Monthly Archives: May 2010

Stock Trading

How To Get An Edge In Stock Option Trading

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Traders need to understand volatility in order to get an advantage when trading options on the stock market. Misunderstanding of this topic by the trader can lead to frustration, confusion and ultimately lost investment. As a trader or investor it is vital to have a clear understanding of the two primary types of volatility in order to be successful at options trading. They include implied volatility and statistical volatility.

Implied volatility is tied to the options price or options pricing model. If traders or investors who are involved in option trading are expecting a future event to drastically change options prices of the underlying security, then they may want the buyer to pay more for the option that they are selling. If this takes place the implied volatility increases. The volatility that is implied in the price of the option changes. However if the option seller is not excited about the future prospects of the option then the option trading prices could reflect very little implied volatility.

Statistical volatility, or historical volatility, relates to option trading in terms of historical performance. It is tied closely to the price of the underlying security. The way traders and investors measure this is to determine how volatile the market reflects its daily pricing fluctuations. The higher the statistics and the more the prices fluctuate, the more volatile the market. Of course the reverse is true if the statistics are lower and the prices are not fluid, then the market is somewhat more predictable with less volatility associated with trading options on the market.

Understanding these scenarios is useful when option trading. Traders and investors compare the statistical and implied volatility in order to determine whether or not the option pricing is overvalued or undervalued. The way to determine whether they are over or under valued is to determine the differences between these two prices. If the implied volatility is higher than the statistical volatility, then the option pricing would be more expensive than if the option pricing model reflected the implied volatility closer to the statistical. It could be as simple as understanding the options pricing and analyzing the daily fluctuations or trends associated with the market and various options.

When a trader or investor begins option trading on the market they need to understand whether they are trading with statistical or implied volatility. If the statistical volatility value is higher than the implied value, it would mean that the option prices are less expensive. This is primarily due to the daily fluctuations of the market, options or underlying securities. If the daily fluctuations are greater than the anticipated future pricing then the options and pricing movements are tied to the underlying security.

Many traders and investors discovery option trading can be rewarding and profitable. Further understanding market volatility and the ramifications of them as applied to trading options on the market can provide greater insight into how and when to invest in various options or option spreads.

If you want to learn more about option trading, feel free to visit our website.

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Initial Public Offerings

Initial Public Stock Offering Process in 1965-Looking Back on the Past

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Seventy percent of the human body is composed of water. Thus, every human being needs water for life support. There are many incidents wherein individuals survived for several weeks by just drinking water.

Trees and plants need sunlight to complete their photosynthesis or their food-making process. In addition, it is also an essential element for their growth. Without sunlight, their chance of survival is very slim even when they are supported with water and necessary soil nutrients.

In the same manner, companies need capital or financial assets to support their day-to-day business operation. They need to pay the suppliers of the raw materials that they are using to manufacture their products. They need to pay their employees who helps the company manages its operation. Advertising and other PR stuffs also needs financial support in order to promote their products to the public.

Thus, capital for all companies serves as their “bloodlines”. Without it, no business operation, and definitely, no generated revenue for the company.

Companies can raise additional capitals that they need to support their business operation as well as possible expansions in various ways. However, one of the more popular ways to raise capital for a company is the IPO or the initial public offering. It is referred to as the first sale of a company’s common shares to interested public investors. As previously mentioned, it is primarily used to raise additional capital for the company. Keep in mind that this term only refers to the first public issuance of a company’s common stocks. Any later issuance of common shares to interested public investors is now referred to as a secondary market offering.

Initial public offering of common stocks has proven to be an effective way of raising additional capital for a company, though there are legal compliances and reporting requirements that must be met. The United States is considered to be imposing heavy legal requirements to those companies that will file an IPO for additional capital generation. Under the Federal Law, all IPO process are governed by the Securities Act of 1993 and laws of the U.S. Securities and Exchange Commission, with each stock exchange has its separate respective rules that every company must follow.

The IPO process generally includes one or more investment banks (financial entities that assist both public and private companies or corporations in raising capital as well as provide strategic advisory services for acquisitions, mergers, and other kinds of financial transactions) as the underwriters. The company will enter a contract with the underwriter to facilitate the issuance of the stocks to the public. The underwriters will be the one to approach investors who are interested in buying those common stocks.

