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The Role of the Options Buyer and Seller

October 9th, 2009

The person, who sells option contract to the option buyer as his opening trade, is also known as option writer, seller or granter. Opposite trade to the option buyer is taken by the option writer. Because of this, he or she has the counter risk profile of the option buyer. The option writer has a temporary liability. If he or she is being called to fulfill his or her obligation, he or she just likes the insurance underwriter. However, the option writer is paid by the option buyer a premium upfront for taking on that risk, which he or she will keep it. If the option buyer doesn’t exercise his or her option, the option contract will be left to expire worthless. In this case, the option writer will earn the premium that the option buyer pays to him or her early. It is much the same way an insurance underwriter does.

Market movements will cause the option prices react differently. How it will react is totally dependant on whether the options are call or put options. If the market price increases, it gives a positive effect on call options but a negative effect on put options. In the other way round, if the market price decreases, it gives a negative effect on call options but a positive effect on put options.

If you estimate that the underlying market will make a concrete move higher, you can buy a contract of call option and after the market has gone up, sell it to earn a profit. Reversely, if you estimate that the underlying market will make a concrete move lower; you should buy put option and after the market has gone down, sell the put option to earn a profit. Based on the above statements, if the market price is going up, the call option prices will go up too. However, the put option prices will go down if the market price is going up.

Let’s try an example of buying a contract of call option on CAT shares and deeply discuss each component. Let’s us make an assumption in this example that CAT shares are trading at $30 in the 5th of February. So, we will buy 1 CAT March 29 call option. The ask price of the option in that moment is $3.4. The premium that we need to pay is equal to the option ask price times 100, which is equal to $340. This amount is not yet deduced by any transaction commission. In this example, buy 1 means buying one contract of CAT call option. One contract of CAT call option will give us the right to buy 100 units of CAT share. One contract is like one agreement that involved 100 units share. CAT is the underlying security on which the option is based. March is the month in which the option expires and it is on the third week Friday in that month. 29 is the exercise price, which is also known as strike price. By owning the call option at this strike price, we have the right to buy 100 units of CAT share at $29 at or before expiry in March.

Alexander Chong –
Author of “Workable Option Trading Strategies”.
http://www.makemoneystocks.com/

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Investing – Simple Tips to Help You Gain the Maximum Out of It

October 8th, 2009

Howsoever good may be your job, if you desire to have wealth in this life, at some or the other point you ought to invest and that too in something great to see your wealth grow. Investing is done by most people throughout their lifetime. The areas where investing is done are life insurance, real estate, bonds, or mutual funds.

Good investing brings along with it mental peace, sense of security and the desired lifestyle for your and your family. Conversely, poor investing or no investing cause lots of personal stress. Here are few tips for people ready to go for investing

Start Early in Life: Start investing at younger age and for lesser amount you will have the same yield. Money invested at younger age has more years to multiply and hence will effectively yield more returns.

Start with Safe Investments: In the initial stage of getting into investing, it’s better to invest in simple and safe investments. Since you are not having much of information about investment strategies, you will have to go through the learning process. So while you master the techniques of good investing and gain confidence, the investment at this stage should be without much of risk. With time your portfolio will grow and so will your experience.

Take Help of a Broker: Internet and online stock trading services has made it possible for a person to trade securities without talking face to face with a person. But as a beginner it’s a good idea to meet a broker. Ask friends and family members for good and honest broker. Broker will make the things clear and will help you move in the right direction. Automatic investment plan can be setup so that contributions are directly deducted from your bank account.

Get all the Information: In this world of information there is lot of information available about investing. The websites on internet are full of good investing ideas. You can join investment group on internet and sign up investing seminars for free. Lack of Knowledge should not prevent you from investing.

Practice will help: Before you start full fledge investment in stock market, you should spend some time practicing all the investment tools available. You can start with penny stocks. This will make you conversant with all investment tools without making large initial investment. Use of a simulation service for trading can be done where you will invest virtual money in non-existent stock market. You will know about different investment types without danger of losing your hard earned money.

Investing good for Retirement and Higher Education: People have started relying on personal investments for better lifestyle in later years of their life. A small education fund started with the birth of your child will not only help you when money is needed for his education but will also inculcate a habit of investing in your children.

