Winning Options Trading System

Winning Trade System

This New System Gives You An Edge In Options Trading For The Dow, Nasdaq, S&p 500, Etc. Includes Videos With Step By Step Strategy To Beat The Market! You Do Not Have To Be An Expert. This training program explains in detail not only how to easily identify these occurrences, but how to identify the recurring patterns that tell you When to go long or short and how to take full advantage of the market for maximum profits using options as well as Etf's. In this step-by-step video training program you'll discover: How to identify the phenomenon what it is and how to harness the power it holds in Any Kind OF Market. Learn what pattern to look for along with the phenomenon that gives you a clear signal to go long or short. and why it's dangerous to act before you get this signal! Why 99% of all retail traders lose money or only make a small amount of money using options, stocks, and futures. How to trade like the professional 1% of traders that make a killing in the market. What the greeks are and how each one works and which ones you need to pay attention to and When. Proven, practical techniques to use in any kind of market to make real and substantial profits (includes real case studies). How to Know ahead of time that the market is likely to have a big drop. What to buy and when to get out. How to Know when a market has stopped declining and is ready to advance strongly. Again, what to buy and when to get out. Why buying at the bottom of a large decline in prices is the Worst thing you can do. How to leverage options so you can profit as much as shorting or going long the actual stock at 1/10th the investment! You'll see exactly what to buy and when. More here...

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Creator: David Vallieres and Eric Holmlund
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The Currency Options Market

The currency options market shares its origins with the new markets in derivative products and was developed to cope with the rise in volatility in the financial markets worldwide. In the foreign exchange markets, the dramatic rise (1983 to 1985) and the subsequent fall (1985 to 1987) in the dollar caused major problems for central banks, corporate treasurers, and international investors alike. Windfall foreign exchange losses became enormous for the treasurer who failed to hedge, or who hedged too soon, or who borrowed money in the wrong currency. The investor in the international bond market soon discovered that the risk on their bond position could appear insignificant relative to their currency exposure. Therefore, currency options were developed, not as another interesting off-balance sheet trading vehicle but as an alternative risk management tool to the spot and forward foreign exchange markets. Therefore, they are a product of currency market volatility and owe their existence...

The first options markets

The Australian Options Market (now owned by the Australian Stock Exchange) opened in 1976. In 1978, the first traded options markets started trading in Europe. The European Options Exchange opened in Amsterdam followed soon after by the London Traded Option Market (now owned by the LIFFE). Other futures and options markets followed. The London International Financial Futures & Options Exchange opened for business in 1982, the Singapore International Monetary Exchange in 1984 and the Hong Kong Futures Exchange in 1985. Many new markets in the Americas, Europe and the Far East followed these during the late 1980s and the early 1990s. While trading in precious metals was up in the United States by 41.0 per cent to 13.9 million contracts in the first half, trading in these products outside the United States declined by 14.5 per cent to 19.4 million contracts. Gold futures at the New York Mercantile Exchange rose by 29.9 per cent to a total of 7.7 million contracts in the first half,...

Dont Let Your Fear of Failure Stop You from Being a Profitable Option Investor

First off, all rational, reasonable, intelligent adults have an innate fear of failure. In fact, most Americans are continually warned from birth to be careful and watch out for the unforeseen. However, it is how human beings are able to overcome the very real fear of failure that determines whether an individual will eventually be successful in a given endeavor. I use my own fear of failure to keep me motivated when I am in the middle of a project. So, if fear of failure is what you feel is holding you back from becoming a profitable option investor, I have a possible solution that just might work. I am usually not a big fan of what I refer to as the rah, rah crowd so-called motivational speakers because I believe that lasting motivation is something that comes from within. However, I highly recommend that you listen to the following two audio programs by best-selling author Earl Nightingale The Strangest Secret in the World for Succeeding Today and Lead the Field, which are...

The Options Trading Crowd at Extremes

Equity-only put call ratios have the most intuitive appeal for sentiment technicians looking to keep a finger on the pulse of the nonprofessional crowd, the most likely traders to make common misjudgments among options traders as a group. If the equity-only options traders are in fact wrong when the group thinks alike at sentiment extremes, it should be easy to examine this options trading crowd behavior to see if it has any reliability and special patterns that would be useful for trading system development. In this chapter, therefore, I conduct a series of tests of the conventional equity-only put call ratio option volume data to determine if the options trading crowd is predictably wrong in its trading decisions near sentiment extremes. The tests show the degree to which this data series provides reliable information about the short- and medium-term direction of the S& P 500 following excessive bearish or bullish sentiment captured in put call ratio levels.

You Do Not Need a Big Checkbook to Become an Option Investor

Term FICO refers to the name of the company, Fair Isaac Corporation, that developed the popular credit scoring model named FICO, and a lifetime employment contract in order to become an option investor. The fact of the matter is that buyers of options usually face very little financial scrutiny. For example, when buying an option, you almost always avoid having to pass any of the financial tests income, debt, and credit scoring that are such an integral part of the buying process. This is mainly because many property owners involved in an option transaction seem to focus only on the amount of the option fee they will receive from the deal and pay scant attention to the party buying the option. The only financial test that most people must pass when buying a real estate option is having the cash necessary to pay the option consideration fee. The amount of money that you will need to do your first option deal depends on what segment of your local real estate market you target. For...

