Top 4 challenges facing option buyers

Top 4 challenges facing option buyers

By: Shaun Rosenberg

There are 4 top challenges facing option buyers in the stock market. Anyone looking to gain long term success with options should have these questions answered before they use them.

1. Time decay. When you buy an option there is both time value and intrinsic value in that option price. Intrinsic value moves the option based on the price of the stock. Time value goes down slowly as the option price gets closer to expiration. Because of this an option buyer needs to have the intrinsic value go up faster than the time value to make any money.

If they intrinsic value doesn’t go up fast enough have this the stock could do what they wanted it to do and they still lose money. The best way to combat this problem is to buy more time value. If you have an option 3 months out the time value will decay at a much slower rate than an option that is 1 month away from expiration.

2. The Bid and ask price also pose a problem for option buyers. When buying options there are two prices the bid and ask. The ask price is the price that you can buy it for and the bid price is the price that you can sell it for. The difference between these numbers is called the spread.

The price you can buy an option for is always higher than the price you can sell an option for. You need the option to go up above this gap in order to make money. This problem is lessened by not trading options with stocks that have a high spread. Obviously if you find a stock that has an ask price of $8 and a bid price of $6 that might not be a good buy regardless of the stock.

3. The implied volatility. This is very important to understand. The IV measures how volatile the stock is at a given time. It is also used to measure the volatility of an option. This can affect the price because if you buy a call with high volatility the stock can go up but if volatility drops your option’s price will be affected. Now on the same note if you buy a call when volatility is low and the stock price goes down you might still be able to make money if the volatility goes up.

Generally volatility goes down when stocks goes up and it goes up when stock prices fall. You may also want to check the VIX which shows the volatility of the SPY. In addition if you can go to a website like ivolatility.com which will give you the volatility of individual stocks.

4. Delta. Many option traders believe that if a stock moves $1 the option should also move $1. Nope. This is one of the biggest misconceptions new traders have about options. They will not move up exactly the same amount as the stock. In fact there is an option greek called the Delta that is designed to determine how fast an option should move. If the Delta is $.5 then it will move $.5 for every $1 the stock moves.

The farther in the money you buy a stock option at the higher the delta will be. But it will also result in a higher option price as well.

For more information about the stock market visit http://www.stocks-simplified.com

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ForEx (Foreign Exchange)

ForEx (Foreign Exchange)

By: Rio Morales

A forex scam is any trading scheme used to defraud individual traders by convincing them that they can expect to profit by trading in the foreign exchange market. One such example of someone who has come under such scrutiny is James Dicks. These scams might include churning of customer accounts for the purpose of generating commissions, selling software that is supposed to guide the customer to large profits,improperly managed "managed accounts", false advertising, ponzi schemes and outright fraud . It also refers to any retail forex broker who indicates that trading foreign exchange is a low risk, high profit investment. The U.S. Commodity Futures Trading Commission (CFTC), which loosely regulates the foreign exchange market in the United States, has noted an increase in the amount of unscrupulous activity in the non-bank foreign exchange industry.[6]

An official of the National Futures Association was quoted as saying, "Retail forex trading has increased dramatically over the past few years. Unfortunately, the amount of forex fraud has also increased dramatically..." Between 2001 and 2006 the U.S. Commodity Futures Trading Commission has prosecuted more than 80 cases involving the defrauding of more than 23,000 customers who lost $300 million, mostly in managed accounts. CNN also quoted Godfried De Vidts, President of the Financial Markets Association, a European body, as saying, "Banks have a duty to protect their customers and they should make sure customers understand what they are doing. Now if people go online, on non-bank portals, how is this control being done?"

The highly technical nature of retail forex industry, the OTC nature of the market, and the loose regulation of the market, leaves retail speculators vulnerable. Defrauded traders and regulatory authorities, can find it very difficult to prove that market manipulation has occurred since there is no central currency market, but rather a number of more or less interconnected marketplaces provided by interbank market makers.

