All you want to know but never asked about the stocks and options markets.

domingo, 28 de diciembre de 2014

Strategies with options: Straddle

No hay comentarios :

This strategy encompasses the simultaneous purchase or sale of options of different types with the same strike price

a) Long straddle

It is a simultaneus buy of a put and a call option based on the same underlying asset and with the same strike price. It is a strategy employed by those traders who expect significant changes in prices, but uncertain about the market direction.

viernes, 26 de diciembre de 2014

The Pacman strategy

No hay comentarios :

The Pac Man strategy  is a defense used by a company that may be acquired in a hostile takeover. The company about to be acquired seeks to prevent absorption purchasing the shares of the company that wants to make the hostile takeover and make a bid for the company.

jueves, 25 de diciembre de 2014

Different types of orders for trading

No hay comentarios :

Market order

An order to buy or sell a stock immediately at the current market price. When placing a market order to buy, the trader should watch the Ask price, because that is the price at which the share is purchased. When the trader wants to sell with a market order, he or she should watch the Bid price because that is the price at which the share is sold. Market Orders can not guarantee a particular price, but is almost always very close to the bid or ask. Although the price is not guarantee, a market order guarantees that you will buy or sell all stocks requested.

martes, 23 de diciembre de 2014

How to trade a price-indicador divergence?

No hay comentarios :
A divergence between prices and an indicator occurs when both go in the opposite direction: prices rise and the indicator falls; or prices fall and the indicator rises.

The divergence may continue for a long time and no trader wants to buy (or sell if we go short) too early.

The key is to use a trigger to get a confirmation of the trade we intend to do.

The following figure shows two divergences, the first is a bullish divergence and the second is a bearish divergence.

lunes, 22 de diciembre de 2014

The four predictions for 2015 made by billionaires investors

No hay comentarios :

Based on the letters of shareholders and other writings of major investors like George Soros, Carl Icahn, Steve Mandel, as well as data collected by iBillionaire, here are four predictions for next year:

sábado, 20 de diciembre de 2014

Strategies with options: Short Call, sell a call option

No hay comentarios :

Sellers of a Call option seek to profit from falling prices of the underlying asset or protect their investments against the bearish market swings or even againts market downtrends. These traders have a neutral to slightly bearish view of the market and expect a decrease in the volatility. These operations, called Short Calls, are the opposite of Long Calls (Buying call options).

The biggest disadvantage of a Short Call is the high risk because of their potential loss, which is unlimited for the expiry in a bullish market, while its benefit is limited to the price of the premium.

miércoles, 17 de diciembre de 2014

The Clear Method

No hay comentarios :

The Clear method is a trading strategy taken from the magazine Stocks & Commodities of October 2010 and the author is Ron Black. This methodology serves to graphically indicate the short-term movements or swings.

This method identifies the direction of the market movement and the exact moment in which the direction changes.

Investment Strategy "Dogs of the Dow"

No hay comentarios :

The "Dogs of the Dow" is an investment strategy where each year the investor buy the 10 stocks in the Dow Jones Industrial Average, which dividend is the largest fraction of the price; ie the 10 stocks in the Dow Jones with the highest dividend yield.

martes, 16 de diciembre de 2014

The phases of the stock markets

No hay comentarios :

The equity markets as happens with the economic activity of any country or group of countries, as may be the eurozone or United States, typically experience during their temporal development a clearly cyclical behavior. This marked rhythm of markets will be detailed for "small and medium investors" in this article in what today we call as "The phases of the stock markets."

Why the stock market always ends up falling and how often?

No hay comentarios :

An old investor used to say that he knew with 100% accuracy what the stock market was going to do in the short and medium term and with 98% of accuracy the market behaviour in the long term. In the short and medium term, it is certain that the market will fluctuate. That is, it will go up and it will go down, not necessarily in that order. In the long term, the stock market usually rises.

Stock market investors should be prepared for at least a market falling  of 10% a year, a falling of more than 20% every few years, a falling of 30% once or twice in a decade, and a big downtrend of 50% two or three times throughout their life. This means that everyone probably will live 2 or 3 severe economic recessions. That's why the trader should develop an investment strategy which take this into account, because otherwise he or she will learn the lesson the hard way.

domingo, 2 de noviembre de 2014

Strategies with options: Long Put, buying a Put option

No hay comentarios :

Buyers of a Put option seek to benefit from the price decreases of the underlying asset or protect long positions againts a possible drop in price. They have a bearish view of the market and expect that price volatility to increase.