Why Option Investors Are Usually Buyers of Last Resort for Obsolescent Property

As I told you in Chapter 2, the most profitable type of properties to buy real estate options on are derelict-type properties that do not appeal to many prospective buyers. And they are also the easiest types of property to put under option because option investors are usually buyers of last resort for obsolescent properties. In other words, no one other than an option investor is willing to take a chance on these types of cast-off properties. And when you are the weary owner of a piece of property in less than pristine condition, which has been sitting vacant for a long time with no purchase offers in hand, you cannot be too choosy about how you sell your property. The fact of the matter is that option investors often provide the only hope that the owner of an obsolescent property has of ever selling his or her property. And this lack of demand can put option investors in the driver's seat when it comes to negotiating low-cost option fees and below-market purchase prices on...

Why Trade Options

With the tremendous growth that has occurred in the option markets over the years, it should come as no surprise that options provide an excellent trading opportunity. As you have probably been able to gather thus far, buying options responsibly can provide a greater level of security to traders, allowing them to rest easy during the day and sleep better at night. Options give traders more time to think about their positions without worrying about how much they could potentially lose. As one family friend puts it, buying options enables the trader to leave the computer screen and hit golf balls. If traders were to take positions in the actual security, or sell options, they must closely monitor their positions and only watch others hit golf balls on ESPN.

Letters

I enjoyed Marc Allaire's article (Rolling covered calls) in the April issue of Futures and Options Trader. I've been doing this and find it works well for me in a select number of stocks. If the credit received from placing a collar trade (see The collar trade, Options Trader, March 2007) does not beat a risk-free rate of return, you could receive from a T-Bill or similar instrument, then the trade is an economic loss (regardless of whether it has positive cash flow) and should not be taken. It is a bad trade and you should say so without qualification.

Trader

The Bible of Options Strategies is the definitive reference to contemporary options trading the one book you need by your side whenever you trade. How I Trade Options You'll find amazing Options trading techniques, proven methods for handling volatility and tips for trading like a pro by exercising strict discipline. Trade Options Online This new book from best-selling author George Fontanills provides online-specific options trading strategies from the simple to the more complex.

Nfa And Cftcrequired Disclaimers

FOREX futures and options trading have large potential rewards but also large potential risk. You must be aware of the individual risks and be willing to accept them to invest in FOREX futures and options markets. Don't trade with money you can't afford to lose. This book is neither a solicitation nor an offer to buy sell FOREX futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in this book. The past performance of any trading system or methodology is not necessarily indicative of future results.

Brief History of Finance and Engineering

Over the last hundred years or so, the sciences of finance and engineering have become linked through the efforts of famous theoreticians like Louis Bachelier, Harry Markowitz, Fisher Black, and Myron Scholes. Black and Scholes' parabolic differential equation for the pricing of options is, mathematically, of the same type as the heat, or diffusion, equation from engineering.7 Their equation became a foundation of the options trading industry and won a Nobel Prize. The success of engineers and mathematicians at explaining complex financial instruments and markets has encouraged thousands of Ph.D.s in these disciplines to join trading and investment firms to build new and better pricing, forecasting, and risk management models for all manner of listed and over-the-counter securities and derivatives and portfolios.

The Forward Foreign Exchange Market

The forward foreign exchange market developed to assist companies protect themselves from some of the uncertainty of exchange rate movements, but foreign exchange forwards are truly appropriate for known exposures. Using them to cover contingent, variable or translation exposures could force a company to accept losses on unnecessary currency transactions. Not only that, but rival companies that leave their exposure unhedged may suddenly acquire a competitive advantage. This has, therefore, partially led to the expansion in the currency options market, which has been even more spectacular than the tremendous growth seen in the entire foreign exchange market over the past decade or so.

Section 9 Trading Resources

However, many novice option traders, as they start trading, encounter many disappointments and issues in the options markets and leave with a bitter taste, for they have unrealistic expectations and are not equipped to compete in this game. This book will help the novice option traders as well as the experienced option traders become better equipped to stay in the game and compete successfully. Some secrets are classics or old adages heard on Wall Street for many decades, but that do work. Others use the new technologies that are available today. Some secrets are common sense. Others are quite unique. Many will help you avoid paying a high tuition as you learn to trade options or try to improve your skills. Therefore, instead of owning high flying tech internet stocks that have a dramatic amount of downside risk, you could receive the same kind of leverage by buying options and utilizing option strategies yet only risking 10 of your portfolio.

Introduction To Basics

Today, options provide a unique set of benefits. Not only does option trading provide a cheap and effective means of hedging one's portfolio against adverse and unexpected price fluctuations, but it also offers a tremendous speculative dimension to trading. One of the primary advantages of option trading is that option contracts enable a trade to be leveraged, allowing the trader to control the full value of an asset for a fraction of the actual cost. And since an option's price mirrors that of the underlying asset at the very least, any favorable return in the asset will be met with a greater percentage return in the option. Another major benefit of outright buying options is that an option provides limited risk and unlimited reward. With options, the buyer can only lose what was paid for the option contract, which is a fraction of what the actual cost of the asset would be. However, the profit potential is unlimited because the option holder possesses a contract that performs in...

