Archive for Stock Market
Are Your Options Losing Value?
Posted by: | CommentsLet’s discuss the complexities of options and how they differ from trading stocks. First of all stocks are simply one-dimensional trading vehicles, the dimension of “price movement.” For example, one can go long a stock if he/she is forecasting a rise in the price of the underlying asset. The stock trader doesn’t need to worry about time or changes in volatility affecting the outcome of his trade. The stock trader only needs to focus on the asset’s price movements.
Options, however, involve these other two dimensions just mentioned, plus the dimension of price as well. So options are actually three-dimensional trading vehicles based on price, time and volatility. To compare stock and options in a practical sense, let’s consider this scenario:
A stock takes a full year to move up 10%. The stock trader who bought and held on to his stock has just made 10% on this particular trade. However, the option trader might have made nothing at all or even lost money if he just bought an option.
The reason the option buyer may have just lost money is because of Time Decay. His option just lost a whole lot of Time Premium because the trade took so long to develop. Also, since the volatility of the underlying asset probably went down, this could have also caused the Call option to lose value. Options lose premium over time.
So, hopefully you can see that in order to trade options, we really need to be educated. Entry level option traders usually buy Calls and Puts, and they don’t understand why they lose money when the underlying asset goes the direction they are hoping. Remember, when trading options, you are not trading a single dimension; you are really trading a 3 dimensional asset. Finally, the exciting thing about options is that once you understand them, they allow you to be very flexible, creative and can be traded in any type of market.
Are your current Option Strategies keeping you up at night? See why our motto is Max Safety, Max Reward trading options. Get your FREE Option Trading Video on Option Greeks by visiting us at www.SJOptions.com
The Beachfront Iron Condor
Posted by: | CommentsSince the Iron Condor is a negative Vega strategy, this should be the right time to use this income option spread. But what is negative Vega anyway? When is the right time to use this Iron Condor spread? If you do not know that answer, then you may want to watch some of the free videos on the Option Greeks that you can find on the San Jose Options’ website. Anyway, now that the volatility has been moving downward and the markets have become a calmer place to be, this makes it much better to manage this option spread.
With little effort and/or changes at all, most of us Condor traders have been making money over the last few months. With this kind of income spread, at times, it can really be great! There are those times that we have very few adjustments to make. If the underlying simply trends and stays within a tight price range, then the Condor works well and you can make money in this market almost each day.
This is one time that the stock market will give us the chance to really enjoy our option strategies. When it’s not so high maintenance, it is a great way to make a living. It is a great way to be able to make money this way. It is very low stress, and at times you will have a steady income.
Now, I studied with San Jose Options, and leaned a far better, more conservative way to trade the Iron Condor option spread. It is a lower risk, safer way to trade the Iron Condor. What I learned before from other courses, and what they had me doing was very high risk. Now I can trade the Iron Condor with much more confidence knowing that my portfolio is safer than it has ever been before.
Before learning this conservative trading I was doing adjustments almost every week to my portfolio in order to keep myself from losing my money. Now, with very little changes at all I have been making about 10% per month. Now that I have a safer way to create the Iron Condor from the beginning, I have less changes to make. Over all it has been really nice trading the stock market over the last few months.
Want to find out more about Low-Risk Options Trades? Then you should take some Options Classes
Making Money During a Stock Market Crash
Posted by: | CommentsThere are a lot of experts out there who are claiming that the market will fall back down and create another great depression. In reality no one knows were the market will be for sure, but if it does go down there are still plenty of ways to make money.
Actually traders can make large returns faster in a bears market then in a bulls market. That is because stocks tend to climb up stairs and fall out elevators. There are 3 different strategies that allow you to make money during a stock market crash.
1. Shorting Stocks
Shorting is the process of borrowing stock and then returning it. By shorting a stock you simply borrow it from your broker and then sell it. Later on you will have to buy it back and return it to your broker. The idea is to sell stocks high and buy them back lower.