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Irsan Komarga - Expert Author

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Moneymaking Ideas That Actually Work

October 8th, 2009

If you’re looking to make money in the online world, then chances are that you’ve seen more than your fair share of moneymaking ideas that simply don’t work. Between forex trades that promise the world from work-at-home opportunities that are more trouble than they’re actually worth, it can be enough to discourage anyone from making money online. However, there’s one great option from moneymaking ideas that actually work – and they’re about to make you very happy with your bank account.

Sports arbitrage trading is a great alternative to traditional investments because it’s a low risk, high yield investment scheme that requires little maintenance on behalf of the investor. Instead of relying solely on the performance of a single stock, sports arbitrage trading seeks out price differences in the market and then exploits those differences to earn a substantial return. Investors regard sports arbitrage trading as relatively risk-free, which is why it’s such a popular choice for new investors who are looking to try out moneymaking ideas.

Sports arbitrage earns significant returns because it compounds your investment capital with each trade. The more you invest, the more your trade compounds, as the typical compounding rate for each trade averages out between one to five percent – and this figure stands during even the worst periods of market performance. This snowballing effect from compounding trade rates has earned many new traders a yearly income that far exceeds the one from their day job! Best of all, you won’t have to hand over half of your yields to the government, as the profits from sports arbitrage trading are tax-free.

Don’t waste another moment on a moneymaking idea that will lead nowhere. Why not skyrocket your knowledge of the sports investment market by visiting CSI Arbitrage today – your bank account will thank you for it later!

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One Great Investment Strategy

October 8th, 2009

All it takes is one great investment strategy to make a big difference to your lifestyle. But how do you find the right one? You can test various methods yourself or you can learn from others. By learning from others who have trialled and tested methods of investment you will save yourself money and time.

You will find various investment opportunities as you research and most are based on the stock market or on property investments. These investments usually focus on either a short term or a long term plan. Investment strategies can also be based on a return on capitol or an income producing result.

Let’s look at one example. In the stock market you can buy and sell shares. Most investors prefer to buy blue chip stock. Most hold these stocks for the longer term, and rely on both capitol growth and income from dividends paid. There are various methods of leveraging these investments to produce greater returns than the expected average. The more leverage used the greater the risk undertaken buy the investor. To get better returns by leveraging is relatively easy, but minimising the risk is hard, unless you understand what risks are involved.

If you use a combination of leveraging derivatives such as options and CFD’s, (contract for difference), you can effectively minimize your risk. A combination of both these products at the right mix based on blue chip stocks will produce a higher than average return and minimal risk. The exact formula is a complicated one and is dependent on other factors such as volume, volatility, spreads and market timing factors. Other considerations are based on dividend returns and historical data. The full details of this strategy are far too much to fully explain in this article.

The important consideration is that this strategy is possible with the right information and education. When it is put in place it consistently returns a higher than average return with minimal risk. Get educated about your investment area and explore all the associated derivatives and leveraging possibilities.

There are other areas of investment where the same principles apply. By understanding all the choices available to leveraging and applying combinations of risk reducing products and services, an investment strategy can give higher than average returns whilst maintaining minimal risk. That one great strategy is possible and will increase your investment returns.

James McInnes is a professional share market trader and investment entrepreneur, with many years experience trading the Australian Share market. You can visit his site to learn about Trading Options In Australia

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One Great Investment Strategy

October 8th, 2009

All it takes is one great investment strategy to make a big difference to your lifestyle. But how do you find the right one? You can test various methods yourself or you can learn from others. By learning from others who have trialled and tested methods of investment you will save yourself money and time.

You will find various investment opportunities as you research and most are based on the stock market or on property investments. These investments usually focus on either a short term or a long term plan. Investment strategies can also be based on a return on capitol or an income producing result.

Let’s look at one example. In the stock market you can buy and sell shares. Most investors prefer to buy blue chip stock. Most hold these stocks for the longer term, and rely on both capitol growth and income from dividends paid. There are various methods of leveraging these investments to produce greater returns than the expected average. The more leverage used the greater the risk undertaken buy the investor. To get better returns by leveraging is relatively easy, but minimising the risk is hard, unless you understand what risks are involved.

If you use a combination of leveraging derivatives such as options and CFD’s, (contract for difference), you can effectively minimize your risk. A combination of both these products at the right mix based on blue chip stocks will produce a higher than average return and minimal risk. The exact formula is a complicated one and is dependent on other factors such as volume, volatility, spreads and market timing factors. Other considerations are based on dividend returns and historical data. The full details of this strategy are far too much to fully explain in this article.