Potential Risks That You Cannot Control When Using Real Estate Options

When I was starting out as an option investor, I bought a one-year option on a run-down commercial property in Ruskin, Florida, that belonged to a fertilizer manufacturer. And two months later, the company filed for protection under Chapter 11 of the U.S. Bankruptcy Code, and the property I owned an option on came under the control of a court-appointed bankruptcy trustee. The judge presiding over the case in U.S. Bankruptcy Court in Tampa ruled that my real estate option to purchase agreement was personalty or personal property and that I did not have an interest in the property. The case dragged on for over two years and, in the meantime, my option expired and I was out my 3,500 option fee. The 3,500 lesson that I learned here was to always do a lawsuit search on the individual or business entity that owns the property before I ever plunk down my hard-earned money to buy an option.

Stick A Toe In The Water

Consequently, buying options is the best way to start trading options. Avoid entering spreads or option writing. Just buy a small number of options to get your feet wet. If it's only going to cost you the price of eating dinner out, why not give it a try. Also, as you read this book, you will discover some hidden secret strategies to buying options.

Why Proper Money Management

All traders have one thing in common. Whether you are an options trader, a day trader, a stock trader, or a little bit of everything type of trader, you are-at least in one way-like every other trader. No matter what the market or method, every trader must make a money management decision before entering a trade. Sometimes this is not even a conscious decision. For these traders, money management never even crosses the scope of intentional thought. This is an extremely dangerous way to trade. It is amazing to me how much time traders spend researching where to get in and where to get out of the markets but then allocate to each trade with little more than a dart throw. Through my own experiences and a few illustrations, I hope to convey that proper money management is the key to success in trading.

The Workings of Option Contracts

Expiration limits the lifetime of the option. The potential profit period for the option speculator is the flip side of the advantage the short seller enjoys. Just as a short seller of stock sells and has an open position, the short seller is an options trader who initiates a position by selling the option. The short option position can be closed in one of three ways. First, it may expire worthless, in which case the entire premium received by the seller is profit. Second, it may be closed by buying back at any time, with the difference between the initial sales price and final purchase price representing profit or loss. Third, it may be exercised by the buyer, and the short seller may be obligated to complete the exercise transaction. When a call is exercised, the seller is required to deliver 100 shares of stock at the strike price. When a put is exercised, the seller is required to take delivery of 100 shares at the strike price shares are assigned to the seller.

Indiana University Kelley School of Business Indianapolis

There are alternatives to selling short in the cash market. An investor seeking to benefit from an anticipated decline in the price of a stock, broad-based stock market index, or narrow-based stock market index (e.g., a sector or industry) may be able to do so in the futures or options markets. Selling futures has several advantages to selling short in the cash market. Buying puts and selling calls are two ways to implement a short-selling strategy in the options market. There are trade-offs between buying puts, selling calls, and borrowing the stock in the cash market in order to sell short. The relative merits of using futures and options for short selling, along with a review of futures and options and their investment characteristics, are covered by Frank Fabozzi in Chapter 3.

Calls and Call Strategies

As a starting point in any discussion of option strategies, two matters have to be remembered. If you buy a call or a put option, you have the right to take certain actions in the future, but you do not have an obligation. Second, if you sell a call or a put, the premium you receive as part of an opening transaction is yours to keep, whether the option is later closed, expires, or is exercised. These two points are crucial in developing an understanding of how options trading works. If you accept the beginning argument that buying options is not normally appropriate for you as a conservative investor, but special situations can bring about an exception to that rule it is always possible that going long could be a useful strategy. It makes sense to keep the long position in reserve as one of many possible ideas. It's a mistake to simply reject a possible strategy because it is not a good fit with your overall investing theme. However, remember that, for the most part, you will not be...

You Must Be Able to Visualize a Property Being Put to a Variety of Uses

One of the keys to consistently making money as a real estate option investor is the ability to look at a piece of vacant property and visualize it being put to a variety of profitable uses. The real estate buzzword for this is adaptive reuse, which refers to putting a property to use in a way in which it was not originally intended. For example, when most people look at a vacant three-bay gas station, all they ever see is just a vacant three-bay gas station. However, when a savvy real estate option investor with a fertile imagination looks at a vacant three-bay gas station, he or she immediately sees a

Why investing in the futures market is like any other business

Conversely, in the futures and options markets there is always a buyer and seller waiting to come together and meet your price. There are no employees to handle, except your broker, and he is generally easy to deal with The liquidity which is inherent in the futures and options market, make commodities trading far more attractive than investing in other businesses.

Your Option Buying Decisions Should Include Local Property Supply and Demand

One surefire way to quickly go out of business as a real estate option investor is to buy options on properties that are not in demand in your local real estate market. If you are smart, you will follow my advice and use the information that is readily available on local economic, business, and real estate market conditions to help you determine which types of properties to buy options on. This way, you will be able to make an informed option buying decision, which is based on the local supply and demand for a particular type of property. You can stay informed of local market conditions by 1. Types of properties you are interested in buying options on.

Why Its Best to Specialize in at Least Two Different Types of Option Properties

How many different types of option properties you specialize in pretty much depends on the size of your local real estate market. At a minimum, I recommend that you specialize in at least two different types of properties. I am telling you this because in most real estate markets, very few potentially profitable option properties are usually available. And if you focus on just one type of property, you probably will not be very successful. The most profitable option investors that I know specialize in at least two different types of option properties. For example, I know one investor who buys options on single-family houses that have been damaged by sinkholes. This same investor as I mentioned in Chapter 1 also buys options on single-family houses and mobile homes that have been used as laboratories for producing illegal methamphetamine drugs. I know another option investor who specializes in buying options on building lots with condemned single-family houses, which have been slated...

