ETF Options Investing Secrets
Mar 1, 2010 wealth building
You must have traded ETFs. No, then let me first introduce you to ETFs. ETF is the short acronym for Exchange Traded Funds. ETF are a basket of stocks or other assets that have been designed to closely track a stock index, a market index, sector index or any other index. Now trading stock indexes is what many trader do. You can trade stock indexes with options. However, trading ETF Options can be a more profitable venture for you!
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. On the other hand, 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.
Index and ETFs both get affected by the dividends paid by the underlying stocks. So if you use options on them, these dividends on the underlying stocks should be incorporated into the puts and calls by using an options calculator.
Now, ETF Options are more flexible than the Index Options as you can use the underlying ETF as well in your options strategies. If you have already traded stock options, ETF options should not be difficult for you. You can hedge your ETF position with an option on the ETF.
Using Protective Put Strategy by combining long ETF with a long put can hedge against the downside risk limiting it to the put strike price with a slightly increased cost for the ETF.
In the same way, you can use the covered call on an ETF with a long ETF and a short call. The short call reduces the cost of the position and slightly reduces the risk as well. However, a covered call limits the upside profit potential to the call strike price.
How about a Collared Position. This is 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. The premium paid in taking a long put position is offset somewhat by the premium that you get by writing a 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.
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.
Mr. Ahmad Hassam has done Masters from Harvard University. Get this 52 page ETF Trading Guide FREE! Read this shocking FREE 49 page Quantum Swing Trading Report.
Tags: credit, Day Trading, debt, Etfs, futures, home business, Investing, mutual funds, options, personal finance, real estate, retirement, small business, Stocks, trading, wealth building
How To Back Test Your Trading System? Know These Shocking Limitations!
Feb 27, 2010 wealth building
Your trading system needs thorough testing before you decide to trade live with it. A trading system might comprise of a set of indicators. You need to know how well your trading system and its set of indicators work in a particular market.
How to do backtesting? Backtesting uses historical data to test the performance of the trading system under the past market conditions. Using a backtesting software makes it very simple and easy.
There are many problems with historical data. There is no slippage in backtesting. Slippage is one of the most important problem that a trader faces while trading live. The other problem that the backtest ignores is the widening of spreads under volatile market conditions. So backtesting results are no guarantee that the trading system will perform well under live market conditions. Things that worked in the past might not work now. Similarly something that didn’t work in the past, may work now! You never know!
In other words, no two trades work out in exact the same way twice. SO you have to be careful when looking at the back testing results and take it with a pinch of salt. However, there are still some advantages of back testing a trading system.
Back testing can give you a feel how a particular market behaves under certain conditions. Back testing can also spot you certain general characteristics of the market like the seasonal trends and market tendencies.
For example, some markets especially the commodities market is highly seasonal and cyclical in nature. Now in other markets, you might not find any seasonal trends. For example, there is very little seasonality in curreny market or the bond market. In case of the stock market, there is much talk of the January Effect. Well, it is there no doubt about it. Some years, it is highly pronounced and others it is not that pronounced. Similarly stock prices tend to rise at the end of each month and the first few days of the new months. The reason for this is that many institutional investors tend to put the new funds to work at the end of the month and the beginning of the new month!
Back testing can also help you establish the amount of time a particular market tends to run in a certain direction. For example, in case of US Dollar Index, its trend lines tend to last for months to years.
There is no substitute for live trading results! To tell you the truth, backtesting can only give you a rough guess about the performance of the trading system under live trading conditions.
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Tags: credit, currency trading, Day Trading, debt, Forex, futures, home business, money, mutual funds, options, real estate, retirement, Stock Market, Stocks, trading, wealth building
Bad Credit Loans-Read This Today
Dec 31, 2009 wealth building
The credit score is extremely important when many people apply for a loan. In the United States, there are three credit-reporting agencies, Equifax, Experian, and TransUnion. They have different methods for calculating the credit ratings yet they still have a huge impact on everyone’s credit score and rating. People with the lower credit ratings are said to have “bad credit.”
Yet people with bad credit can still get loans and credit cards. They have to do things differently due to the bad credit yet they still have options. They will have to pay higher rates on the interest of the loan as well as sometimes have the loan secured by collateral. The higher the interest rate the higher the payments on the loans and credit cards, this is one negative aspect for people with bad credit.
There are financial institutions on the internet that provide the loans to people with bad credit. They will screen the applicants and verify the credit history, yet the applicant will still qualify for the loans. The loans will have higher interest creating a higher payment. Many people with bad credit are willing to pay the higher interest just to get the loan from the online providers.