The important consideration is that this strategy is possible with the right information and education. When it is put in place it consistently returns a higher than average return with minimal risk. Get educated about your investment area and explore all the associated derivatives and leveraging possibilities.

There are other areas of investment where the same principles apply. By understanding all the choices available to leveraging and applying combinations of risk reducing products and services, an investment strategy can give higher than average returns whilst maintaining minimal risk. That one great strategy is possible and will increase your investment returns.

James McInnes is a professional share market trader and investment entrepreneur, with many years experience trading the Australian Share market. You can visit his site to learn about Trading Options In Australia

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Sports Arbitrage – Your Next Moneymaking Venture

October 8th, 2009

Entering the world of online investments is risky chance that many stockbrokers are uncomfortable making – that’s why so many online traders choose to invest their time and money into sports arbitrage! Instead of settling for traditional stocks – which require 24/7 monitoring, not to mention a degree in finance! – savvy investors know that the world of sports investments is the next moneymaking venture.

Not sure what sports investments are? Grab a cup of coffee and read on, because once you learn about sports arbitrage, you’ll never want to go back. It works in a simply but brilliant way: investors find different prices in the sports investment markets and use these differences to earn quite a healthy profit. It’s a low-risk yet respectable reward system that’s a popular choice for new investors and experienced traders alike.

If you’re wondering how this type of trading can be so financially rewarding, then get ready for a mini-course in investments. Sports arbitrage generates portfolio-pumping profits because it compounds the investment capital with every trade made. In other words, the more of your capital you put into sports arbitrage, the more your trade compounds. While many investors warn that large capital investments carry significant risks, this falls to the wayside with sports arbitrage, as the typical trade ranges between one and five percent. This means that an investor seeing a simple compounding rate of a mere one percent can earn $36,700 per year – now that’s a low-risk investment with high yields!

Wondering how your tax return will be hit? Not to worry – the yields from sports arbitrages are tax-free, which means that you won’t be hit with penalties just for having success in the market.

Don’t settle for anymore moneymaking ventures that fail; to learn more about how you can make a serious lump of money from sports arbitrage, visit CSI Arbitrage today!

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Investment Information Truths and Falsehoods

October 8th, 2009

In your search for information on investing you will come across many articles, brochures, and sources that outline opportunities for you to make money. Some of these will be truthful and others will be misleading. Just how do you tell the difference?

Look for experience

Many reputable people and firms will offer information on investment opportunities. The main way to find out if the offer is genuine is to look at the structure of the organisation that is making the offer. You need to go into the historical results and structure of the organisation.

In Australia, investment advisors need to be licensed. How long has the firm you are considering been licensed? If the people or firm have only been licensed for a year, then they have no previous historical results that you can look at. It might be wise to review them at a time further down the track when they have performance results to show you. Look for experience.

Beware The Unbelievable

In your research travels, you will come across all sorts of offers. Some are too good to be true. Often they are just that. Unfortunately, there are those people that become trapped in financial exploits and need money to bail themselves out. Often they need or want your money. These are dangerous investments. It takes a shrewd business person to rescue a financially exposed business opportunity. These are not investments for beginners. You may be offered ownership rights, with the majority of profit outcomes as a lure into financially rescuing a business opportunity. You see all the outcomes as positive, and are rarely aware of the downsides of costs and viability. A financial disaster awaits you.

Misleading Headlines

Headlines are meant to grab your attention. Brochures and advertisements rely on this. However with the misleading headline, once your attention is gained, the explanation behind the headline is never reached or given in the follow up. Headlines that state “Massive profits!” and “Opportunities never to be repeated!” are marketing tools that can be used to mislead the investor into believing that easy profits are to be made. The main question to ask here is that if easy profits are to made, has the person offering the product or service made the profits they are talking about, and if so why are needing investors to make the same profits? What’s in it for them? This cautious attitude will save you from many bad investments.

Good Information – Bad Information.

In summary, the three main points to look at are;

1) Who

Who is giving you this information, what are the history and track performance records that can be verified?

2) What

What is on offer and is it too good to believe. It often will be.

3) Why

Why is the offer being given to you? Has the person making the offer completed and made the same profits that they are offering you?

4) When.