The Seven Most Profitable Types of Properties to Buy Options On

The real trick to being a successful option investor is in knowing which properties to put under option so that you can create instant equity without having to spend oodles of time and gobs of money on an extreme property makeover. And over the years, I have been able to take the same derelict properties, which most uninformed investors reject out of hand as being hopeless cases, and by using just a smidgen of imagination and some old-fashioned creative thinking, I have turned them into profitable option properties. From my experiences, the seven most profitable types of properties to buy real estate options on are In most real estate markets nationwide, savvy, knowledgeable real estate option investors who really know what they are doing have very little real competition from other individual real estate investors for these types of properties. This is because the average real estate investor is not very sophisticated when it comes to putting relatively complex deals together. Plus,...

Practical Application Through Different Systems And Markets

This is another area of common confusion when money management is concerned. I often receive questions about whether my money management methods work on the British pound, or whether they work with buying options, selling options, stock trading, or whatever the market may be. To be as direct as I possibly can about this subject,

Gem Of A Benefit In Futures

One of the first things to know about buying options in futures is that you do not need to hold them until expiration. Option buyers may sell their position at any time during market hours when the contracts are trading on the exchange. Options may be exercised at any time before the expiration date during regular market hours by notifying the broker. Usually one exercises in-the-money options this is called the American style of option exercising. It is called the European style of option exercising when the option can only be exercised on the day the option expires.

Option Payoffs 611 Basic Options

Because buying options can generate only profits (at worst zero) at expiration, an option contract must be a valuable asset (or at worst have zero value). This means that a payment is needed to acquire the contract. This up-front payment, which is much like an insurance premium, is called the option premium. This premium cannot be negative. An option becomes more expensive as it moves in-the-money.

Dont Give Up and Quit before You Achieve Your Objective

Americans today live in a drive-in society where just about everything under the sun is available from the front seat of an automobile. And as a nation, we are the most impatient people on the planet. When we want something, we want it right now, instantaneously. Well, that type of impatient attitude may be hunky-dory when it comes to customers' expectations about the service at fast-food restaurants, but it will not fly when applied to the real estate option business. Being a profitable option investor requires consistent persistence and dogged determination, which prevents investors from quitting the first time things do not go exactly as planned. Trust me, the only thing that you can depend on in this business is that things will almost never go the way you think they should. And in a way, I suppose that is a good thing because if options were a piece of cake, everyone would be using them, and that would be bad for business. So, if you are looking for some magic formula that will...

Select the Investment

Because the value of an option is based on the underlying stock, a working knowledge of the stock market is imperative. If you know nothing about the stock market, you will know even less about how to trade options. For people who have never invested before, starting out in trading by using options is akin to trying to learn math for the first time by starting with calculus. Therefore, you need to know the stock market in order to trade options because you need to know how to pick stocks and make informed and reasonable predictions about the direction the stocks will move. The first step in placing a trade is selecting the underlying stock.

Fixed Fractional Tradingthe Math

When applying the Fixed Fractional method to futures and or options trading, it can be stated a different way. For example, if your largest risk on the next trade equaled 1,000 and you decided not to risk more than 10 percent of an account on any given trade, the following formula will tell you what the minimum account must be to make the trade

Extreme Bearishness Threshold Level Analysis

The results of a 10 percent buy threshold level, which produced excellent results in nearly all time frames, are presented in Table 4.1. It contains the time frames T + 5 (5 days after threshold penetration) through T + 240 (240 days after penetration of a threshold). Overall, the extreme sentiment threshold levels produced an average change in price of 5.31 percent in the T + 40 and shorter time frames. The average change in price rose to 12.03 percent in the T + 50 and longer time frames. Comparing these results with the historical random average change in the price of the S& P 500 during these same time frames, seen in Table 4.1, there is no question that it pays to trade against the options trading crowd when these traders become excessively bearish. The average change in price of the S& P 500, for example, is just .33 percent for the shorter time frames and .45 percent during the longer time frames, a significant difference.

Remember Your Plan and Stick to It

This chapter is not an exhaustive review of the mechanics and strategies of options trading or the specific characteristics of options. We assume you have a basic understanding of options and a familiarity with many of the strategies. The review is meant to merely give an overview of the strategies and present some other tools available to option traders. The tools presented in this chapter are necessary not only for successfully implementing the SCORE trade management formula, but also for taking advantage of various adjustment strategies covered in this book.

Dont Run Out and Form a Separate Business Entity before You Do Any Deals

Do not make the all-too-common mistake of running out and forming a separate business entity before you have done any option deals. As far as I am concerned, it is totally asinine for aspiring option investors to go to the effort and expense of forming a separate business entity solely for the purpose of buying options before they even know if they are cut out to be an option investor. However, to those of you reading this book who do go on to become profitable option investors, I very highly recommend that you form a separate business entity such as a Sub-chapter S corporation or limited liability company to buy options through. It is one of the best and least expensive methods available to help reduce your risk and limit your personal liability as a real estate investor. This way, there is a clear distinction between your personal and family assets and the assets held by your corporation or limited liability company. And, in most cases, any liability incurred by the business entity...