The best way to get a lower interest rate is to wait to apply for a loan or credit card. Give your credit time to improve by taking measures that will increase the credit score. There are several ways to improve the credit score. Here are three such ways.
1. Apply for a prepaid credit card. A deposit made into a savings account and used as collateral secures the credit card. Using the prepaid credit card will increase the credit rating. Do this for six months and see the difference.
2. Pay all bills on time. Each time the bill is paid and the account is current it raises the credit score. Again, do this process for six months and watch the credit rating improve.
3. Talk to the existing lenders for debt consolidation and refinancing options. These options will allow the loan repaid faster, increasing the credit rating in the process.
Loans are available for people with bad credit. The best option for people with low credit scores is to wait to improve the credit score by making their payments on time and waiting for the credit score to rise higher. The long-term benefits of waiting will mean lower interest rates on the new loans after the credit has improved.
Find out more about low interest student loans, and bad credit home loan refinance for your needs.
Tags: business, debt, finance, financial advice, loans, personal finance, personal loans, wealth building
Advice On How To Get Paid On The World Wide Web Doing Surveys From Home
Nov 17, 2009 wealth building
Many women are researching to earn profits online to supplement their income. While economy has tanked in many local areas of the country and all over the world, the internet remains a fascinating place to create extra income. It is the place where every person has a fighting chance.
Even though there are several top cash making models, the opportunity you get involved with has to be right for you. There are heaps of ways to make money on the internet but each comes with its own uniqueness. No two models are the same.
If you are the type of person that loves to interact with other individuals, you may want to get involved with an opportunity that allows you to coach and mentor other men and women. Multi-level marketing or MLM programs is one such opportunity. There are over one thousand MLM programs online each with a number of profitable coaches and mentors.
Should you choose to participate in one of the many programs, be sure to do your investigate before you leap into an opportunity. First find a company that has a good standing and a long history of contructing thriving sponsors. Secondly, make sure they have attractive compensation plans. Finally, never join a company with an inferior product line.
There are also people supplementing their income by taking paid surveys in their spare time. This is not only enjoyable work, but it also offers you with a unique opportunity to make extra money for doing a little work on the side. There are a lot of companies looking to hire people for their opinions on certain types of products and services.
Affiliate marketing is one of the greatest areas online to get into. This is a very large industry representing billions of dollars each year being paid out to affiliates around the world. These programs are free to join and anyone can participate in affiliate marketing. There is a lot to understand in this subject ranging from the best programs to the greatest conversion methods.
Selling information products is also an topic that has made many men a lot of cash. The internet has created an opportunity for thousands of men to package and share their knowledge and experience online for others to study. Most information products are in digital PDF form and can easily be downloaded after a visitor pays.
You can find success online. It is not hard. At all times remember that there are a lot of men and women making extra money from the comforts of home. Several have been able to leave their day jobs and go full time online while others are comfortable working part-time. The choice is yours.
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Tags: blogging, cash, debt, entrepreneur, home, income, internet, jobs, make money, marketing, mlm, opportunities, wealth building, work at
Dont Trade Without A Stop Loss (Part I)
Oct 29, 2009 wealth building
Lets assume that you already have got a trading system that tells you where to enter the market. Now you have a trading system that tells you when to enter the market. Does this system also tell you where to get out before you enter the trade?
In other words are you taking the market conditions into account and willing to give your trade a breathing space so that you dont get whipsawed or repeatedly get stopped out. On the road to profitability, lets start by agreeing that we need stop loss exits.
Trading cost is an important factor in your trading that many traders tend to ignore. Most take it as the inevitable cost of doing business. Just dont forget, the more trades you place, more commissions or spreads you will have to pay and the higher your trading cost will be. After this agreement on having stop loss exits, we need to determine how to effectively select stop loss exits to avoid excessive stop outs.
The best way to do this is to develop a stop loss strategy that takes into account currency market conditions. So right there you can increase your profitability if you increase the number of winning trades that is your win ration thereby decreasing your trading cost.
A trading system is like having a girl friend. You can only have one girl friend at one time. There need to be a connection between you and your trading system. It truly is like having a personal relationship. Finding the right trading system can be a lengthy process. You must believe in your trading system and have a high degree of trust that it can produce consistent level of profits overtime.
You need to thoroughly test your trading system and try to measure and calculate its parameters accurately. If you have a trading system that isnt working for you and your win ratio and your payoff ratio dont generate a profit over time then you need to rethink your trading strategy. But you must also understand that no trading system can be perfect and no trading system can produce 100% winning trades.