Always remember that there is no such thing as a "free lunch." Be especially cautious if you have acquired a large sum of cash recently and are looking for a safe investment vehicle. In particular, retirees with access to their retirement funds may be attractive targets for fraudulent operators. Getting your money back once it is gone can be difficult or impossible.

The following are examples of statements that either are or most likely are fraudulent:

"Whether the market moves up or down, in the currency market you will make a profit." "We are out-performing 90% of domestic investments." "The main advantage of the forex markets is that there is no bear market." The currency futures and options markets are volatile and contain substantial risks for unsophisticated customers. The currency futures and options markets are not the place to put any funds that you cannot afford to lose. For example, retirement funds should not be used for currency trading. You can lose most or all of those funds very quickly trading foreign currency futures or options contracts. Therefore, beware of companies that make the following types of statements: "With a $10,000 deposit, the maximum you can lose is $200 to $250 per day." "We promise to recover any losses you have." "Your investment is secure." Margin trading can make you responsible for losses that greatly exceed the dollar amount you deposited. Many currency traders ask customers to give them money, which they sometimes refer to as "margin," often sums in the range of $1,000 to $5,000. However, those amounts, which are relatively small in the currency markets, actually control far larger dollar amounts of trading, a fact that often is poorly explained to customers. Don't trade on margin unless you fully understand what you are doing and are prepared to accept losses that exceed the margin amounts you paid.

What is Forex (Foreign Exchange)? Can you trust the majority of claims they make? How are Forex (Foreign Exchange) brokers regulated? What is margin buying? http://bossbiz.netsalaries.com/index.cfm?scn=fx

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Profitable Forex Trading Strategie

Profitable Forex Trading Strategie

By: Andrew Daigle

As you know, the only way to make money in the forex currency exchange market is to have profitable forex trading strategies and good money management. Without these two skills, you will certainly fail as a trader and if you master these, you will be a very profitable forex trader.

It sounds so easy, doesn't it? Two simple rules to follow and you will be profitable in this business. The problem with this however, is that most people can't follow these rules. They let their emotions get in the way of their trading and make bad decisions. They may not take any trades at all because they're afraid they'll lose money. They may be in a profitable trade and decide to close it early to lock in their small profits. They may decide to let their losers run longer than they should because they "know" the currency is about to reverse and go in their direction. There are many reasons why people fail in this business and these are just a few of the examples.

Before you start trading, you need to learn about this business. You not only need to learn how and when to trade forex, but you also need to know when "not to trade". This is just as important. You also need to know how much "risk" you should take on any given trade. If you over leverage your account, you will lose money very quickly and you could actually blow your entire trading account.

Once you learn how to trade, the next step would be to open a forex demo trading account. This is the trading platform you would use from the forex broker of your choice to make trades in the market. Most forex brokers have all the charts and tools you need and the platform on which to execute your trades. Demo accounts allow new forex traders to trade fake money while trading the live market. You get to trade on a live trading platform but you risk absolutely no money. There aren't any businesses I know of where you can learn everything you need without costing you a dime.

Demo accounts are a great way for new traders to get a feel for trading the forex market without risking any money. But be careful. When you trade a forex demo account, and you know in your mind that you have no money at risk, you can start making stupid trading decisions. You may use poor money management skills and risk far too much money on each trade. You may double up on trades to make up for losing trades. These are bad habits, and the last thing you want to do in this business is treat it like a game. It's not a game. It's a real business and should be treated as such.

Before getting into trades, you should also know exactly what price you're getting in to the market and also know what your stop loss and take profit targets should be. If you don't know these three things, do not trade. Every profitable forex trading strategy you learn will have the rules for determining these entry and exit points. Also know that a profitable forex trading strategy does not have to be complicated. Most of the best forex trading strategies are very simple to learn and use.

If you follow the simple rules we mentioned above, you will see how profitable this business can be. It's no wonder why trading forex is becoming one of the fastest growing home businesses today. You get to work from your home using your personal computer and an internet connection. Pick up a great forex trading strategy and open up a forex trading account with a broker and you have everything you need to start trading.