2. Buy Put Options
Put options give traders a way to make much higher returns in a falling market. When you buy a put you simply buy the right to sell a stock at a given price. As the price of the stock goes down your option becomes worth more. After all if you have the right to sell a stock at $50 it should be worth more if the stock is trading at $30 then if it is trading at $60.
3. Selling Calls
Another type of option is called a call option. When you sell a call option you give another trader the right to buy the stock from you at a given price. For this you recieve a premium. If the stock stays below that price the call will expire worthless and you walk away with the free premium.
Of course if it goes up there is no limit to how high it can go, so the risk is unlimited unless you buy a higher call option. For instance if you sell the $50 call for $5 and buy the $55 call for $3 you would profit from the difference, $2. You would also limit your potential loss to $5 because even if the stock goes to infinity you can always buy it at $55.
Learning what caused the great depression and how to make money in that situation can help you to prepare in case we see another crash like the 1929 Crash of Stock Market
The Right Value Stocks
Posted by: | CommentsBuying value stocks is a good investment. The time is right to get stocks at reasonable prices. With the market making a comeback it’s a great time to invest in stock picks. Higher quality stocks can be purchased at standard company rates.
The time to strike is now as the iron is definitely hot! Okay, what is hot and what is not? The companies that are on an upward swing are smaller companies. This in itself does not imply that these would be the best stocks to invest in.
Researching potential companies to invest in is a smart thing to do. Check historical markers and financial projections. Some larger companies were hit hard and took tremendous losses. Find out why this may have happened before investing in them.
It is possible to generate ideas from picks by financial newsletters. Some of those prove pretty reliable in the long run. A great idea is to invest in blue chips obtained from companies that have very little debt. These types of companies usually make a lot of money.
Playing it safe is always a good thing to do. If you have many stock options and especially if you are young, risk taking is something you do not have to think about. Find several promising companies, invest and watch your money climb slowly, but surely.
A really good strategy is to focus on great companies and buy when they are cheap. This strategy in the long run is a safe and virtually lucrative one. Stocks of a medical or food nature are ones that will always stay strong. People have to eat and they need medicine.
Now is the best time to buy value stocks. With the market recuperating from the recent onslaught, price of stocks are very reasonable. Take your time, but not too much time. Assess all of your options before making a final choice.
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What You Need To Know About Investing in ASX Shares
Posted by: | CommentsThe ASX Share market can be a great place to increase your wealth – provided you make the right moves from the start. By this I mean that there are a few fatal mistakes that can cost people their nest eggs, and see them leaving the market for good.
What do I mean? Let me give you an example: Let’s say you started putting $150 a month into ASX Shares in 1980. That’s around $5 a day. It earns an average of 15% per annum over the years including dividends. If you re-invested all your returns, today it would be worth over one million dollars – $1,038,490 to be exact.
But not everyone makes it that far. In fact, a great deal of people investing in ASX shares lose a portion of their money, get scared out of the market and never invest again. And the sad part is they never discover that million dollars we just spoke about because after all, you’ve got to be in it to win it.
So how can we make sure we don’t make the same mistake trading ASX shares? Your Trading Plan is the answer, and although it can be simple, it is the most powerful tool you will use in the market. If you haven’t got one, you shouldn’t be trading. But where do we start?
Well, there are many different ways to invest – in fact as many people as there are investing. But there are a few solid ground rules that will definitely help you out. Therefore, your trading plan should have the following:
1: Your Rules for Buying and Selling – these are the rules you have tested that determine when you buy and when you sell a share. Whether it is buying for fundamental reasons, like company earnings or book price, or whether it is for technical reasons like crossing a trend line or Dow theory it doesn’t matter: so long as it suits you.
2: Your Money Management Rules – this is where you decide how much of your portfolio you will invest in one share. And also how many positions you will spread your portfolio across. As a guide, between 6 and 12 positions is usually optimum. Any less than 6 and you risk not being diversified enough. Any more than 12 and you risk being unable to out-perform the market (the best portfolios are often slightly focused).
Having these in place will set you on your way to a solid start in ASX Shares.
Get more from your ASX Shares with a free course on trading and investing. There’s also free research on Australian Stocks – all at www.asxmarketwatch.com .