currency futures?

Easy Accessibility: With the availability of currency trading on the recognised exchanges NSE, BSE, and MCX, it has become very easy for all sorts of market participants to trade in currency markets.

Easy Affordability: With contract size of $1000 USD and margin as low as 1.75%, it was never so easy and affordable for any retail investor to take a call on Indian Rupee by taking position in currency markets. Foreign Exchange Trades

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Options Trading Championship 2006

Options Trading Championship

Options Trading Mastery: Factors that Affect Straddle Prices

Since the Straddle’s profit potential depends on its price from purchase time to expiration, the investor should be aware of the factors that affect the Straddle;s price. Several factors affect a Straddle’s price. The first is, of course, stock price. The stock’s price dictates the value of both components of the Straddle – the call and the put – affecting the Straddle price as a whole. As the stock price moves, the prices of the call and the put will fluctuate via the current Deltas of the options and thereby affect the price of the Straddle.

As the stock moves higher, the price of the call will increase while the price of the put decreases. They do not move linearly, meaning that as the stock continues higher, the call’s value increases progressively more while the put’s value decreases progressively less. This non-linear effect is because of the option’s changing Delta.

The call Delta increases as the stock goes up while the put Delta decreases. This opposing effect continues until the call gains value dollar for dollar with the stock (once its Delta reaches 100) indefinitely. At the same time, the put value-loss stops because the put now has no value (as put Delta approaches 0).

The opposite is true if the stock trades down. The call will lose value progressively slower until it reaches $0. Meanwhile, the put will gain value at an increasing rate until the Delta becomes 100. Then the put will gain dollar for dollar with the stock indefinitely. The chart below illustrates the effect of stock movement on the dollar value and Delta value of the Straddle.

Again, we will use the July 65 Straddle as an example. The Straddle will be worth $4.10 ($2.10 for the call, $2.00 for the put).

Stock/ Call/ Call Delta/ Put/ Put Delta/ Straddle

57.50 .42 15 7.81 -86 8.23

59.50 .78 24 6.16 -77 6.94

61.50 1.35 34 4.17 -67 6.06

63.50 2.11 45 3.46 -56 5.57

65.50 3.13 56 2.47 -44 5.60

67.50 4.35 66 1.69 -34 6.04

69.50 5.77 75 1.11 -25 6.88

71.50 7.37 83 .71 -17 8.08

73.00 9.09 83 .43 .12 9.52

A second factor that affects the pricing of a Straddle is implied volatility. As implied volatility increases, the value of the Straddle increases. The price of both calls and puts increase as implied volatility increases. A Straddle will feel a double effect when volatility increases because the strategy employs two options working together and not against each other.

When a strategy uses two options working against each other, the effect of implied volatility on the strategy is the difference of its effect on each option. This is different from a Straddle where the two options are working together. This combines the effect of implied volatility on each option.

Implied volatility movement affects an individual option to an exact dollar amount as indicated by the option’s volatility sensitivity component or Vega. An option with a $.05 Vega will increase five cents in value for every tick that implied volatility increases. It will decrease in value five cents for every tick that implied volatility decreases.

A call and its corresponding put will have the same Vega. That is, if the July 65 call has a .10 Vega, then the July 65 put will also have a .10 Vega. Remember, Vega is calculated by the strike price and does not differentiate put or call. Now that we have confirmed this concept, we can use it to calculate how much our Straddle price will change with a movement in implied volatility.

The Straddle combines a call and its corresponding put doubling the Vega effect. This means that the Vega of a Straddle is the addition of the Vega of the call and the Vega of the put. Since the put and call Vega are the same, we simply times the Vega of the strike by two.

Look back at our example. If the July 65 call has a .10 Vega, then the July 65 put must also have a .10 Vega and thus the July 65 Straddle will have a .20 Vega. This means that for every tick that implied volatility increases, the July 65 Straddle will increase $.20 in value. Conversely, for every tick that volatility decreases, the July 65 Straddle will decrease in value. The chart below shows how the Straddle-value changes at different implied volatility levels.

Price/ Vol.Level Call Put Straddle Vega

65.50 30 3.13 2.47 5.60 .174

65.50 40 4.05 3.39 7.44 .180

65.50 50 4.96 4.31 9.27 .182

65.50 60 5.88 5.23 11.11 .184

65.50 70 6.80 6.15 12.95 .184

When you study the chart, you can see that as implied volatility increases or decreases, the value of the Straddle increases or decreases by the amount of the Straddle’s Vega multiplied by the amount of tick change in implied volatility.

Finally, time is another major factor affecting the price of a Straddle. Time takes a toll on all options. Its effect is even more pronounced on the Straddle which that combines two options for the same period. A Straddle will see twice the rate of decay that a single option will. From previous discussions, we should be familiar with the option decay chart and its non-linear curve. As time goes by, the Straddle will decay, day after day, at an ever-increasing rate until expiration Friday at 4:00 p.m.