How Obsolescent Properties Can Be Put to Their Most Profitable

The only reason I invest in real estate instead of widgets is that it is one of the very few businesses left in America where private individual investors can profit handsomely by turning problems into opportunities. And nowadays, white elephant properties can be a bonanza for savvy option investors who have the ability to visualize new lives for buildings that have outlived their original use. In fact, today's real estate lexicon is peppered with buzzwords that are used to describe how obsolescent properties can be put to their most profitable use and includes terms such as And as I told you in Chapter 2, to consistently make money as an option investor, you must develop the ability to look at a piece of vacant property and come up with a variety of viable uses for it uses that your competitors have overlooked, but which make economic sense. For example, for over two years I drove by a boarded-up gas station located near MacDill Air Force Base in Tampa until one day it dawned on me...

Strategic Timing and Short Term Price Changes

Consider the possibilities in options trading when markets are exceptionally volatile. Most of your capital may be tied up in long stock positions that would produce losses if sold when market prices are low. You recognize that this is the time to buy more stock, but you are uncertain, and you do not have capital available to make a bold move even if you wanted to. This is the perfect opportunity using a limited amount of capital, of course to buy cheap calls. You know that sharp market drops usually rebound quickly. You also recognize the stocks whose fundamental strength supports the probability of a healthy return to the normal trading range. So, picking the bargains is not difficult the decision to put money into the market at these moments is the difficult part.

Avoid An Options Last Month

One reason such depreciation may occur is because option investors sell (write) options the last month before expiration. In fact, I write options a day or two before the last month begins (expiration of the previous month). Nevertheless, sometimes I buy options with one month or less before expiration if they are extremely cheap and undervalued and if the underlying stock or futures price is close to the strike price.

Why the Sublease Option Strategy Isnt Financially Feasible

The main reason I am not a fan of the sublease-option strategy that is being taught today is that it is not financially feasible. In other words, there is just not enough profit in most sublease-option transactions to make them financially worthwhile. For example, under a typical sublease-option scenario, a lessee-optionee would be lucky to receive from a tenant-buyer a 1,000 option fee and a monthly sublease payment that is 100 above his or her lease payment. In most cases, what appears on paper as a 100 a month positive cash flow really is not. This is because most investors involved in sublease-option transactions never bother to factor in the amount of time they spend managing property as a business expense. If they did, they would come to the quick realization that they are working for minimum wage. I do not know about you, but to me, the prospect of working for minimum wage, especially as a self-employed real estate investor, has zero appeal However, low wages are not the only...

Most Investors Dont Have the Cash Reserves to Subsidize Sublease Options

The fact of the matter is that most real estate investors are woefully undercapitalized and do not have the deep pockets or cash reserves that are usually needed to subsidize sublease-option deals. Few serial sublease-option investors are around because most people go broke supporting their first sublease-option deal This lack of operating capital creates a domino effect whenever there is any type of financial emergency. For example, when a tenant-buyer fails to pay the monthly sublease payment, the lessee usually has no money to make the lease payment to the property owner, which forces the owner to initiate eviction proceedings against the lessee for nonpayment of rent. This in turn forces the lessee to start the eviction process against the tenant-buyer for failing to pay the rent. And if the lessee cannot come up with the money to pay the lease payment, the lessee will end up losing the real estate option, and the only thing he or she will have to show for their time, effort, and...

Beware Of Delusions Of Grandeur

Most option buyers have totally unrealistic expectations. There is a tremendous amount of hype about how much you can make buying options. Many option experts promise 100 and even 1000 returns each year. Unfortunately, most option investors lose, and most get discouraged very quickly when their dream of quick riches vanishes.

Selling Options why should I do it

Up to now, we have talked about buying options. But it stands to reason that when someone buys an option someone else is selling options. In any given transaction, the seller may be someone who previously bought an option and is now liquidating it. Or the seller may be an individual who is participating in the type of investment activity known as option writing. The attraction of option writing to some investors is the opportunity to receive the premium that the option buyer pays.

Fraud Scams and Off Exchange

Even though there is no Exchange (central clearinghouse) for currency trading, broker-dealers who operate from telephone boiler rooms are still referred to as off-exchange. Beware of these practitioners and avoid them like the plague. Most of them have no web site or a few shoddy pages built in straight HTML and operate primarily via telephone solicitations. They typically sell FOREX options. (See Chapter 19 for information on legitimate FOREX options trading.) They are almost never registered with the CFTC, NFA, or any recognized regulatory body.

Margin Requirements and Trading Restrictions

There are two areas in which option investors have to live with special rules taxes and trading restrictions. The tax rules are covered later a more immediate concern involves the special financial requirements that apply once you move beyond the status of stockholder and begin to make actual option trades. The second restriction is intended to limit the volume of trading undertaken by investors with limited capital. The Securities and Exchange Commission (SEC) defines a pattern day trader as any individual who makes four or more day trades within five business days. A day trade is opening and closing a position within a single day. Once you make the fourth day trade within a five-day period, you are required to maintain at least 25,000 equity in your account (in cash and securities). For many options traders, the restriction certainly applies. So, unless you can limit activity to three or fewer, you will be treated as a pattern day trader.