Make adjustments to entry and exits. Determine if it is your trading system that isnt working or is it your trading psychology that is off. Maybe the market conditions have changed and you havent adjusted your trading system to the new market conditions.
Just keep this in mind that if you dont give your trading system a chance to work jumping constantly from one trading system to another trading system in search of a holy grail wont help you.
Divorce is never a good idea. But if the things dont work out there is no recourse except taking a divorce. Divorce of any kind can be emotionally and financially expensive so proceed with caution when divorcing your trading system. The decision to divorce your trading system should be a carefully thought out one.
If you feel comfortable and confident with your trading system, you ultimately will also be profitable. The primary purpose of your trading system is to make you feel comfortable and confident.
Its a team work. You will feel confident when your trading system has proven to you and you have proven to your trading system that both can work together.
Mr. Ahmad Hassam is a Harvard University Graduate. Try These 1500 Pips A Day Forex Signals From Heaven. Download Your Free 82 Page PDF Candlestick Guide!
Tags: business, commodities, credit, debt, finance, Forex, futures, home business, Investing, options, real estate, Stocks, trading, wealth building
Candlestick Guide
Oct 27, 2009 wealth building
Candlesticks have become popular in the Western trading community especially the United States in the past decade. However, candlestick charting methods had been developed by Japanese rice traders hundreds of years back.
The advent of internet has leveled the playing field for traders whether they trade stocks, futures, options, commodities, precious metals or currencies. Access to the market is now only one mouse click away.
Market information is now in most cases freely available online. Internet has made commission rates dramatically lower. The result is that a whole generation of new traders and investors want to try their luck beating the market.
I am a great fan of candlesticks charting and I have seen many traders both new and professionals becoming die hard fans of candlestick charting. Why? Because candlestick charting is the best tool available. Can you beat the market? It depends if you are using the right tools.
On your trading platform provided by most of the online brokers you will find various types of charts. There are many forms of charting techniques that have been developed over time. Why candlestick charting is superior to other forms of charting like the line charts, bar charts or point and figure charts? One of the best features of candlestick charting is its visual appeal and readability. You can glance at a candlestick chart and quickly gain an understanding of whats going on with the price action in the market.
You can easily spot opening and closing price of a security or currency on a candlestick chart. These price levels can be a very important area of support and resistance from day to day.
This information can be extremely useful for short term traders like day traders and swing traders. There are certain specific candlestick patterns that can help you identify when is the best time to buy, sell or wait on a trade or investment.
These candlestick patterns can be a real boon to your trading and you can combine them with other technical indicators for even more reliable results. Now in order to trade and invest effectively using candlestick charts you need to understand these candlestick patterns.
Many different types of candlestick patterns can tell you what may lie ahead in the market. Patterns appear on the candlestick charts as simple, single stick occurrences or complex multi stick formations.
You may use the information provided by candlestick patterns to decide when to get into a trade, when to get out of a trade or even when to hang unto a trade you are already in. This information can be highly valuable in knowing that the prevailing trend might reverse or continue.
Download your 82 page candlestick guide here complete with strategy flash cards all free. This is the best candlestick guide in the market and you dont need to waste your money on buying a guide because this candlestick guide is a complementary gift for you from the Options University.
Mr. Ahmad Hassam is a Harvard University Graduate. Try These 1500 Pips A Day Forex Signals From Heaven. Download Your Free 82 Page PDF Candlestick Guide! Don’t reprint this exact article. Instead, reprint a free unique content version of this same article.
Tags: business, commodities, credit, debt, finance, Forex, futures, home business, Investing, options, real estate, Stocks, trading, wealth building
Selecting Your Trading System
Oct 26, 2009 wealth building
Why you need a trading system? You need a trading system to make sure that your trading decisions are not arbitrary and based on your whims or emotions. When selecting a trading system, first try to paper trade it. You need to paper trade your trading system to get the bugs out. Paper trading is not a substitute for live trading but still you can assume that 75% of the results that you achieve in demo trading can be replicated in live trading.
Money management plan for your trading system is a must. A good money management plan will tell you how much you should risk on each trade with that trading system. For that to know you need two ratios. Win ratio and the payoff ration are two highly important figures to know for any trading system. Use the results of these paper trades to calculate your win ratio and payoff ratio. Determine what your personal win ratio and payoff ratio are in using that trading system over time.