The implication to the buyer and seller is obvious. The passage of time decreases the value of the Straddle and thus always favors the seller. Time works against the buyer. The buyer has until expiration to get either a large stock or implied volatility movement to offset the price paid for the Straddle.

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UBS Says Sell S&P 500 Options on Volatility Outlook

UBS Says Sell S&P 500 Options on Volatility Outlook
Investors should sell Standard & Poor’s 500 Index options to profit from a “range-bound” equity market that’s likely to fluctuate less this year, UBS AG said.

Read more on BusinessWeek

How to become a Successful Forex Trader

www.NonDirectionTrading.com – From Timothy Stevens – The Forex Options Guy who provides valuable Forex Options Training at www.NonDirectionTrading.com

Actions speak louder than words as Lions look to crawl out of NFL cellar

Actions speak louder than words as Lions look to crawl out of NFL cellar
GM Martin Mayhew has said little about strategy heading into training camp.

Read more on The Saginaw News

tell me about future and option,nifty,call,put theorytically & practically?

i want to know about share trading properly

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Financial Spread Trading: an Introduction

In the past, trading on the movement and price direction of financial markets was largely the preserve of major banks, high net worth individuals and sophisticated investment houses. However, the advent of online applications like the Internet has now made it possible for retail investors with limited capital to trade worldwide financial markets in exactly the same way these sophisticated investors did in the past. This form of online trading is widely known as Financial Spread Trading/Betting.

What is Financial Spread Trading?

Financial Spread Trading is a highly leveraged form of trading that has become a mainstream investment tool for retail investors around the world. Effectively, it is a mechanism for ordinary individuals with limited capital to gain access to worldwide financial markets. You can actually trade shares, options, indices, currencies, commodities and just about any other financial instrument through an online financial dealer.

Unlike the traditional way of investing the stock market, Financial Spread trading is based on a simple concept. Individuals get the opportunity to back a trading judgment that they may have, that a particular market is going to rise in value or is going to fall in value. For instance, if you believe that the shares of Microsoft are going to rise in value, you would “buy” Microsoft shares. Conversely, if you believe that Microsoft shares are going to fall in value, you would “sell” Microsoft shares. You don’t actually own the underlying asset. You are simply trading on the price direction of the financial instrument. If your prediction is correct, you make a profit. If you are incorrect, you suffer a loss.

There is also provision of posting a “stop loss order” on every trade you initiate. A stop loss order is a way of reducing your risk exposure to the markets, which means that you can effectively limit your loss in the event of the price moving against your perception.

Spread trading is most easily explained through an example – the concept is the same whatever the market. Let’s assume that it’s October, and due to an imminent breakthrough in the cure for bird flu, the shares of XYZ Corp have been rising steadily over the past few weeks. You’ve been following the market closely, and decide you want to get in on the action. The shares of XYZ are currently selling at $42.14 per share. In order to buy shares in any listed company, you need to buy a minimum of 100 shares. This means that you need a minimum of $4214 just to buy 100 shares. However, you only have $150 risk capital. What can you do?

Well, given your limited capital, you can simply place a spread trade with a financial dealer on XYZ Corp shares to rise. Financial spread trading enables you to be highly leveraged because you actually trade on margin. Leveraged trading, or trading on margin means that you are not required to deposit the full value of your trade in order to open a position, so buying XYZ Corp shares at $1 a point is actually the equivalent of purchasing 100 shares of the same company. Thus if you are looking to buy 1000 shares of XYZ shares, instead of paying $42,140 for the shares, you can place a spread trade on XYZ shares to rise at $10 a point.

Let’s assume that you contact a dealer for a price on December contract futures in XYZ Corp and get a quote of 4214/4219. You always buy at the higher price, so you buy $4 per point at 4219. This means that each penny movement in the price of the shares is worth $4 to you. To limit your risk exposure to the market, you also place a stop loss order of 30 points, which means that should the market go against you, the maximum you could lose is $120. Over the next few weeks, the stock of XYZ Corporation continues to rise. Six weeks later, you contact your dealer, and the quote for December XYZ Corporation is now 4293/4298.

Because you’re trading futures, it means that the contract expires in December. However, this doesn’t mean that you have to wait until December before you close out the trade. You can close out the trade the same day or at any point before the contract expires.

You decide to take your profits and sell to close at 4293. Because the market went in your favor, you get your full deposit of $120 back. In addition, your profit on this trade is calculated as follows:

Closing level 4293

Opening level 4219

Difference 84 points

Your profit: 78 x $4 = $336

Financial Spread Trading is a derivative product. This means that you are trading on a price that is actually derived from the underlying product. Therefore, if you are trading Microsoft shares, a financial dealer would give you a “derived” price of Microsoft shares. As the prices of those shares go up and down, so would the dealer’s derived price of Microsoft shares go up and down.