Andrew Daigle is the creator and author of many successful websites including ForexBoost at http://www.ForexBoost.com and http://www.CashCurve.com for learning profitable online home business opportunities

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The components of trading

The components of trading

By: Shaun Rosenberg

I would say that there are two different components of trading. These are the trader and the system. Each one has something that they can bring to the table to give you a successful trading system.

The system component is easy to understand. If you follow your own strict rules of what to look for before you invest your money you will come up with some sort of consistency. If you always trade by do the same thing then you will be able to get the same results, over and over again.

This makes having a trading system very important aspect when it comes to making money in the market. Develop a well tested system can be the best way to make good money. However there is one other major component when it comes to trading, and that is the trader themselves.

Some traders believe that a trading strategy should be all system and the trader should try to keep their own thoughts out of it. This can be true to an extent. The major flaw we as humans have when it comes to trading is our emotions.

Our emotions might make us sell too soon or buy too early. That can cause us to lose money. But there is a good reason that traders should not rely 100% on a system and keep some human touch in trading.

This ability that humans can bring is the ability to change and adjust to new markets. You may have a system that is working well buying calls but if you start to see that the market is crashing it can tell you that you might not want to be buying calls right now.

You might adjust that strategy by taking the same rules you learned from buying calls and reversing it to give you good put buying strategies. Or you might try something different. But our ability to adjust is what gives us an edge over a pure systematic way of trading.

For more information about the stock market visit http://www.stocks-simplified.com

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Forex Trading From Home - Become a Successful Trader in 2 Weeks!

Forex Trading From Home - Become a Successful Trader in 2 Weeks!

By: Kelly Price

Here I am going to give you a checklist on how to get started in forex trading from home in just 14 days and then be on target to make triple digit profits in under 30 minutes a day.

What inspired me to write this article is the "turtle experiment" where Richard Dennis taught a group of traders to trade in just 14 days and they went on to make hundreds of millions of dollars. You probably won't make as much money as this group but it shows anyone can learn and anyone can be successful, if they have the right forex education.

Lets get started and the first area to focus on is learning about forex charts and formations and all this information is available free online. You need to focus on long term trend following and base your strategy on breakouts.

We have written about these frequently simply look up our other articles. Once you have this mastered, check some indicators to time you're trading signals and take your time two great ones to start with are the stochastic and RSI, so look them up.

You will now have a simple robust forex trading strategy you can apply for profit. Don't think simple systems don't make money - they do. Simple systems are robust and easy to understand and will enable you to have confidence and discipline which is essential for currency trading success.

Discipline is what separates winners from losers.

You must be able to apply your trading system through losing periods with discipline until you hit a home run and if you cant do it - you don't have a system.

It's always good to get some lessons from the pros and some books which are from traders who have walked the walk and don't just talk the talk.

Here are a few which I think can help any trader.

The Disciplined Trader - Mark Douglas

This is simply one of the best books on trading discipline you will read and for any newbie trader who thinks discipline is easy, read it and you will see why its not and why most traders cant master it.

Another excellent book is.

The Way of the Turtle - Curtis Faith

The most successful of the turtle group we discussed earlier, its essential reading and very inspiring as well.

Finally I simply love the book - Trader Vic Methods of a Wall Street Master by Victor Sperandeo.

This guy is simply consistent decade after decade of huge returns and you get a bit of everything in this book.

The above 3 books will cost you less than a $100.00 but will give you some great insight on the discipline side and what it takes to be a winner and pay for themselves many times over.

When you come to trade your system, make sure that you have enough cash forget trading with $50 d and get a reasonable amount so you have staying power. $500 - 1,000 is a bare minimum and preferably $5,000.

Do not over leverage, take it gently to start, forget about 200:1 leverage and start at 10.

You are in this for the long run and you need to preserve equity and build your base.

