Stock Options – The Greatest Wealth Building Tool Ever Invented

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It is a well known fact that serious investors seeking long term growth of capital have as their main objectives the two most basic goals in investing:

? to find an investment vehicle that would effectively preserve capital and minimize risk in the face of a fluctuating and constantly flexing economy
? the investment vehicle must provide better than decent yields in all economic conditions to promote constant growth of capital value.

With the stock market as the premiere choice due to its historical record of outperforming all other investments over time, people are increasingly turning to the stock market as their main investment vehicle for future capital growth. It is here where much higher rates of return can be made with a relatively small increase in risk to capital.

With thousands of books, manuals, internet sites, seminars and courses offering investment strategies and trading systems in the stock market and its derivatives, there are few, if any, that deliver the ideal investment vehicle sought by the long term investor in search of safety and high returns. Not only is there a near total absence of an ideal investment system but there are many that promise eye popping, mind boggling returns and, they are exactly that; mere promises.

Most of the trading systems offered are structured on strategies or activities that work when conditions are ideally suited to the program being peddled. Most of their successes are highly dependent on picking the right stocks at the right time. In other words you must be a good stock picker or use a stock picking service (for a high monthly fee) to select the right ones for you. Market timing is also an important factor in their systems. Again, you must be a good market timer or depend on a service that provides market timing signals (also for a high monthly fee). These supposedly high yield investment programs don’t say anything about how bad things can be when conditions go against their predictions. These programs do exactly as promised: great when the going is good but disastrous when the going is bad. Without doubt many have been taken by these so-called services and while an investor/trader may be successful for a while, the end result over a long period of time is always the same – no better than if you had done the selections yourself.

While there is no one investment system or vehicle that can be an answer-all to the various goals of various investors, there are some investment alternatives that can come close to satisfying the two basic needs of safety and decent returns. Diversified mutual funds have been touted as the answer to these basic needs. But over the years these funds have shown that during downturns in the economy they perform just as badly as the whole investment market in general. And, over the long term, many of these diversified funds have failed to even match market performance in general, much less outperform it.

Enter market derivatives with emphasis options.

Trading in stock options has become very popular with institutional investors as well as private individuals as a sound money management system supplementing their investment portfolios. The ability of stock options to give the investor a wide range of choices is what has made the options market grow considerably over the last two decades. To quote one options expert: “Stock options are the greatest wealth producing tool ever invented on this planet. . . . if you know how to use them”.

The key element of this statement is: . . . if you know how to use them.

For many people the mere mention of stock options, sends shivers up their spine. They look at options as synonymous with great risk. But isn’t driving a car very dangerous for one who doesn’t know how to drive? The ability of stock options to give the investor a wide range of choices in stock market investments is what has made the options market grow by leaps and bounds over the last twenty years. Statistics compiled by the Options Industry Council, a group that educates investors about options, show that volume in options trading has risen tremendously in recent years. Further, studies show that individual investors make up 60% of the market.

For the individual who has sufficient funds and is looking for more than a decent return on his capital and with controllable risk, stock options may be the answer.

There are dozens of option trading systems being employed by individual investors and institutions. Each system is designed to accomplish a specific investment goal. A financial institution may use long put options to hedge its winnings in stocks that have appreciated in value. Another investor may buy call options instead of stocks to enter a position in a security that has caught his fancy. Still another may sell calls against his stock holdings to generate income from his stock position, or what is popularly known as covered call writing.

Of the dozens of option trading systems there is one that can be carried out as a long term investment program offering a fair degree of safety and consistent high returns over time, thus satisfying the investor’s two basic needs of safety and return.

This is the selling of uncovered or naked options.

But wait! Is it not said that selling naked options carries the risk of unlimited losses? Isn’t this a contradiction?

Indeed selling naked options when done carelessly and without a disciplined strategic program is extremely risky!

But by using a carefully planned and disciplined system of trading, the so-called “unlimited risk” factor in selling options can easily be conquered. There is a three-pronged trading strategy being used by one successful options trader that is proving to be a consistent winner in all market conditions. It is a trading technique that couples naked option selling with a modified ratio credit spread and the use of the roll over feature. While naked option selling has acquired a bad rap of being highly risky, this three-pronged trading strategy allows the trader to defeat the risk. Not only is the system able to substantially reduce the risk, it also offers one the ability to become a savvy investor/trader without having to depend on picking the right stocks or timing the market.

It involves utilizing the system in any market condition using only one or a few stocks, ETFs or indexes (the latter two are more effective). One need not worry about finding the right stocks or timing the trades. The fact remains that stocks behave, more often than not, in crazy and irrational ways so that one can almost say that consistently choosing winning stocks is as good as a random walk down Wall Street. Rather than be proactive and try to predict and time the market, as many try to do, this three-pronged investment system is reactive. The prescribed trades are done in reaction to how the market has moved, not in anticipation of its future behavior.

