Tag Archives: mutual funds

Stock Trading

ETF Options Investing Secrets

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Index Options and ETF Options both provide you with an opportunity to use options strategies on a group of underlying stocks. However, there are some major difference between the Index Options and the ETF Options.

ETF Options are settled with the underlying instruments that is shares of ETFs. This gives you the chance to use various combination strategies with ETF Options that you cannot normally use with Index Options.Now trading ETF Options is somewhat different than trading Index Options. Though both track almost similar indexes but Index Options are settled in cash at expiry.

Now when you are trading index options or ETF options both of them get affected by the dividend payments on the underlying stocks. You need to take this fact into account when calculating the values of puts and calls with an Options Calculator otherwise your investment returns may not be what you have been anticipating.

As said before, since ETF Options get settled with ETF shares, you can use the different options trading strategies on them unlike the Index Options that get settled in cash. This makes ETF Options a much superior instrument as compared to Index Options. If you have traded stock options before, trading ETF Options should not be difficult for you.

Protective Put is a famous options trading strategy that portfolio managers use to hedge their stock positions. Now when trading ETF Options, you can use the famous Protective Put Strategy by combining long ETF with a long put. This way you can hedge against the downside risk with a small increased cost to the ETF. A Protective Put will limit the downside risk to the put strike price.

Another options trading strategy is often used is the Covered Call. Covered means that you are covering the call with the stocks that you own and on which you have written the call. You can use a Covered Call on ETF. A Covered Call is formed by taking combining long ETF with a short call on that ETF. The short call will give you some income in the shape of a premium and reduce the cost of the position. This will also slightly reduce the risk of the position. But on the other hand, a covered call will limit the upside profit potential. Your max profit now will only be limited to the call strike price.

Another combination strategy that you can use with an ETF is forming a Collared Position. A Collared Position is formed with a long ETF and a long put combined with a short call. A Collared Position limits the limited but high risk to a limited risk only. The downside risk is now only limited to the put strike price. The premium paid in taking a long put position is offset somewhat by the premium that you get by writing a call.

Options trading is risky in the sense that it has both time volatility as well as price volatility. Now, many traders trade options without getting good options trading education. What you need to do is first paper trade these strategies and master them. This way you will learn how to deal with unexpected risk.

An important fact that you need to know is that not all ETFs have options written on them. This should not surprise you as there are many stocks that don’t have options written on them. Another important fact that you should know is that ETF Options are always American Style. American Style options can be excercised anytime before expiry. You can even trade LEAP Options on ETFs. LEAP Options are long term options having expiry of more than nine months to less than two and a half years.

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Stock Trading

Inverted Hammer Candlestick Pattern Can Make You Rich!

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Inverted Hammer Candlestick Pattern is a trend reversal pattern. This pattern can be bullish as well as bearish and occurs rarely or what you can say not frequently.

An Inverted Hammer is a quite rare pattern as the price action needed to produce it does not takes place frequently. But if it does, it is an important signal that you shouldn’t ignore. Now an inverted hammer can get formed in a downtrend as well as an uptrend. In a downtrend, the first day is a bearish candle signalling that the bears are still in control of the market.

How to identify an Inverted Hammer? Identifying an Inverted Hammer is not difficult. It looks just like an inverted hammer! What this means is the high of the trading day is way above the body. So most of the trading took place close to the small area near the low. Now, this low serves as the support for the coming days. An Inverted Hammer has a very small body at the bottom of the candle with a long wick on the upside.

Now, you should wait for the confirmation the following day in order to trade this bullish inverted hammer pattern. If the open of the next day after the appearance of the inverted hammer pattern is higher than the low of the previous day, the inverted hammer pattern is a true pattern and you can trade it by putting the stop at the same level of the open of the day.

Now, when an inverted hammer is formed in an uptrend, it means that the uptrend is about to reverse itself into a downtrend. On the first day, you will find the usual bullish candle signalling that the bulls are in control of the market. This is followed by a gap opening and more buying.

But at some time, the bears take hold of the market. The bears start to push the prices lower. The close is equal to or very close to the low of the day. When you spot a bearish inverted hammer, you can sell or go short by placing the stop close to the open of the second or the signal day.

However, as an aggressive trader, you can place the stop at the high of the inverted hammer formed on the second or the signal day. Always follow the rules. Place the stops and wait for the market to move further. If the market moves in the direction anticipated, you can make a nice profit. If not and the candlestick pattern is not confirmed by the subsequent price action, the stop loss order will take you out of action at a very small loss. Sometimes, the price action can retrace itself but stick with the rules, this is what disciplined traders do!

Mr. Ahmad Hassam has done Masters from Harvard University. Read this shocking 40 page FRWC Brutal Truth FREE Report on trading robots and how to trade with them! Master these Candlestick Patterns!

Forex Trading

Futures Trading Like The Turtles Can Make You Rich!

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A futures contract is a security just like a stock or a bond with some similarities and many differences. A stock gives you the right to own a small part of the company while a bond makes you a lender to a company or the government.

Futures contract as the name implies is a binding contract between two parties for the delivery of a commodity or an asset or even a financial instrument at some future date between the buyer and seller of that contract. Futures market is a highly regulated market with the CFTC responsible for its regulation. Buyers and sellers don’t come in direct contact with each other. In between is the Central Clearing House that enforces the contract reducing the risk of party default!

Futures market is a very important financial market that sets the prices in the retail and wholesale markets of commodities like wheat, corn,heating oil, oil, gasoline, gold, silver, cattle, soybeans, meat, hogs, coffee and many other foodstuff. Futures market was primarily developed for helping farmers hedge their risk while growing agricultural commodities. Agricultural commodities are a very important part of the futures market. Over the decades, futures contracts become popular on a host of other commodities and contracts.