Once your system is set you are ready to roll, don't believe all the people who say you should try and improve their system, or keep journals of your losses its complete waste of time.

You are going to lose, that's trading and the perfect system doesn't exist.

I have used the same system for 25 years and never changed it sure it losses but overall it gives me great annual profits for less than 30 minutes work a day and the system enclosed can do the same for you, allowing you to become a profitable forex trader from home.

Follow the above steps and you could be on the road to currency trading success in just 2 weeks and making profits in around 30 minutes day.

NEW! 2 X FREE ESSENTIAL TRADER PDFS ESSENTIAL FOREX TRADING COURSE

For free 2 x trading Pdf's, with 50 of pages of essential info on Becoming a Currency Trader From Home visit our website at: http://www.learncurrencytradingonline.com.

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Investing Vs Trading

Investing Vs Trading

By: Shaun Rosenberg

Everyone always says that the safest way to make money in the stock market is by investing for the long term. I don’t believe it. In fact long term investors might have the disadvantage.

There are a number of reasons why trading can be a safer strategy then investing in the long term.

1. Traders can make money in all markets. Unlike a long term investor who only makes money in bulls market and loses money in a bears market, traders can take advantage of whatever the market does.

2. Strong companies don’t have to go up. People seem to have a false image in their mine that if you own Disney stock and they make a sale your stock goes up. That is not necessarily true. You could buy a stock that makes loads of money with great fundamentals and still lose money. In fact Wal-Mart, Disney, Microsoft, and coke are all stocks that have huge earning but have not done anything except go down a little in the last 10 years.

3. Successful traders base their conclusion off of price, the trends and patterns of it. This is a much better way to grow your money because what you make money off of is ultimately what the stock does not what the company does.

4. The idea of holding onto a stock forever can actually hurt you. I have seen people with a long term prospective ride a $40 stock to a $10 stock because they are in it for the long term. As far as I am considered it not a good idea to hold a stock through a 75% decline in hopes that it might one day go up no matter what your time frame is.

5. Actively trading is a can give you higher returns. Think about it like this, if you are actively trading in the stock market you will be able to learn from your past trades. The more you learn the better a trader you will become. Where as someone who invest in the long term cannot use what they learned from their last trades into their new trades because your last trades lasted 40 years.

For more information about the stock market visit http://www.stocks-simplified.com

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Forex Short Term Trading Strategies - Forex Day Trading Restrict Risk Build Big Profits

Forex Short Term Trading Strategies - Forex Day Trading Restrict Risk Build Big Profits

By: Samuel Leslie Berkovits

Forex day trading is very popular and is probably the route most new forex traders try and the appeal is obvious - trading with low risk and building steady long term gains but how do you win...

The industry in short term trading us huge and there are numerous courses to train you and teach you the basics and they all have tremendous track records with low drawdown and huge long term gains. There is a problem though and it lies in this warning you will see:

"CFTC RULE 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading.

And

Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown".

Of course, there is a huge difference between knowing what happened and not and anyone even a kid can become a millionaire on paper.

In real time it's all a lot harder

Within a day trying to predict, to predict what a vast number of traders will do, in a time period of minutes or hours is impossible as the price can go anywhere.

To make money you need data that is reliable - it's as simple as that.

You need to be able to work out the probability of a price going in a specific direction on your forex chart and its plainly obvious you don't have decent data to work with and you cannot get an edge or the odds in your favor.

The odds are not in your favor and this means you are destined to lose.

Alas forex day trading is a good theory (if it worked) but it doesn't add up in practice and if you are not convinced, try and find an audited track record of a day trader over a few years - you wont find one, you will find day traders with simulations - but that's not hard crisp dollars, you can spend them. Don't trade short term, trade longer term and get yourself the right forex education, get the odds on your side and enjoy currency trading success.

FREE FOREX STARTER PACK 5 X PDFS - DAILY RESEARCH AND MUCH MORE! For free infopack and free research and more get your 5 x FREE PDF Reports visit our website at: http://www.learncurrencytradingonline.com

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