When is the offer expiring? Do not get pushed into acting by an expiration date. This is often used to stop you properly exploring the background information you need to make your decisions.

For more information on how to invest in shares visit http://www.i-tradeoptions.com

James McInnes is a professional share market trader and investment entrepreneur, with many years experience trading the Australian Share market. You can visit his site to learn about Trading Options In Australia.

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Financial Investment

October 8th, 2009

When you invest your money, it can seem like a risky venture since you are unsure if there will be returns on your investment or not. You may not be in the know of what kind of investment opportunities are available to you or provide you with the financial satisfaction that you so deeply desire. This could be for education, buying a home or retirement. That is why it is advisable to seek counsel from an expert.

There are many independent financial experts or companies that deal with various aspects of investments. They will be able to guide you on how to invest, what type would work well for you and how you will benefit in the long run. It is also important to have a financial strategy so that you are able to achieve your financial goals. There are various types of investment opportunities available. It is good to be aware of the different possibilities and how each works. It is necessary to do your independent research despite the fact that you are getting advice from other sources.

Do your homework on the companies or ventures that you want to invest in. Once you do this, you will be in a position to make a decision on what suits you best and whether you will diversify or not. It is advisable to diversify so that you get the most out of everything while reducing the risks.

When you invest for the long term, it is important to be patient. Don’t pull out too soon and also learn when to pull out. The trick here is about timing and balance. You also have to know your limitations when you are investing. Have the discipline to stick to your targets regardless of what happens. Your aim is for you to keep your money while also hoping that it will grow.

Mercy Maranga writes content on Finance and Small Business Management. Visit her site here for more information on Finance and how to effectively Manage your small business. Small Businesses
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Investing As a Career

October 8th, 2009

Do you know the common misconception most people carry about investing is that it is a term used to describe what you do with your money, instead of having it sit in a savings account, as another long term alternative for appreciation? And yet it can very well be a short term endeavor and in fact there are ways to make more of a return on your capital in shorter periods of time in more consistent methods than the traditional sit and wait approach.

Investing today carries many connotations with it and it can be applied to a great array of industries. From Real Estate Investing to stock market investing to running your own business or even selling startup businesses. These and many other types of activities fall into the category of investing and yet many of these avenues greatly resemble running a business.

That is what smart entrepreneurs are doing. They are running investing businesses. Investing itself is their business and within that category an entire world of opportunity is available to them. It is the goal of the investor to put their money to work for them. The investor becomes a researcher deciding where their money will flow next. All the while picking up new skills and exploring more possibilities within the investing arena.

If you are in a standard employment job do not feel that you are stuck there. There are ways to begin investing now that require very little capital and that can produce substantial returns. With practice you can reach a point where your dollars begin pulling in more and more profit for you. The goal is to reach auto-pilot, where your money is doing all the work for you and as if they were employees in the business of you, you as the manager simply instruct them where to go and what to work on next.

By investing in high performing vehicles you can develop an investing career that can one day surpass your standard employment and allow you to retire to the world of investing where your money will be doing as it should be and that is doing all the work for you.

To take part in a free educational resource center that will teach you all about the various types of investing and provide you with educational and venture opportunities please visit us at http://investorsinvitation.com/investingeducation/studyhall.html

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The Top Twelve Investing Mistakes

October 7th, 2009

Mistake # 1. Buy and hold mutual funds

This strategy lost money over the last 10 years. ETFs, Modern Portfolio Theory and semi-annual rebalancing worked beautifully. You were able to capture gains of NASDAQ 2000, real estate 2005, clean energy 2007, DOW 2007 and more!

Mistake # 2. Commission Based Brokers

They are paid to sell you things and most don’t have the ability to offer you ETFs and no incentive to offer you Modern Portfolio Theory. Commission-free brokers are paid for “assets under management,” meaning they want to keep you happy.

Mistake # 3. Trading on Analyst Recommendations

Following analyst recommendations is a losing proposition. Researchers at the University of California and Stanford found that, in the year 2000, the stocks most highly rated by analysts lost 31 percent for the year. Even more incredible is this finding from the study: The stocks least favored by the major analysts soared 49 percent. This study examined 40,000 stock recommendations from 213 brokerages. Analysts are not all crooks, but they are definitely not fortune-tellers. This is mostly just a case of supply and demand, not dumb, corrupt analysts (though there are a few of those).