During the early years of the IPO, it is considered to produce a positive mean initial return to the listing companies. In 1965 when the IPO process is still on its first years of operation, there are around 120 companies listed which generates an average initial return of 11.4 percent from the issuance date to the end of the offering month.

IPO analysts recorded an average of 22 percent worth of initial returns on the listed companies from 1965 to 2004. It clearly shows that many investors are interested on purchasing shares through the IPO process. It also illustrates that companies under IPO listing generally provides an additional capital for them.

The initial public offering of common stock during the 1965 era is just a manifestation that the IPO process, despite of the heavy legal requirements that must be made, it is still the most ideal way to issue stocks to the public and raise additional capital for a company’s day-to-day business operation.

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Forex Trading

Automated Forex Trading: Clever Yet Effective Technology

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Why Forex trading?

This is probably one of the questions that you need a reasonable answer. There are hundreds of investments out there that you can prefer, but why go trading foreign currencies instead?

Forex investment is unique in various aspects.

Its trading volume is relatively huge compared to other market.
It has extreme liquidity or the capability of either buying or selling the currency without causing significant movement in the market price.
It has the largest number and variety of traders.
It is one of the markets that have long trading hours (24 hours each day, except during weekends.
Trading locations are almost everywhere, not just in the United States or major cities of Europe.
There are different factors that affect foreign exchange rate.

Another whooping fact that will make you excited to go on Forex trading: it has an average turnover in traditional foreign exchange market of around $1.88 trillion daily, according to the Triennial Central Bank Survey of the BIS (Bank for International Settlements). Here are the daily averages of turnover on the Forex market for the last 17 years:

$500 billion (April 1989)
$750 billion (April 1992)
$1.18 trillion (April 1995)
$1.48 trillion (April 1998)
$1.16 trillion (April 2001)
$1.88 trillion (April 2004)

From the figures alone, you will notice that the average trend of Forex turnover is increasing. It is estimated to reach as high as 2 to 3 trillion dollars within the next 8 to 10 years, if the number of traders around the world will continue to increase. As a matter of fact, everyone have the chance of getting a substantial slice of the Forex market wealth pie, especially that the Forex trading marketing is now on its automation process.

The concept of automation becomes the new trend to the foreign exchange trading market. The Interbank spot Forex market has also considered switching to the automated method as well.

There are several benefits that a Forex trader can derive from automated Forex trading. Here are some of such benefits and figure out why Forex trading as well as other investments (futures and commodities) prefer the automated process.

Through automated process, transactions can now be done in real time. Although manual systems have existed for quite some time now, it is difficult to achieve such benefit that the automated Forex system can offer to its traders. All of the trades can happen within a few milliseconds and can be a big plus for automated transactions against the manual system. In fact, there are problems that are addressed using automated Forex trading especially if the trader is losing a few times in a row that prevents him from making new trades. Such problem could be addressed using the automatic trading system.

With automated Forex trading, you will have a greater diversification. It means that you can trade in various markets in different time zones at a time. You can execute trades with traders from Singapore or London even it is already 12 midnight in the United States. This benefit allows you a multiple exchange model option. You can use varying trading models to evaluate short-term data. This means that you will be able to predict the trend for a shorter period of time, let us say from fifteen minutes to half an hour.

As previously mentioned, the Forex market is unique because of its extreme liquidity. This liquidity is increased when the market goes automated.

Risk management problems are solved through automated Forex trading. International checks, which are commonly used in making purchases on Forex market, are synchronized through automated technology. Since the transaction in an automated process is now on real time, there is a slim chance that the payments will be delayed, reducing the risk of non-payment by either parties. Although there are problems noted with the use of the automated system, it can be fixed through consistently-updated technologies.

With automated Forex trading market, the prediction of $2-3 trillion average daily turnover within the nest 8 to 10 years can be changed within the next 4 to 5 years. Given the quick yet efficient trades on varying time zones, automated Forex trading will now be among the existing lucrative business around the world.

