YodZiaN

In the investing world, trillions of dollars worth of shares are bought and sold each day on the major exchanges all over the world. On any given day, traders and investors can take part in the purest form of capitalism by putting their money at risk by buying into any of the major global corporations across the planet in the pursuit of profit. Yet, there is another way of speculating, trading options, which can be far superior to just trading the shares of a given company.

An option is a derivative on an underlying security that gives the right, but not necessarily the obligation, to buy the underlying security at a given set price. They come with different strike prices, expiration dates, and allow tremendous leverage as each option controls up to 100 shares of stock in a particular company. These advantages make options a far superior trading instrument than just trading stocks.

One advantage is leverage. Leverage is the ability to use a small amount of capital to control a huge asset. Like in real estate, where a small down payment allows a prospective buyer to control a huge piece of property, options allow the trader to control up to 100 shares of stock for with just a tiny bit of capital or, in this case, it is called the option?s ?premium? which is the actual cost of the option.

Let?s look at an example of how options are superior to stocks in when using leverage. If you notice that ABC stock is set to rally higher and is trading at $50 a share and you then buy 100 shares of stock for a total of $5,000. A few weeks later, ABC stock has rallied to $60 a share and you sell all your shares you will have profited $1000 or a 20% return. Not too bad.

But a friend of yours sees the same setup in ABC stock and decides instead to buy an option with a $50 strike price which is priced a $2 premium for a total cost of $200 ($2 X 100 shares = $200). ABC stock rallies to $60 and your friend sells his $50 strike option for $1200 which is a 500% return! That?s the power of leverage when trading options.

Another advantage is that a trader can generate income by using credit spreads with options. If you see that ABC stock is in a trading range and is staying above support at say around $50 a share you can create a credit spread by creating what is called a Bull Put Spread. You sell the current month?s $50 put option and pocket the premium you received and then purchase the current month?s $45 put option for insurance in case the stock plummets unexpectedly. Then sit back and let the options reach their expiration date and you collect the difference between the premium received for selling the $50 put option and the cost of purchasing the $45 put option.

ABC stock can go up or stay around $50 and the position would make money. It could even decline below $50 equal to the cost of the premium that was received and the position would break even! The only time the position could lose money is if it declined below this breakeven point. Many option traders specialize in these types of option spreads only and generate often generate steady returns of 10% to 90% per position!

A third advantage is options also give you the ability to short stocks without the restrictions of short-selling stocks. When you short a stock in the anticipation that it will go down in price you not only have a larger cash outlay versus buying put options but you also have to pay interest on the stock you borrowed to short plus you have to pay the dividends back that the stock might pay during the Read more…

During the trading week almost any newsbreak will report the gains or losses for the Standard

The meek shall inherit the earth, at least if it isn’t lost to margin calls. In a world full of opportunities comes an equal number of risks. On-line investing has brought Wall Street into the study, kitchen, living room, or wherever an investor wishes to trade. For the elderly, this can be a problem. While many may think of rocking chairs on the porch or shuffle board on a cruise ship, the real retirement for many professionals means trying to manage their investment portfolio to maintain income and growth. For many, that also means taking an active role in this process. This is not Bingo, and due to the very nature of the process, can be much like gambling, addictive and risky.

One of the longest running pieces of financial advice has been to carefully manage your investments in terms of a financial triangle. This triangle is made up of varying levels of financial tools or instruments and each layer closer to the top reflects additional risk. This triangle starts with a bottom denoting safe, risk free investments such as treasury obligations or bank certificates of deposit. As the type of investment increases risk, and therefore a potentially greater return or loss on invested capital, the higher on the triangle it goes. General belief is that each level as a percentage of a person’s investment portfolio should be adjusted as they get older and closer to retirement to reflect a more conservative, risk adverse position. This is in line with the concept that there are fewer earning years, or no earning years, left to support the recovery of a financial loss if a risky investment goes bad.

Investment in the stock market, in general, has been very good over the long term. The problem for the typical retired person involved with on-line investing is that they don’t have a long term over which to recover short term losses if they occur. In addition, this description of the stock market is just that, the overall stock market, not individual stock issues.

Before you or a loved one decide to “play the market” or be a “day trader”, be aware that significant risk is involved. The following are points to note for the elderly investor.

1. The Market goes on forever. The market for a stock can now be beyond the typical stock market day of 9:30 a.m. to 4:00 p.m. Eastern time. As the markets continue to evolve, there are now markets before the normal market opening and after the market close. If your on-line firm does not participate in these markets, you may be at risk if your stock position trades actively in before or after hour trading due to news on the company while you are on the sidelines. Stocks can trade wildly up or down in these non-market hours.