Mistake # 4. Bankruptcy Buying

Think buying Delta at $1.54 a share when you’re positive that they will come out of bankruptcy is a brilliant idea? Guess again. Reorganization plans commonly call for the cancellation of the existing common stock, with holders receiving nothing. Nada. (Translation: your stock becomes toilet paper.) Lawsuits are a difficult and costly way to try to recover losses.

Mistake # 5. Pet Rocks

It’s very tempting to buy stock after shareholders have earned seven thousand times their investment, or real estate after the industry has posted intergalactic gains, but that is called chasing money. There were people, lots of them, who bought real estate at peak prices in 2005. Too bad losing weight isn’t as easy as losing money.

Mistake # 6. Hot Tips

Hot tips are often merely “Pump and Dump” or Ponzi schemes. Shysters and scam artists prey on you through this mechanism – from Madoff to the penny stock ads that you receive in your email.

Mistake # 7. Sure Shots

If someone promises to double your money in a set period of time, or to give you annual returns that are double or more of what the average person can achieve, assume that you’re dealing with a novice or a scam artist, especially if they want you to write a check before you do any due diligence into their real rate of return and a background check. This would have saved you from Bernard Madoff. Even though he had a good pedigree (like a handful of high-profile scum bags before him), he was notorious for providing no backup documentation of how he achieved his astronomical gains. Beware anytime someone wants you to hand over money before you have a chance to read or research anything.

Mistake # 8. Buying on Headlines

Headlines are written by editors to catch your eye. If you don’t read the fine print, you could be missing the most important information. Before United Airlines declared bankruptcy, investors gobbled up UAL shares on the headline that United had received $1 billion in promised concessions from its unions. The investors assumed that this was great news and that the labor concessions were all that United needed to soar the skies once again and be profitable (with the help of some federal loans). A key consideration was hidden on the inside pages of the article, however: that the Federal Loan Guarantee required. $1.5 billion in union labor concessions. In fact, receiving only $1 billion in concessions – when the loan was going to fall through unless $1.5 billion was delivered — was very bad news, not the good news that the headline trumpeted.

The Loan Guarantee application was rejected, and United Airlines was forced into Chapter 11 only a few weeks after that headline appeared in what many people consider the country’s most reliable news source, the New York Times. The headlines of less respected news sources can be even further from the complete story. The New York Times had actually printed the complete story, but too many didn’t take time to read it.

Mistake # 9. Press Releases

Press releases are written by professional writers, who are employed by the company they are writing about. A company can talk about an increase in revenue without ever mentioning that increased revenues don’t mean the company is profitable or that, due to cash constraints, the company’s fiscal health is on the ropes. If you read anything that is from PRNewsWire or BusinessWire-services that distribute press releases written by corporate PR people-ask yourself, “What aren’t they telling me?” Press releases can have valuable data and information, but they are designed to give you a snapshot of something newsworthy, not to draw out the full picture.

Mistake # 10. Placing all your chips on one sector

Diversify with Exchange Traded Funds so that you can see and capture your gains, with your semi-annual nest egg rebalancing! The former Blue Chip Index has become the Bailout Index, so it is more important that ever that you know what you hold in your ETFs. Mutual funds are too big and too diversified, which makes it impossible to know what you own and to take profits when one segment of the stock market – industry or size or style – has a rapid run-up in gains.

Mistake # 11. Keeping too much stock in your employer’s company

Rule of thumb, according to ERISA guidelines: no more than 10 percent of stock in your own company.

There’s one exception to this rule: if you’re the owner of the company, you may need a dominating percentage of the stock for voting/power reasons. In the early days of Apple Computer, Steve Jobs was booted out of the company he had co-founded.

Mistake # 12. Handing your investments over to a loved one, relative or friend

I’ve spoken with women executives who have commanded billion dollar corporations, and others who have multi-million dollar salaries, who turned over their personal investment portfolios to a husband, in order to make him feel like “more manly.” With men, it’s more likely to be the guy at the country club who convinces his poker partners to come in on a sure shot investment of his. Interview your Certified Financial life partner as if your life depends upon it, because your lifestyle does!

Tushar Mathur writes regularly about Personal Finance and Investing at Everything Finance (http://www.everythingfinanceblog.com). He also writes about making Investments in India at Invest In India (http://investmoneyinindia.com)
Tushar Mathur - Expert Author

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