The typical novice student usually comes to a class with a predefined perception of the markets and it is my job to show them the reality of how Forex really operates.
When it comes to trading different asset classes, I get more questions about the Futures markets than any other set of markets. This is because many people hear from others how great these markets are for short and long-term trading but know very little about them.
In this article, I will discuss a concept that is somewhat vague to many novice traders. First, I will define Delta in the most traditional way, and then I will provide an example of using Delta as a hedge.
The weekly options have been the topic of our blog discussions over several weeks now. Despite this topic being the trendy subject and in the forefront of many discussions, it is helpful to recognize the functional flexibility this dramatically shortened lifespan brings to a variety of strategies.
I believe that trading is 85% psychological, 10% risk management and 5% strategy. If you are just starting out in trading, keep this in mind. Too many times people are so busy looking for the Holy Grail trading strategy that they forget to work on the most important part of trading – themselves.
Summer is typically the season where market participants have things other than trading on their minds. Even more so, this vacation season, as the cloud of uncertainty hovers over the market. This lack of interest has been manifested in the low trading volume the market has experienced over the past several months.
In this article, I will address some of the questions that I have received from students over the past few months. The topics are strike price selection, exiting short option positions and current market analysis.
Over the past couple weeks, some very good questions have come in that I think may be on the minds of a few of our readers. Whether they are or aren't, the goal of this piece is to enlighten you through Q&A with key trading nuggets that can help you reach your financial goals.
The 7 Pillars is a unique summary of the tried and tested skill sets which any rookie speculator needs to learn from in order to get the results they are looking for. For this week's article, I would like to run through each of these 7 Pillars making them specific to the world of Forex trading, so we can all fully understand the main requirements and skill sets necessary to make it as a consistently profitable trader in today's financial arena.
I held a press conference for members of the Mumbai economic press. One of the questions I received was, "Will your technical analysis technique work on our (Indian) markets?" The answer is a resounding yes and is obvious if you understand what trading is all about.
The 7 Pillars is a unique summary of the tried and tested skill sets which any rookie speculator needs to learn from in order to get the results they are looking for. For this week's article, I would like to run through each of these 7 Pillars making them specific to the world of Forex trading, so we can all fully understand the main requirements and skill sets necessary to make it as a consistently profitable trader in today's financial arena.
This article is the continuation of the previous one, Could the S&P Go Higher Without the Financials Participating?, which discussed whether the U.S. market could continue going higher when its biggest component, the financials, is approaching supply. I highly suggest rereading the last article for better comprehension of this one.
By the time the market opens in the morning, I have a short list of securities I want to watch closely. I watch for opportune times to enter or exit positions on my list. One thing I monitor closely is where stocks are trading relative to Volume-Weighted Average Price (VWAP). A lot of large players like pension funds and mutual funds have rules about where they
I know most of you are wondering why I would write about a trade I would rather pass on than show you one that works. The reason I am doing this is because when it comes to selecting a trade, I usually pass on the majority of them.
Trading options has many uses: speculation, income, protection, and on. The current merger speculation around Genzyme Corporation (NASDAQ: GENZ) is an example where investors and speculators can take some refuge by buying some protection. If a buyout from Sanofi-Aventis (NYSE: SNY) does not occur, or if any other merger problems arise, the put options in Genzyme should offer at least some defense.
For a while the major Oil Companies and Drillers were drifting out of the news. The nasty leak from the BP well was not getting constant attention any more as a mostly successful cap was put in place. Four of the largest Oil Companies are beginning a program for rapid response to a spill, all of which is very good. The problem is part of the market is not buying this, yet.
I was recently asked a question about option trading and the placing of stops. Although I answered that question right there and then, I felt that the topic of stop losses and options needed to be explained in more detail...
A recent discussion on options was started when this question was asked:
If I want to buy a PWER stock option with its high growth because I don’t have the money to buy it outright. What things in such a option should I look for and what should I avoid?
Time to expiration, price of the underlying, implied volatility, historical volatility, puts, calls, delta, gamma, theta, vega, in the money, at the money, out of the money, intrinsic value, extrinsic value, higher commissions, egregious bid ask spreads, no options traded on a stock with a beautiful technical set up, multiple potential beasts and physiologies, LEAPS; why would one even bother with options? If I retain a shred of rationality, an open question to be sure, there must be some reason to complicate my life with these additional variables.
I learned about one risk of buying LEAPS the hard way.
LEAPS (Long-Term Equity Anticipation Securities) are options that expire in a year or more. That means they generally have a lot of time premium built into them.
Implied volatility is a major determinate of the magnitude of the extrinsic option premium. Considered together with time, these two factors act in concert to define the pricing of the time value (extrinsic value) of options.
A friend of mine in the futures pit had been having a rough time of late when he asked me a typical question among us traders – How do I come back from a loss? Since he had been having a "rough patch" and not just one bad trade, I gave him the following advice that is to be used over a period of time...
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