2. The market can be a terrible mistress. The need to monitor investments can dominate your time if you are in a position that is movement sensitive and you are trying to trade the stock for the short term. You can find yourself becoming isolated, not wanting to step away from your computer screen in fear of missing an opportunity, or facing a loss.

3. Losses are real. Most people believe they know when to get in when buying a stock, but it is human nature to hold on to an investment when it is going down in value, hoping and praying that it will return to at least break even. It takes a lot of discipline and the on-going use of stop loss orders to make sure that your emotions do not leave you with a significant loss if the market is “irrational” and goes against your position. Look at the wild fluctuations of a Read more…

The trend reflects in which direction a certain stock is trading. The technical analyst can always distinguish three different types of trend behavior and will choose to buy or sell based on that underlying trend.

A particular stock or an index is always trading in one of these three trends: the uptrend (prices going up with higher bottoms and higher tops), the downtrend (prices going down with lower tops and lower bottoms) and the sideways trend / trading range (prices trading between an upper and lower boundary).

“The trend is your friend” is the most important rule of the technical analyst. This rule points out that you should not trade against the trend. So you will want to open long positions when the market is in an uptrend, and you will sell your positions (or go short) in a downtrend. The reason for this is that there’s allways a higher chance that the the current trend will continue, while the chance for a trend reversal is much lower.

So if the market is going down, you should not open long positions. It’s better to wait Read more…

Put options are a misunderstood investment tool but once understood by an individual investor it can be a very versatile investment tool. Put options can be used to protect your portfolio, and they can help you pick up huge profits by controlling the stock of a company during a price decline and profiting from the decline. Plus, put options offer strictly limited risk. If an option trade goes the wrong way, you won’t lose more than your initial investment plus commissions.

So what are put options? Put options are a type of investment that gives you the right to buy an underlying security at a higher price for a specified amount of time and if that security falls lower you can purchase the shares at that price and then sell it to the issuer of that put option at a higher price and keep the difference as your profit.

In other words, put options give you the right to bet on the price decline of a stock, but you are limited to that bet for a certain period ? usually from 1 month to as long as 3 years depending on the option selected.

For example, you believe that the SPX, the S

…unless the stocks you own ARE beating the market!

There is no way on earth you could ever beat the market if the stocks you hold are not keeping up with the market. And hopefully, staying ahead of the market.

But yet, that?s what lots of people try to do. They?d rather keep all the dogs in their account and maybe ?take a flyer? on one stock, hoping for a miracle. It?s like trying to win a NASCAR race with your Ford Taurus. It just ain?t gonna happen.

But hey, maybe you don?t want to beat the market overall. Maybe you just want to own the BEST semiconductor stocks, or the best retailers, or the best utilities.

Seriously, how would you even KNOW if your stocks or mutual funds are beating the market, or are the best names to own in their group? Well, I can tell you this…

the best indicator I?ve ever seen in twenty-plus years in the business has been relative strength.

What is relative strength? It is simply the measure of how your mutual fund or stock is doing, compared to a group of other stocks, funds or indexes…or the market overall.

Perhaps you want to compare Intel with other semiconductor stocks. Maybe you want to compare Microsoft with the S

Through online trading, you can easily buy or sell thousands of stocks. Orders are routed through the brokers online system to the particular stock exchange and executed within a few seconds, usually without any manual intervention.

Online investing is different from day trading. In day trading, an individual buys and sells shares in a very short period of time, within the same day in most of the cases, in order to gain from marginal movement in the securities.

Risks of Online Trading

If you are a new investor, you should be aware of the principles of investing, your investment goals and risk tolerance before entering into online trading. Being an online trader you may tempt you to trade very frequently or to be involved in over trading, which would result in increase in trading costs, complication in your tax related conditions and large losses.

Despite some limitations, online trading has improved the way stocks and other investment instruments, such as, bonds, mutual funds and currencies, are being traded, substantially, in the fast moving capital markets. So, should you should be a trader or an investor?

Being a Trader

Normally, short-term traders including day traders, who are also called market timers, do not gain profits from their investments consistently, since their investments are not based on the companies? fundamentals. Short term traders sit in front of their computer terminals throughout the day to see the movement of the particular stock. Day traders usually buy stocks on borrowed money to make quick profits, however, they bear very high risks of losing money. If you are a day trader, you should risk that amount of money which you can afford to lose. Short term traders do not ?invest? generally, since they are riding on the momentum on the particular stock, by seeing the charts. They do not research or look into the fundamentals.