The risk of this strategy is limited to the premium price paid by the trader at the beginning and profit potential is unlimited at maturity in a bear market.

The breakeven point in this trade, ie the point from which begins the potential for profit, is the strike price - the price of the premium. Furthermore, we note that its delta decreases to -1 as the underlying asset prices falls.

domingo, 19 de octubre de 2014

Day Trading vs. Long-term Trading - Which is better?

No hay comentarios :

Both the short term and long term stock trading can be effective trading strategies, however, long term trading has several advantages compared to Daytrading. These include the effect of compounding, the opportunity to earn dividends, reducing the impact of price fluctuations, the ability to make corrections in a more timely manner, less time spent tracking your investments and other.

Here we will explain in more detallers these advantages.

Stock trading platform EquityFeed

No hay comentarios :

¿What is EquityFeed?

EquityFeed is a real-time platform for traders interested in the stock market. This application integrates seamlessly with the most popular stock brokers and allows instant execution of transactions and it was also designed to provide the greatest benefits to traders who trade regularly in the U.S equity markets. It is a modern suite that includes multiple trading tools and is revolutionizing the way in which traders follow the stock market in real time to find opportunities when they arise. This professional grade platform puts the "small trader" in such a position that it can discover the opportunities presented by the market, and trade in the highest level possible.

miércoles, 1 de octubre de 2014

The Options Premium

No hay comentarios :

The symmetry of rights and obligations that exists in futures contracts where two parties agree to make a purchase/sale of an underlying asset when the contract reach maturity, ceases to apply in the options because one party (the buyer of the option ) has the right but not the obligation to buy (call) or sell (put), while the seller or writer of the option will only be required to sell (call) or purchase (put) the underlying.

viernes, 26 de septiembre de 2014

What are the Pink Sheets in the stock market?

No hay comentarios :

The Pink Sheets is a system where a trader can buy and sell stocks that are not listed on an stock exchange in the United States.

Formerly known as the "Pink Sheets," the OTC Markets Group, Inc. is a privately held company that provides trading services in the stock market for shares that are not listed on an organized exchange. According to the SEC, the Pink Sheets is not a stock exchange. The company simply facilitates the exchange of shares ​​between independent brokers.

The company was founded in 1913 as National Quotation Bureau (NQB). For decades, the NQB reported  quotes for both stocks and bonds, the publication of quotations on the Pink Sheets and Yellow Sheets, respectively, where they received their names from the color of paper they are printed on.

The Pink Sheets is not a stock exchange. To be quoted by the Pink Sheets, companies do not have to meet any requirements (eg filing financial statements with the SEC). With the exception of foreign issuers, represented by ADRs, the companies which are traded on the Pink Sheet tend to be very small, illiquid or bankrupt. Most of these companies do not meet the minimum requirements for admission to be included on a stock exchange such as the NYSE. Many of these companies have no regular reports or financial statements with the SEC, making it very difficult for investors to find reliable, unbiased information on businesses.

For these reasons, the SEC says that companies listed in the Pink Sheets are among the most risky investments and advises potential investors to carefully research before investing in these shares.

There is concern of public interest related to Pink Sheets. This may include a campaign of fraud of the promotion of dubious shares which can lead to a investigation of fraudulent activity committed by the company or its executives.

What is a good till canceled order (GTC)?

No hay comentarios :

A good till canceled order(GTC) is an order to buy or sell a security at a specific price that lasts until the order is completed or is canceled. A GTC order will not be executed until the price reaches the value. Investors often use GTC orders to put a limit price that is far from the current market price. Some brokers may limit the time of a GTC order and may charge more fees to run this type of order.

For example, if a stock is trading at $15, but  you want to buy when the price drops to $12, you can place your good till canceled order as a limit order.  Once the price arrive to the level $12 , the stock is purchased by the order. Good till canceles orders ares different from day orders, which are canceled at the end of the day.

In most cases, GTC orders are canceled by the broker 30-90 days from the date the order is place, so it is advisable to ascertain the trading terms of the broker/dealer. Such orders are used when the order is placed in a price level which is remote from the current market price (can be taken as a type of pending order).

lunes, 15 de septiembre de 2014

What is moral hazard?