This three-pronged trading system does not promise quick profits or mind boggling yields but steady annual returns in excess of 30%. Many are averaging returns of 50% to 60%. It would be prudent to say that in times of deep downturns the system may not deliver the promised returns but it will hold its own and will definitely outperform the market.

One options trader that has mastered this three-pronged trading technique has decided to share his knowledge of the system by writing an e-book on its methodology. Borrowing from that quote about options being a great wealth producing tool he has aptly titled his work: STOCK OPTIONS: THE GREATEST WEALTH BUILDING TOOL EVER INVENTED. In it he details the step by step methodology of this trading technique and gives an exhaustive series of sample trades covering several months of transactions. It shows the effectiveness of the system in an up market, down market and horizontal market using only one ETF stock. To this day the writer continues to use only one or two ETFs in all his options trades and he includes a web page that shows his current and actual trading results month by month on an ongoing frequency.

The Wait for the iPhone 5 Hits Asia Tech Stocks

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In the past, releases of the Apple iPhone have usually been well received by consumers, with sales numbers being quite good for Apple, even if not all users and technology reviewers were completely satisfied with the features of the device.Many are anxious to see what the iPhone 5 will be able to do when it comes out in September, but this waiting has started to have a negative effect on some Asian stocks. Apple’s quarterly earnings have been below expectations lately, mainly because many consumers are holding off purchasing a new iPhone until the 5th edition comes out in a few months. This has had repercussions not only for Apple, but also for its supply chain.

While Apple has developed the device, it relies on a supply chain in Asia to manufacture many of its components, such as the circuit boards and the screen. It is thus normal that when Apple’s numbers are down, Asian tech stocks belonging to firms in Apple’s supply chain take a hit. Some of the companies whose stocks went down include Foxconn, the company that assembles the iPhone and makes some of its components.

This is because a large amount of revenue for the company comes from production of Apple devices, such as the iPhone and the iPad tablet. Japanese companies such as Ibiden, which manufactures circuit boards and Toshiba, who make memory chips, have also seen their shares go down.Anyone investing in Asian technology stocks should seek advice from a professional financial adviser, preferably one that has experience in tech stocks in the Asian market. While these shares may eventually rebound, exactly when this will happen is open to some speculation. Some market analysts are now predicting that Apple’s earnings may not be too good for the next quarter and may continue to be low until the iPhone 5 launches later in 2012.

While current predictions say that the device is going to be ready for launch in late September of 2012, it should be noted that no official release date has been put forward by Apple for now. Therefore, the exact moment where the earning of Apple and tech stock prices in Asia are going to be up is not yet known.It makes sense that periods where stock prices are down would be times where it may be profitable to buy shares. However investors will need to know that the Asian tech market is subject to volatility, especially among companies where a large percentage of their revenue is tied to one specific device. Investors should be careful where they will be putting their money, diversifying their portfolio regularly and following technological news and trends so that they have a better idea of how their stocks will do.

3 Easy Ways to Boost Your Stock Market Profits

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People always want to know how they can improve their profits in the stock market. And I keep telling them it’s simple. There are three easy things you can do right now to boost your returns. It’s so easy.It really is.Here are the 3 steps you can take:1. Only buy the best ETFs – ones that are already going up 2. Avoid high fees 3. Keep a risk balanced portfolio.That’s it. Those are pretty easy things you can implement immediately. If you can do this, you can make money in the stock market.

The rules for successful stock market trading aren’t hard. But despite that, the average 401k investor in the stock market gets creamed by the stock market.A formal study from the stuffy Journal of Pension Benefits documents the horrible performance of most investors. Here’s what it says:”The elephant in the room that no one seems to want to discuss is that individual investors as a whole do a poor job managing their own is, by and large, a recipe for has long been known that individual investors don’t typically fare well in their efforts at do-it-yourself investing.”This notion has been validated by numerous studies, including one by Dalbar, Inc., which revealed the staggering margin by which the average individual investor trails the returns of the broader market.

Here’s what Dalbar, Inc. says:”Wow. Nobody wants to talk about it, it’s that bad. When the stock market only makes 8% per year, giving away 6% eats up almost all of the possible returns. In fact, it’s possible you’ll get a better return from Social Security than you will from the stock market.”Fortunately, there is help.Improving Your Returns with True DiversificationThere is more to making money than just blindly hopping on the trends.If you want to really make money, you need to take active control of your can’t just sit back and gripe about your lousy returns when you’re not doing anything to prevent best way to improve the performance of any trading strategy is to balance the risk taken on each trade.Diversification works wonders for increasing returns. But it only works when you actually diversify.Most people do not get similar exposure to the risk of their investments. They dramatically over-invest in some of their portfolio, and under-invest in others. It’s like only watering ?? of your garden but expecting it all to grow.To get great returns, you need to give each and every investment a fighting chance to make money for your portfolio. Each investment needs to be able to provide meaningful returns for you to make real money.