Futures contracts are by design meant to limit the amount of time and risk exposure experienced by hedgers and speculators. What this means is that all futures contracts are time bound and at some point in the future they expire.

Now you can easily trade these contracts by opening an account with a FCM brokerage and deposit an amount to start trading these contracts on margin. The minimum amount with most of the brokers is something like $5,000 but it can less too! Brokers allow leverage upto 10:1 when you trade on margin. Compare this to the leverage of 2:1 allowed by stock brokers. In the last decades, electronic trading has become highly popular among the traders. This includes futures as well.

In US, open outcry trading still takes place during the official hours at the different futures exchanges. However, most of these futures contracts also get traded electronically. GLOBEX allows electronic trading of most of these futures contracts 23 hours each day. Electronic trading provides a more level playing field, more price transparency and lower transaction costs.

The most popular futures contract that get traded on GLOBEX are S&P 500 stock index futures, NASDAQ 100 futures, Eurodollars, CME E-mini futures, foreign exchange rates, gold futures and crude oil futures. You can also trade options on GLOBEX.

GLOBEX trading overnight tends to be thin and more volatile than during the official trading hours that are from 8:30 AM EST to 4:15 PM EST. If you trade financial news on Bloomberg or CNBC before the stock market opens officially, you will find quotes on S&P 500 futures and other taken from GLOBEX.

These quotes are real time. There are many contracts that you can trade and the possibilities of making money in futures trading are immense. Imagine the prices of crude oil going up again just like what happened in the summer of 2008! Futures trading can be highly profitable but risky as well. Before you dabble in them, you should paper trade these contracts for at least a month just to get a feel of how to do it.

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Forex Trading

A New Way To Invest In The Market

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If you are investing in the market, chances are that you are subscribing to newsletters from names that are know for their investment strategies, the so called “gurus”. Well, none of them saw the recession coming and a lot of them lost money like the rest of us. The market is capricious and difficult to predict, especially if your into high risk, high gain stock trading.

I came across this website, ETFTradingSignals.com. I expected a pitch to buy software, but instead it was something different. For one thing, it wasn’t the typical trend following. Instead of stocks, this site tracks EFTs. EFTs are usually part of a long term strategy. They are low risk, but like most safe investments, the returns aren’t usually impressive.

EFTs are like mutual funds, usually considered a low risk, long term investment. ETF Trading Signals has proprietary software that tracks the trends in the EFT market. They send members a monthly newsletter and email alerts advising them of the best EFTs to follow, when to get in and when to get to maximize profit and minimize losses. You only need to make ten or twelve trades a year to realize of profits of at least twenty percent.

The thing about ETFTradingSignals.com is their proprietary software which was developed to maximize the yield from EFTs by following trends the same as with other stocks. EFTs are less volatile than other stocks and require fewer trades to maximize yield.

I found out about ETFTradingSignals.com a few months ago. It didn’t really fit my market strategy, but I was losing money steadily with high risk, short term investments. I thought maybe it was time for a change and I subscribed to their newsletter. Since they offer a sixty day money back guarantee, I didn’t put my money into any of their picks, I just did a test with paper trades. After two months I wished I had gone ahead and invested. Their picks were were making money, which is more than I can say for mine.

There was one trade I took a loss on, but it was a small loss and my other trades all did well. No system is perfect, but this one is very good. Overall these investments are performing better than anything else in my portfolio.

I feel more comfortable about my investments now. I’m not constantly watching the market and worrying about every fluctuation. I let Trend Following Signals do the work and I just make the trades I want when I get an alert, or if I see something I like in their newsletter.

If your investments are controlling your life, instead of you having control over your investments, you may want to consider a change. I can absolutely recommend that you join ETFTradingSignals.com for a new take on investments and a better return on your money.

Go to ETFTradingSignals.com and sign up for their free newsletter to receive the best ETF of the month or find more about their ETF trend trading.

Stock Trading

Mutual Funds: A Safe Investment

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Investing in the stock market can be a fun and exciting way to make money. With all of the various options one has to invest in, there is always profit to be made. For some, it is the investment of stocks, while for others it is the bonds. Of course in today’s day and age, more people are turning to mutual funds. Many investors though are asking whether these mutual funds are safe for the small investor.

The first thing that you have to realize is that a mutual fund is actually a large portfolio of stocks already diversified for you. When you open an account, you are not simply choosing to invest in the stock market, but you are hiring a professional investor who only makes any real money if you do.

Think of a mutual fund as the hiring of a professional investor for a much lower rate then simply opening up a managed account. If you are a small time investor, then there is no way that you could ever come close to the knowledge and experience of the portfolio manager. They also have one main advantage that you do not; they pool the investor’s investments together to increase their buying power and therefore increase the potential for profits.

You can consider the mutual fund as a highly liquid investment. In most cases, when you are in need of some cash, simply placing an order with your broker will result in a check being available by the end of the business day. With stocks and bond investments, this is not the case though.

When you first open your mutual fund account, start off with the bare minimum and then add to your investment at each paycheck. You will not have to deal with any fees along the way and since it is all managed for you, there is no need of keeping track of the various shares of stock. The portfolio manager takes care of all of this for you in order to make investing as simple as it can be.

If you have a lot of money to invest, then go right ahead and invest in stocks or even bonds. You will have the cash to diversify your portfolio properly. For the small time investor though, let someone else handle reducing your risk of loss by choosing one of the safest investments around; the mutual fund. While any company can go belly up tomorrow, the mutual funds can take a whole lot more damage before they begin to falter.

The small time investor will find that not only is the mutual fund a safe investment, but it is also a very profitable one. Many people even look at the mutual fund accounts like a savings account which offers one of the highest returns for your investment.

Learn more about Mutual Funds Trading and Forex Trading Coures at the Forex Trading news dir.