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

domingo, 28 de diciembre de 2014

Strategies with options: Straddle

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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

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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

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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?

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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

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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

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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

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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"

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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

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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?

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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.