No hay comentarios :

The term "moral hazard" originated in England in the 17th century, and was often used by insurance companies to involve fraudulent activity by one of its policyholders. Today, moral hazard is used in different situations, including insurance, finance and management. A moral hazard is a situation in which the behavior of one of the parties may change to the detriment of the other part after a transaction. For example, a person with a home theft insurance may be less cautious about their house, because the negative consequences of theft are now the responsibility of the insurance company. One part makes a decision about how much risk to take, while the other part absorb the costs if things go wrong. The isolated part of the risk behaves differently than it would if it were fully exposed to the risk.

jueves, 11 de septiembre de 2014

Typical frauds stock market

No hay comentarios :

Fax or email solicitations that tell about a particular stock

The fraud works like this: you receive a fax or an email describing a stock, giving the symbol and some details about the company. This fax or email is sent to many people, with the intention that they buy the stock given the impact that the fax created for the stock. What is really happening is that the fax you received came from a penny stock promoter, which was paid by the company (on company shares) to promote the stock.

domingo, 7 de septiembre de 2014

What is an initial public offering, or IPO?

No hay comentarios :

An initial public offering, or IPO is when a company sells its shares to the public for the first time. An IPO occurs in the primary market. Before the IPO, it was a private company, but now the company is allowing the public to participate in their growth and profits. In return, the company can raise money by selling its parts. 

To expand their business, increase their inventory or maintain their operations, companies need to raise money. There are two main ways to raise money: incur debt or sell shares. Debt can be in the form of line of credit, loan from a bank, or the company may sell bonds. Shares can be either common stock or preferred stock.

sábado, 6 de septiembre de 2014

What is the Nasdaq Level II?

No hay comentarios :

The Nasdaq Level II is a quoting system showing all offers and demands of the market makers, the daytraders and buyers and sellers. This system also tells the trader how many shares these market participants want to buy or sell for each stock traded on Nasdaq. For example:

jueves, 4 de septiembre de 2014

Guerrilla Trading Strategies

No hay comentarios :

In this article we will discuss a number of strategies used to trade shares on the stock market. These are the famous Pristine's guerrilla strategies which have been taught for several years. The concept on which these techniques rely the 20/20 bars. These are basically bars that have a fairly wide range in which the minimum value is very close to the opening and the maximum is close to the closing price in the case of the bullinsh bar while in the case of  the bearish bar the maximum is near to the opening and the minimum is near the closing. 

Strategies with options: Long Call, buying a call option

No hay comentarios :

Buyers of a Call option seek to benefit from the price increases of the underlying asset or protect short positions againts a possible price increase. They have a bullish view of the market and expect that price volatility to increase.

The risk of this strategy is limited to the premium price and profit potential is unlimited at maturity in a rising market.

The breakeven point in this trade, ie the point from which begins the potential for profit, is the strike price + the price of the premium. Furthermore, we note that its delta increases to +1 as the underlying asset prices rise. 

martes, 2 de septiembre de 2014

The Nirvana Fallacy in trading

No hay comentarios :

Unknown by most, the nirvana fallacy is the logical error of comparing real situations against utopian, unrealistic and idealized situations. Alternatively it can also refer to the tendency to assume that there is a perfect solution to a particular problem.

This term was coined by economist Harold Demsetz of Chicago School in 1969 and stated that:
The view that now pervades much public policy economics implicitly presents the relevant choice as between an ideal norm and an existing 'imperfect' institutional arrangement. This nirvana approach differs considerably from a comparative institution approach in which the relevant choice is between alternative real institutional arrangements.
Or as Voltaire would say, "Le mieux est l'ennemi du bien" ("The best is the enemy of the good").

SpeedTrader Broker

No hay comentarios :
Broker de acciones&Forex regulado SpeedTrader

SpeedTrader is a regulated stock broker from United States which is specialized in stocks and options (options based in these shares) of the major stock exchanges in the United States and Canada. This broker offers various trading platforms (web-based and desktop) designed for buy, sell, or trade stock options & stocks. The broker noted for its low fees and its fast trade executions. The following overview shows the main features of this broker.

domingo, 31 de agosto de 2014

Psychology and Emotions in Trading I

No hay comentarios :

Investment in financial markets is a psychologically frustrating activity. We can have all the logic on our part and in the end the market can make a move against all odds (and worse, when nobody expect it). We must get used to generate a high tolerance for failure against losses and not build castles in the air when we are in a winning position.