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Currency Trading

Christmas Gift For Boyfriend: Top 7 Christmas Gifts For Your Boyfriend

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Is your boyfriend extremely hard to shop for? Have you been trying to buy him a Christmas gift, but nothing that you really like comes to mind? Have you been thinking about it for a while, and getting frustrated with buying Christmas gift for boyfriend, because you just can’t find anything that he will love?

Well, read this article for our top 7 Christmas gift ideas for your boyfriend! If you have been thinking, what should I get my boyfriend for Christmas, then your search is over! In this article you will find a few gift ideas that will be great for your boyfriend for this holiday season!

Here are the top 7 gifts that you could get for your boyfriend this Christmas:

1. Name Key Holders. If your boyfriend is always losing his keys, how about getting him a key holder, so that he always remembers where his keys are? You can personalize the key holder with his name!

2. Sports Prints. Does your boyfriend love sports? How about getting him a few sports prints that he can hand on his walls?

Get him the sports prints of his favorite sports teams, that is something he will love.

3. Beer Glasses and Beer Mugs. Does your boyfriend like to drink beer? If he is a fan of beer, how about getting him beer mugs personalized with his name! He will love your gift and he will enjoy drinking beer from the special mugs you got him!

4. Personalized Nameplates. How about a nameplate with your boyfriend’s name that he can put on his desk? Get him a cool nameplate that he will really like!

5. Golf Gifts. Does your boyfriend like golfing? If he does, then you can get him a golf gift. Of course, some golf gifts cost a lot of money, and you may not want to get those. But if you want to get him something golf-related, but do not want to spend a lot of money, here are some ideas.

You can get him golf balls. You can get him clothes that he can wear when golfing. Just be creative, and you can get him a gift that he will love, without breaking your budget.

6. Mens Watches. Here is a classic gift idea, a mens watch. Just like with gold gifts, you can get a watch in your price range. There are  many expensive watches out there, but if you know the looks that he likes, you can get him a watch that he will like, without breaking your budget doing that.

7. Can Coolers. If he likes drinking beer, soda, or both, how about getting him a personalized can cooler? You can personalized it with his name, and he will be able to cool off his beer and his soda in his personalized cooler!

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Commodities Trading

The Successful Approach of Trading Commodities

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An average individual can become a successful commodity trader if he is going to adopt a one hundred percent mechanical approach. This is the best solution so that emotional influences are minimized because emotional drawbacks can destroy the decision making of a trader.

If you are encountering problems in commodity trading, the more you should become mechanical in the approach you are going make, so that there is a greater chance of better results. A one hundred percent mechanical approach means that you would find the most important step in finding a perfect system that will help you solve the risks being faced.

However, a perfect system can be a great approach for a particular month but can turn lousy on the next. Perfect systems refer to a perfect mechanical approach that will solve the problems or risks being faced in commodity trading.

A non-trending market for now could be a trend tomorrow. There is only a short period of time span. You can never find an indicator that tells what type of market that will boom in the future or when is the best time to trade your commodity. The best system that you will mechanically apply is the one being tested or have shown a job well done in the history of commodity trading.

Make sure that if you use the system, it will help you gain profitability in the future. One perfect system that could be applied is diversifying your capital and time frames. Diversify as much of your capital using a relatively long-term system. Remember that one system is enough but trading several systems is not bad using different markets.

The most efficient method is using the long term trading system. It is because you are holding the winning trades in a longer time span increasing your average profit in every trade compared to the short term trading system. As the time frame goes shorter and shorter, the average profits will also decrease. However, there is a less percentage in marginal error because the trading costs, commissions, slippage, and asked/bid spread remain the same.

Comparing the two systems of commodity trading, short term trading decreases its trading efficiency causing big trouble in the future, but long term trading system can still make money. Short term trading could make the most of your capital if your chosen system can freely move from one market to another looking for the best opportunities.

The real purpose of diversifying is to shorten the time frame in order for the equity curve to stay smooth so that it could take advantage of the periods when the congestion of markets happened in the long-term time frame.

Your personality in trading commodities is a big factor. You can use additional capital in diversifying a long-term system or simply add contracts in the market that you are currently trading. This approach can offer you the highest probability of creating long-term profits and earn the highest value of expected profits.

Choose among the well-selected groups of diversified markets. Develop your discipline, patience and have the courage in keeping your system traded until you achieve the long-term effects. Don

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