Many people split their portfolio 50-50 or 60-40 between stocks and bonds. This doesn’t work. It ends up being only slightly better than burning $100 bills in a fire. Why? Stocks are 3-4 times more volatile than bonds. All of the returns and risk are due to what happens to the stocks in the portfolio.The only way bonds will have equal impact on the portfolio is for the allocation to be 75% bonds, 25% stocks – or even higher.You can balance the dollar amount allocated to an ETF selection by the risk taken by each ETF. You can do this in your other accounts also.You can take into account how much risk each ETF has, and then adjust the amount of shares to trade. That way you know you get equal exposure to each of your investments. This came in extremely helpful this month for me because the month allocated extra dollars to real estate and preferred stocks,which have outperformed the S&P 500. That’s how true diversification can help you also.As a result, your system could be up about .5%, while the S&P 500 is down nearly a full percent. Instead of under-performing the stock market by 6% a year, your system can outperform the stock market, in this case by nearly 8% per year.

When you create a system to allocate your funds, your system should tell you exactly how many shares of each ETF to buy so you’re not under- or over-investing. Risk balancing works great for really pushing returns upwards. If you want to know the steps – and are a real math geek – here you go:1. Find ATR: Find the Average True Range (ATR) for each of your Stocks/ETFs 2. Find Volatility: Divide the ATR by the Price of the Stock/ETF 3. Invert Volatility: Take 1/(Step 2) for every stock Find Total Vol: Total up Step 3 for your entire portfolio 4. Find Percent Allocation: Divide Step 3 by the total given Step 4Step 5 will give you the percentage of your account that you should allocate to that investment. It’s a bit complicated, but you can do it. An easier way would be to have someone else do it for you. Either way, you can outperform the S&P and give your accounts the boost you want.Copyright ?? 2012 Trend Following 101

Gain The Expertise To Identify The Perfect Time To Buy Shares

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People invest in shares and most of them do not make enough profits in selling them because they do not know the exact time to buy shares. Having the expertise to understand the movements of the market and the trends which indicate the correct time to collect shares from the market will help you to when get a substantial profit when you sell. There are experienced people in the share trading circle, who are able to identify the right time to buy shares of a particular chip.

The main indicator is the stock market, which has its own ups and downs resulting from different pressure points on economy. The stocks may even slide down during a positive economic trend and may push up even in when the economy is experiencing dull conditions. In short, there is enough scope to collect shares when the market is weak by paying lower prices for them. However, the true value of shares cannot be estimated in this condition. The indications spell out a simple formula to sell when the market is high and buy shares when the market is dull.

Make a study and buy shares
Study the value of the shares you are interested in before you buy shares. Dividend estimation is a qualified measurement scale for knowing the value of a particular share. The dividend yield is to be computed on the current price of the share and the dividend declared for the next phase. The market goes down with low dividend yields and the mood of the investor is always in favor of a higher dividend to buy shares.

The market may appreciate – lower prices with higher dividends – and may respond positively to them in this situation. The dividend yield can make a long-term trend of shares and you can buy shares during this condition. The price-dividend declaration is another important aspect of estimating the market for a particular share. This is the dividend yield expressed in terms of percentage.

Dividends are taken out of the company’s earnings, but they do not fluctuate – unlike the earnings – and are always paid by the company to shareholders irrespective of the functioning of the company. When you are ready to make your investments and buy shares, you do not have to look at the earnings of the company. Instead, you must understand the dividends declaration from the company for your profits.

There is another aspect that you should also look into: the value of a share in the company?s book. This is the book value of a share of the company. It is estimated from the net worth of the company in relation to the number of shares. With the book value of a share, you are able to know the current condition of the price of the share – i.e., whether it is undervalued or overvalued. When the price of the share is low relative to the book value (or undervalued), you should buy shares in the situation. Conversely, when the price of a share is exceptionally high relative to the book value of the share, it is the right time to sell for profit.

Investment Products Fixed Deposit Versus Stocks

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Before understanding the importance and the use of fixed deposit calculator it is essential to know the meaning of fixed deposit.Well, a fixed deposit is an investment product. It is one of the most popular options available in the financial market today; especially for people who would like their money to be safe and at the same time seek guaranteed protection from the vagaries of financial markets.In simple terms, a certain amount of money is placed with the bank, as deposit. This deposit earns interest depending upon the prevailing rates.