In general, the more frequent our trades, we will face more against our own psychology. For those who do intraday trading (many fast trades that must be closed at the end of the day) or swing trading (transactions in a short period, usually from one day to a couple of weeks), it is absolutely essential to follow the famous three "M" of Alexander Elder: "Money, Mind, Method".

sábado, 30 de agosto de 2014

Different types of stocks

No hay comentarios :

When a company decides to issue shares, the owners must decide what kind of stocks and in what quantities. The decision determines how profits are distributed to shareholders. The two types are preferred and common shares, but the decision goes beyond deciding the type of shares. Owners can choose to issue different classes of shares within these two types.

jueves, 28 de agosto de 2014

Stock Market Indices

No hay comentarios :

A stock index corresponds to a compound statistical record, usually a number, which tries to reflect changes in the value or average returns of the component stocks. Generally, shares in the index have common characteristics such as belonging to the same stock exchange, have a similar market capitalization or belong to the same industry. The stock indices are usually used as a reference point to different portfolios such as mutual funds.

The purpose of stock indices is to reflect the evolution over time of the prices of securities listed on a stock exchange. In short these instruments try to reflect the performance of all companies listed on the stock taken together like a single unit values.

Like shares, stock indices are traded on major stock markets.

What is an option?

No hay comentarios :
An option is a contract between two parties whereby one party acquires the right but not the obligation, to buy or sell a specified amount of an asset to the counterparty at a set price and at a future time. There are two basic types of options: 

  • Call option contract
  • Put option contract
There are four basic strategies when buying and selling options, which are:

Buying a call option (long call)

This strategy gives the buyer the right to buy the underlying asset at the strike price on or before the expiration date of the option. This right is granted by the payment of a premium. The maximum loss is limited to the premium and it has an unlimited potential profit.

Buying a put option (long put)

This strategy gives the buyer the right to sell the underlying asset at the strike price on or before the expiration date of the option. This right is granted by the payment of a premium. The maximum loss is limited to the premium and it has an unlimited potential profit.

Sale of a call option (short call)

This transaction is also known as writing a call option. It obligates the seller or writer to sell the underlying asset at the strike price on or before the due date, in exchange for payment of a premium. This strategy has limited profit (the premium) and a unlimited loss potential.

Sale of a put option (short put)

This transaction is also known as writing a put option. It obligates the seller or writer tobuy the underlying asset at the strike price on or before the due date, in exchange for payment of a premium. This strategy has limited profit (the premium) and a unlimited loss potential.

Option premium 

The premium is the price that the option buyer pays the seller of the contract (writer) to acquire the right to buy (call option) or sell (put option) the underlying asset in the future at the strike price. 

The option buyer pays the premium and the seller collects the premium, due to the difference of obligations and rights. The buyer has the right but not the obligation, to buy or sell, and the seller is obligated to buy or sell at fixed price, whether or not beneficial to him.

Call option Sell option
Option buyer Right to buy Right to sell
Option seller Obligation to sell Obligation to buy

domingo, 9 de febrero de 2014

What causes the stock price to rise or fall?

No hay comentarios :

We have talked in previous articles about the stocks and how we can make huge profits with its buying and selling in the stock markets. Regardless of the company we choose to buy/sell securities, the market is quite changing so prices are constantly changing.

In the stock market shares of many companies are traded and billions of dollars in securities are moved every day. There are a number of reasons why the stock price of a company is changing and therefore tends to rise or fall. These changes reflect decisions made ​​collectively by investors in the market.

jueves, 9 de enero de 2014

What is daytrading?

No hay comentarios :

Day trading is a term that refers to the purchase or sale of financial instruments or assets like stocks, currencies, futures or options on shares to close the position in the same day.  This type of trading is considered one of the most risky because market movements can be quite erratic during the day, which can lead the trader to suffer multiple losses in a single session. However, it also provides the ability to open and close multiple transactions in a day

For the stock market, perform day trading is largely based on bet on the stocks price and its value at the end of the day (if the value will decrease or increase). Although day trading also includes short-term operations, including scalping. Using a broker that provides the data in real time and an internet connection we reach this type of commercial activity.