Being an Investor

Investors generally look into the fundamentals of a particular stock, such as revenue growth, earnings growth, cash flows, debts and rate of returns etc, before investing into Read more…

Emerging Scene In Asian Markets

Growth rates: Population growth in Asia has always been the subject of discussions in the developed countries, but changes in economy of Asian countries and the increased participation from USA and UK in Asian Markets has not been given the same amount of publicity. China has a growth rate of over 9% for last many years and India has peaked growth rates of 7.5/8% for last year.

Size of markets: Growth rates are closely linked to economic development and the increase of population and increase of per capita income has meant that the size of Asian Market has increased considerably. Everyone is eyeing the emerging markets in Asia as a big marketplace and this has meant that if you are to grow quickly, you cannot ignore Asian Markets.

The booming markets: Stock markets in Asia are booming. The rate of increase of Asian markets is higher than the US and UK markets. When the markets in US or UK are steady, or move side ways, the Asian markets go up. The down slide of markets is much less when the markets in developed countries slide down. Some of Asian markets have a very low PE and some of them have a high P/E ratio at this moment, but the future projections justify purchasing shares even at this P/E ratio.

Individual markets: Let us now have a look at individual market so as to get a feel of market and growth potential. We will have a look with a 5 t 10 year horizon

China: China has captured a large international market and is growing at a rate of 9.2 percent annually. The market size in purchasing power parity (PPP) basis is of the order of $8.58 trillion. It is the second economy after the USA. Per capita income is about $6200 per year.

The Single child norm adopted (rather forced) by the government of China is responsible for increase in per capita income. Air pollution, soil erosion, corruption, and the aging population are some of the problems that are likely to raise the head in near future. But generally the market is booming and economy is on rise and will continue to rise.

India: India with a population of 103 billion and Read more…

Introduction: Trading stocks is basically trading ownership in companies. However, not all companies are traded on the stock market. In order to become a traded company, there are steps that must first be taken.

1) Private vs. Public Companies

When a company first forms, it is a private company and is not traded on the stock market. Eventually, a private company may decide that it wants to become a publicly traded company. In order to do this, they must issue stock certificates.

2) Going Public

When a company decides to “go public” by selling shares (stock) to investors,they have an Initial Public Offering (IPO) to sell shares. The number and price of shares issued varies with each IPO.

3) Why or why not?

Why would a company decide to go public?
Well the biggest reason is because they get all that money from selling shares. This has two benefits – it increases the financial base of the company and gives them money to expand the business.

So if companies get $$, why wouldn’t they go public?
There are many reasons but one big one is that as soon as a company becomes public they have to answer to a lot of different investors and regulators. More on this later.

Definitions-

Private company: Read more…

Was singer Stephen Stills giving investment advice when he wrote the song ?For What It?s Worth?? Or is this just another investment firm experiencing a ?60?s flashback?

Take it from me; a little paranoia can be a good thing. It makes you very aware. And you need to be aware…not only of trends in the marketplace, but also longer term trends that are evolving all around us.

Let me explain. Imagine you were turning age 65, not today…but way back in 1950. Your average life expectancy beyond 65 back then was 13.9 years. This was the original idea behind social security…they just didn?t expect so many folks to be living past 75 or 80.

Today we?re approaching the point where people will have an average life expectancy of more than 20 years after retirement. Going forward, many will be retired for 25 years, or even longer! And if you?re blessed with some luck and you worked hard at staying in good shape, it may be even longer than that.

That?s 25 years or more without a paycheck! With most folks simply ?working for the weekend,? that?s enough to make most baby boomers paranoid.

But here?s where it gets worse: Many have nothing substantial saved for retirement!

I had a 60 year old prospective client tell me recently (with a straight face) that he was ?living in his retirement plan.? Meaning, he had nothing set aside for retirement. He simply planned on selling his expensive home when he retired and expected to live on whatever he could get for it.

Ok. I understand. But this is where it gets even more interesting. In our conversation, he went on to tell me, ?Come on, my wife and I work hard. We only take two vacations every year…when some of our friends seem like they?re away more than they?re home! And since we work hard, we also figured we deserve to drive around in new cars every two or three years. And don?t talk to me about our club membership, that?s our social time. After all, we deserve it.?

Not only did this guy not look ahead and think through to the end of the game, he also expects that when he?s retired, he?ll be comfortable in a completely different lifestyle…living in a scaled down home, no vacations, no new cars, maybe no private club either. Wow. A total change. He may have a long adjustment phase.

So, what will you do? What?s your game plan…sell your home and move to a sunnier climate? The demographics show that the baby boomer generation is the largest in the United States. Read more…