The accrued interest along with the principle amount is then returned to the account holder at the end of the term which can range from fifteen days to ten years. Interest is calculated on monthly, quarterly, half-yearly or on annual basis and then added to the principle amount.Typically, the funds cannot be withdrawn before the end of the term.Here are some of the advantages of fixed deposits.1. Extremely safe.2. Protection against market vagaries.3. Loans can be availed on such deposits (up to 75%).A fixed deposit calculator is an application to calculate the maturity amount. Many websites offer this software.

The user simply inputs various parameters such as amount, deposit period to get the net amount payable to them after the end of the term.They are Bombay Stock Exchange or BSE and National Stock Exchange or NSE. It is advisable to screen the stocks before buying. Stock screeners are basically research tools, some of which are free, while some come with a big price tag. BSE stock screener helps in identifying the weaknesses and the strong points of a company.Once you have understood the risk factor involved and screened the stock, the next step is to select a broker who will help you in buying or selling as the case maybe.You will also need to learn the technical terms of stock trading, such as market order, stop loss, margins and block purchase. They may sound difficult to interpret but over a period of time and with the help of your broker, these terms may not overwhelm you.Finally, you will need an account with a bank to trade in stocks.

The Australian Share Market A Brief Summary of a Global Economy

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The Australian Share Market A Brief Summary of a Global Economy
But, it can also be very rewarding to the patient investor who is willing to learn the skills necessary to cash in on the markets.Remember that investing in whatever global stock market can be a risky task. Based on the Global Stock Market Review by Standard and Poor’s, Australia’s stock exchange is the 9th largest worldwide in total market capitalisation terms and the 2nd largest in the Asia-Pacific region, after Japan’s.Strategies and outlook as of April 2010, the Australian share market is now 1 year on from the turn in the markets as the potential financial disaster was averted as well as domestic economy started its recovery. Certainly, Australia has one of the strongest economies across the world in keeping with the present major players. Stock Analysts possess the experience and training to more accurately predict likely activity on the Australian share market. The market has re-rated back to its long-term valuation, contingent on a recovery in earnings of 20% in the 2011 financial year.

Sydney’s timezone offers companies the unique opportunity to make the most of the full trading day in Asia while also bridging the closing in the American markets and the opening of the European markets. Since the 6 March 2009, the Australian share market rose by 27.3% through June 30, and the US share market by 34.9% in local currency terms. The Australian Securities Exchange (ASX) based in Sydney is the first major market to open internationally each day. Its ability to withstand quite a lot of external and internal events, including a major drought, a housing boom and the Asian financial and economic crises also demonstrate the depth and liquidity of the Australian share market.Comprehending the Australian Share Market

Retail Is For Stockpickers

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Since September 2004, the S&P Retail Index has been caught in a sideways consolidation channel at between 400 and 500, unable to establish a sustainable trend in one direction or the other. During that time, the monthly retail numbers have been largely mixed. But in January, the retail data (excluding auto) was impressive, showing growth of 2.20% versus the estimate of 0.8%. It was the strongest reading in years.

Yet the initial optimism appears to be fading after seeing mixed reports from the nation?s retailers on Thursday. The early data suggests that same-store sales growth will be sub par compared to what we saw in January.

The reading in January may have been an aberration because of warmer than expected temperatures. The surfacing of cold weather in February apparently sent a chill through the pocketbooks of consumers. Also, the strong January sales may have taken away from spending in February.

The reality is the absence of a positive trend in retail makes investing in retail stocks more of a risk. You need to pick the right company. Even bellwether stocks such as Wal-Mart Stores (WMT) are struggling as far as its share price in spite of some decent sales results and same-store sales growth. But the current valuation deserves a look.

Youth oriented clothes retailer Gap (GPS) is a company that is clearly struggling at the cash register. Its February same-store sales crashed 11% year-over-year, well above the Street estimate calling for a decline of 6.80%. This followed on the heels of an 11% decline in the company?s Q4 earnings along with a FY07 forecast that was short of Wall Street expectations.

GAP expects comparable-store sales to be negative in the first half and turn moderately positive for the remainder of the year. Same-store sales are widely viewed as the best indicator of a retailer’s health.

For investors, GAP is clearly a turnaround play that could pay off if it can somehow figure out how to attract shoppers. The fact is the company has great brand awareness and this counts for something in this brand conscious world we live in.

On the upside, you have a company like Best Buy (BBY), a dominant market leader in consumer electronics. The stock is just below its 52-week high, up 69% from its yearly low.

The reality is retail spending may be impacted by the higher financing costs associated with the rising debt loads across America. The personal savings rate is declining and was negative in January. Consumers are eating into their savings and you know this cannot be good for retail.

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