Now in the case of a successful trader, it takes three to tango here. The trading system, your money management system and you yourself, all three of you have to gel together. The more profitable you will be over time, the stronger and more developed the relationship is between the three of you.
These numbers are required in developing a sound money management plan that will work hand in hand with that trading system. What can be the best parameters to selecting your trading system? When selecting your trading system, use these five parameters:
1) The trading system that you select is analytical and not whimsical based on your emotions. Trade entries in the trading system are defined by market price activity, key support and resistance levels, volume and volatility dynamics and not on random and spontaneous decisions.
2) Never ever enter a trade without first putting a stop loss in place. Some new traders dont do it and get their account blown out in minutes. Before you enter the trade, the trading system is supposed to tell about the stop loss. The initial stop loss exit is determined before entering your trade.
3) Just like the trade entries, the trading system determines the trade exits by market price activity, key support and resistance levels, volume and volatility dynamics and fundamental rules, not on any arbitrary dollar loss that you feel comfortable with.
4) You must not underestimate the importance of paper trading though it is not a substitute for live trading. Your trading system has been adequately paper traded or live traded and you have determined your personal statistical performance. You need to know your win ratio and the payoff ratio.
Win ratio and the payoff ratios are two number that are personal to you and your trading system. Some traders would like to use the win ratio and the payoff ratio achieved by the other traders. Do not rely on the results that the other got with that trading system. Use the actual results that you attained while using that trading system in calculating your win ratio and the payoff ratio.
Do not try to rely on computer back tested results. Your personal performance results are the real results that matter. You cannot depend on computer results and other traders results.
5) Your trading system should be mechanical and rule based. Your trading rules should be written out step by step in sequence so that the entries and exits are consistent, clear and above all quantifiable. This makes your trading mechanical and emotions free. This is very important.
Have you ever heard of the Turtle Trading System? One perfect example of a rule based trading system is the Turtle Trading System. This system was developed for the commodities futures market.
You must know the story of Turtle Trading Rules. The story of Turtle trading rules is very interesting. The creators of that trading system had a discussion one day. One was of the opinion that great traders are born. The other said great traders can be made.
So a number of completely new traders were selected to teach them those rules and see if they could become successful traders. Many succeeded with this trading system and became highly successful traders.
Mr. Ahmad Hassam has done Masters from Harvard University. Know Forex Charts! Try This 1500 Pips A Day Forex Signal Service! You are welcome to reprint this article – but get your own unique content version here.
Tags: business, credit, debt, finance, Forex, futures, home business, Investing, options, real estate, retirement, Stocks, trading, wealth building
Dealing With Card Debt
Oct 24, 2009 wealth building
Credit card debt is a much discussed topic in both commercial and social circles. A big proportion of the population has has gotten itself into trouble with credit card debt.
The main reason for so many credit card related casualties is that many people don’t understand the idea of credit cards properly. They treat credit cards as free money. So all the discipline, which would otherwise have been exercised when spending hard-earned money, goes by the by.
Which means that people overspend and get into credit card debt. They keep spending until they reach the credit maximum on their credit card. Some people treat it like a game and consider it a defeat (or consider their credit card under utilised) if they don’t hit the credit limit quick enough. These needless spends result in a condition where they are not able to pay back their credit card debts and end up paying interest on the amount they owe.
This keeps increasing their credit card debt and they soon find that the interest constituent has become a standard feature in their monthly expenses and it is there even if they spend nothing on their credit card. That is credit card debt at its worst. Soon they find that their current credit card can no longer handle their needs and they commence looking around to get another credit card. With the additional credit, they let themselves free again and follow a shop till you drop routine. In a little while the credit limit of the new credit card is reached as well and they again shirk on payments. This is how credit card debt accumulate.
After a while, they might find out about credit card debt consolidation and other credit card debt eradication techniques. They are quick to grab such credit card debt reduction techniques, but that’s not because they are serious about reducing their credit card debt but because of the appealing low APR offers. As if it were treasure, they again get back to building up their credit card debt. All the while they are spoiling their credit card status and they soon realise that no one is prepared to loan them any money because of their credit history.
At this point, they can only get a secured credit card (ie where you first deposit money into your credit card account and then only do you get the privilege of spending it (50-100% of it) using a credit card. Credit card debt collection agencies, the auction of their goods and bankruptcy is the next thing that awaits them and their dream is blown away in a flash.
Don’t get caught up with credit card debt. You cannot win, unless you die.
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Tags: Advice, credit card, debt, family, finance, Lifestyle, loans, men, money, other, personal finance, self help, wealth building, women