Changes in forward and derivative trading

While there are some electronic (screen-based) forwards matching and electronic options trading products, they are very different animals to spot. Forwards tend to move at a slower pace, giving participants time to counter-bid and offer in the hope of dealing at a slightly better rate. In the options markets, brokers still play a major role in price discovery. The FX options market, like spot and forwards, appears, conversely, to have stopped growing. Between 1995 and 1998, daily volume more than doubled from USD 41 billion to USD 87 billion. In the following three years, however, it declined by 31 to USD 60 billion. There is anecdotal evidence that new accounting regulations, such as FAS 133 (for companies that report under US GAAP - Generally Accepted Accounting Procedures), have caused many companies to revert to using outright forwards to manage their currency exposure. The way the options market operates has changed little. There is still a thriving voice broker and interbank...

How You Can Use Options to Profit from Properties with Correctable Problems

The one thing that the most profitable types of option properties all have in common is that none of them will ever be mistaken for a so-called blue chip property. The term blue chip is used to describe properties that have a flawless appearance, are in pristine condition, and are situated in prime locations. As you will soon see, none of the properties that I write about in this chapter fit that bill. In fact, the chances that the average real estate option investor has of ever putting a trophy-type property under option are slim and none. I say this because the owners of highly sought-after properties can pretty much name their own sale price and terms and have no compelling reason to sell an option to anyone whereas owners of vacant properties with various types of problems, which scare off most prospective buyers, are in no position to be choosy when it comes to how they sell their property. And this is exactly why one of the most profitable types of properties to buy real estate...

The Omega Theta Vega and Rho of an Option

One unit (usually the unit is one week) vega (W), the change in option price with respect to a 10 change in volatility, and rho (p) the reaction of the option price to changes in the risk-free rate. For example, if a p 0.5 the option's theoretical value will increase by 0.05 if the interest rate is decreased by 1 . The information about the Greeks, usually accompanied by the definitions of terms, is increasingly being made available by brokerage houses for the convenience of options market investors. In this chapter we have examined derivative contracts as first a method of hedging risk, and then as a source of collecting information about the perceived volatility of the market. In later chapters these measures will be used as a means of improving our historical estimates of downside risk with forward-looking measures from the options market. STRIDES are useful for small investors for two reasons (i) They allow a bullish investor to earn a high yield without incurring further costs...

How You Should Use the Problem Property Option Strategy

Their problem properties themselves usually do a pretty lousy job of marketing and end up with no takers. They do not know how to conduct market research to identify prospective buyers who could possibly have a use for their property. And luckily for us savvy option investors, they usually fail to look beyond the borders of their own local real estate market for so-called niche investors, who specialize in buying properties with every imaginable type of problem. These niche problem property investors run property wanted ads in professional real estate trade publications and newspapers with national circulations, such as the Wall Street Journal and the New York Times. For example, I have resold options on two problem properties that were contaminated with hazardous waste material to niche investors who specialize in cleaning up contaminated properties, whom I found through ads in trade publications.

How to Buy Options on Properties Destroyed by Natural and Man Made Disasters

First things first You must be very careful when using this option strategy, so that you are not perceived as just another sleazy opportunist trying to take advantage of the plight of disaster victims. And this is why it is best that you never contact any property owners in disaster areas until after the dust has had a chance to settle. I am telling you this because after every man-made and natural disaster, there is always a segment of the population, especially in the areas that have been the hardest hit, who throw in the towel and take their insurance money and run. And property owners who have been reimbursed by their insurer for their loss but, for whatever reason, have no desire to rebuild are the owners who are most likely to sell an option to purchase their destroyed property. Savvy option investors can buy a one- to two-year option to purchase the property at a bargain price, clear away the rubble, and wait until the recovery is well underway, and then resell or exercise...

Squeeze Play I Pulling the Price Trigger

The Squeeze Play I option sentiment trading system explored in the previous chapter allows trade entry, either long or short, if the EMA5-21 oscillator value has been above zero (longs) or below zero (shorts), and then experiences a crossover. Just to reiterate what is happening during this crossover, when the oscillator crosses to the negative, the options trading crowd moves from a previously bearish mood to a bullish state. This is captured in the faster-moving EMA5-21 oscillator, so the hope is that it catches the start of a sentiment reversal. The presumption is that sentiment is experiencing a sudden change, from what were excessive levels before the cross. At this point, there is no specification in the system code to require any specific prior level of extreme sentiment. The sentiment measured in the EMA5-21 oscillator just needs to have been above average levels of sentiment, then suddenly to have reversed to get us into the trade. As for exits, when the slower (EMA21-50)...

Users of Currency Options

Writing options on exchanges tends to be simpler as the credit risks are controlled by a margin system. The margin is a small percentage of the value of the contract, which must be deposited to cover losses up to a certain limit. The margin is usually adjusted on each trading day and occasionally more frequently to take account of market movements. However, the greater flexibility available in the OTC market allows some of the credit difficulties to be pursued and overcome. Participants in the foreign exchange currency options market include

Squeeze Play I To The

As a measure of the unsophisticated options trader sentiment. First applied to the S& P 500, the system was then run on the Dow Jones Industrial Average and NASDAQ 100 (without optimization), and finally the OEX S& P 100 equity index. Performance was quite consistent across each of these equity indices. Calculating dollar rates of return using futures contracts, gains were highest (1,222 percent) on the NASDAQ 100 for the seven-year period of the test and the lowest on the DJIA (900 percent). Total return on the S& P 500 futures contract was 951 percent for the period. The average annual gain for the three contracts combined was 146.3 percent. The tests did not include commissions and slippage, but given the small number of trades and the type of position trading employed, this would have had only a minor impact on performance. Later, in tests that take many more trades, I factor commission costs into the performance results. A look at the most active puts and calls at the...

The big picture

If you only looked at the daily charts and you want to trade three to four months out, you will probably be making the wrong trade. This is especially true if you want to trade options, and four months down the road the trend changes. Now all the options you bought are worthless.

Pay a Finders Fee for Information That Results in the Purchase of an Option

Without the cost of a weekly payroll. I know an option investor in Orange County, California, who specializes in buying options on properties that have been stigmatized by being the scenes of violent crimes. To find these types of properties, this investor has enlisted the help of the technicians who work for the companies that specialize in the grisly job of cleaning up crime scenes. This guy pays a 500 finder's fee for every property he buys an option on.

An Interview with Robert Prechter

None of the famous traders had any influence on me. My primary early influences were Richard Russell in the area of market analysis and Dick Diamond in the area of trading. Russell taught me that technical analysis was proper and reasonable. My friend Diamond taught me how to trade options.

How could hedge fund investors be aware whether a manager was mispricing stocks in the portfolio

In the beginning it was about 10 percent, but as he lost more and more money, the portion of the portfolio in privately held companies continued to grow. By the end, privately held stocks accounted for a major portion of the portfolio, and he was largely left with a bunch of nearly worthless paper. It sounds as if he was gambling in the options market and hiding his losses by marking up his private deals. Wouldn't the truth come out when investors redeemed their money and received back much less than the reported net asset value

Retirement Plan Wake Up Call

I am currently an employee with the State of California and have the ability to start setting aside trading capital in a 457 plan with Charles Schwab at the rate of 1000 per month. I am considering purchasing the Turtle Trader course. My concern is that although the tax benefit is huge, I will not be able to do any short selling or trade anything that is not on a cash up front basis. For options trading I am restricted to writing covered calls and buying puts against long positions. Since the putting 1000 a month into a self directed retirement plan cuts my taxable income almost in half, it seems pretty great, but if the restrictions force me into a long-term buy and hold investment strategy My basic question is this Can I effectively trade the Turtle system with these restriction and if so, how much will I be hampered by not being able to short sell on a margin account. Would I be better off just paying the taxes and putting the money into a margin account with a discount broker

How to Perform Due Diligence on a Potential Option Property

ver the past 24 years, my real property research credo has evolved into Trust no one, assume nothing, verify everything, and be prepared for anything I have learned the hard way not to automatically assume that all of the information contained in the official public records about a property is complete, up-to-date, and 100 percent accurate. It usually is not. The only way to obtain reliable, up-to-date information on a property and its owner is to go directly to the source of the information and then verify it, which is exactly what due diligence is all about. The purpose for performing due diligence on a potential option property is to gather the most up-to-date and verifiable information available in order to make an informed option buying decision. And, given the Internet and the vast amount of property-related information that is readily available online today, there is absolutely no valid excuse for anyone not to perform due diligence on potential option properties before they...

Features Of The Listed Market

Open and orderly marketplace - prices in the crowd may be given by market makers (also referred to as registered options traders), specialists or floor brokers representing customer orders. A specialist, designated by the Exchange to represent a particular currency, is responsible for maintaining fair and orderly markets and disseminating the best-quoted prices for each series in standardised options. In addition, specialists are responsible for the proper execution of orders entrusted to them. Customised options do not have a specialist. Instead, market makers are assigned to particular currency pairs and are responsible for making two-sided markets. While standardised options are quoted continuously, customised options are only quoted upon request. Both standardised and customised options are marked-to-market daily. Trading hours - for the PHLX, their currency options market is open for trading from 2 30am to 2 30pm Eastern Time, Monday through Friday (except for standardised...

Element 2 Time and Extrinsic Value Premium

Time works for the seller and against the buyer. Buying options can be highly speculative because the buyer has to hope not only that the stock rises enough to create intrinsic value prior to expiration but that the growth in price also rises far enough to offset lost time value. Because time value evaporates as expiration approaches, this is difficult to

Global Futures Fear Indicator

Start buying good value stocks whenever the readings of this index fall below 0. This takes of course a lot of guts because the opinions of the widely quoted gurus are usually contrary at this time. Unfortunately this indicator does not tell you when to sell. Set yourself a limit if you trade options or use trailing stop-loss orders if you are a long-term investor.

Theoretical Valuation

The vega or volatility risk of an option is the extent to which the valuation will change with varying estimates of volatility. The theta, or time decay, is the decrease in value of the option as it approaches maturity, as an option is a constantly diminishing asset. Finally, every option has forward foreign exchange risk equivalent to the delta and an interest rate exposure based on changes in funding costs. The delta and interest rate risks can be hedged easily in the relevant markets. The dynamic nature of the other risks is the essence of the options market.

Examples Of Other Models

As already has been mentioned, Black-Scholes is by no means the only model being used in the options market today. Theorists have devoted a substantial amount of time and effort developing mathematical models for pricing options and a number of different models exist as a result. All make certain assumptions about market behaviour, which are not totally accurate but which give the best solutions to the price of an option.

Concluding Comments

Tremendous growth in the exotic options market across all asset classes has rendered certain types of first generation exotic options such as barrier and binary options almost vanilla in nature. With this growth expected to continue, the thin boundary separating vanilla and exotic options is likely to dissipate as investors become more familiar with pricing models and how to manage option risk on both an instrument level as well as on a portfolio level. As more products are introduced into the marketplace, the traditional asset allocation landscape is expected to change and accommodate a greater diversity of alternative assets to which exotic options will form a significant portion of.

Adapting Put Call Ratios to Bond Futures

Similar to the stock market, the options trading crowd can be relied upon to furnish the fuel needed to power bond market trades to profitability. The same dynamic of crowd psychology, identified with bond option put call ratios, can be found to work in the market for bond futures.

Options On Stock Indices

Several exchanges trade options on stock indices. Some of the indices used track the movement of the U.S. stock market as a whole. Some are based on the performance of a particular sector (e.g., mining, computer technology, and utilities). Some are designed to track the performance of a foreign stock market.

Trading Options With The 5 Day Momentum Method

I will begin this section by telling you I am not an options trader . I trade equities and this keeps me busy enough. There are, though, many people who focus on the options markets as a leveraged way to make their money grow. Unfortunately, the overwhelming majority of traders lose money buying options. My observation is they commit two trading sins 1) They guess where the market (stock) is going and 2) when they are wrong, they don 't use stops and they let their options go to zero. In my opinion, The 5 Day Momentum Method lends itself well to short-term options trading and it helps cleanse the above mistakes.

How to Accurately Estimate a Propertys Current Market Value

I rom what I have seen over the years, buying options on overpriced properties is the number one reason many people fail to make it in the real estate option investment business. And for most beginning option investors, overestimating the value of their first option property usually proves to be a very costly and often a fatal mistake, which generally marks the beginning of the end of their foray of investing in real estate options. You must understand that when you assign or sell a real estate option to a third party, what you are really selling is the property under option. This means that if the property under option has a purchase price that is right at or above market value, it will be nearly impossible to find anyone willing to buy your real estate option. I know an investor in Las Vegas, Nevada, who learned this lesson the hard way when he bought a one-year option for 10,000 on a former gas station, which had been sitting vacant for two years. This neophyte investor...

The Option Clearing Corporation

The Option Clearing Corporation (OCC), the clearinghouse for options trading, is jointly owned by the exchanges on which stock options are traded. The OCC places itself between options traders, becoming the effective buyer of the option from the writer and the effective writer of the option to the buyer. All individuals, therefore, deal only with the OCC, which effectively guarantees contract performance.

The Fundamental Equation Of Trading

Now we will take the exact same trades, only, using the Black-Scholes stock option pricing model from Chapter 5, we will convert the entry prices to theoretical option prices. The inputs into the pricing model are the historical volatility determined on a 20-day basis (the calculation for historical volatility is also given in Chapter 5), a risk-free rate of 6 , and a 260.8875-day year (this is the average number of weekdays in a year). Further, we will assume that we are buying options with exactly .5 of a year left till expiration (6 months) and that they are at-the-money. In other words, that there is a strike price corresponding to the exact entry price. Buying long a call when

Dynamic Gamma Scalping

An alternative can be to buy premium with each adjustment. This strategy can work well if the futures move in one direction. One buys the delta equivalent amount of puts on the way up and the delta equivalent amount of calls on the way down. However, if this strategy had been used in my example, a large loss would have been incurred because of the premium decline on the opening. On days when implied volatility increases, traders profit very well from buying options to scalp their gamma because their hedges either do not lose as much as the futures would have lost, or they do not lose anything at all. On days when volatility is very high and the market goes up, the puts can increase in value as well, and the strategy will be extremely profitable.

Combination Trade Strategies

Your potential participation 10-fold. At the same time, your exposure is limited to the premium, as previously mentioned. The financial aspects of any particular transaction can dictate the strategy that is most effective. Keep in mind that the zero margin only pertains to buying options. This is because exposure is limited. If you decide to sell options, you must post margin. However, the premium you collect adds to the value of your account.

How to Negotiate Low Cost Options and Below Market Purchase Prices with Property Owners

In my more than 24 years as a real estate investor, I have seen real estate investors ranging from neophytes just starting out to self-proclaimed seasoned veterans get snookered into overpaying for property, all because they were unable, for whatever reason, to master the fundamentals of negotiations. This hapless group of investors failed to grasp the very basic concept that when it comes to the terms of a real estate transaction, everything, and I do mean everything, is negotiable. They did not understand that, unlike your local Home Depot where every item in the store's inventory has a universal product code or UPC that lists the product's non-negotiable sale price, how much you pay for a real estate option or property really depends on how good a negotiator you are. And if you are a shrewd negotiator, you can buy low-cost real estate options and properties at below-market purchase prices. But, if you are a poor negotiator, you will probably end up paying way too much for your...

The Oex Early Exercise

An exercise usually takes place from just after the cash market closes (3 00 P.M. Chicago time) until the futures and options close (3 15 P.M. Chicago time) when the OEX combos or the S& P futures at the CME make a significant move in either direction. If there is a large move in the market, traders take the opportunity to buy sell the S& Ps and exercise the OEX calls puts that are far enough in the money. Traders have until 3 20pm, or five minutes after the options market close to exercise, and public customers have a little bit more time. Far enough in the money means that they could either buy the same strike puts, for example in the case of a break (market decline), for significantly less than the combo's discount to cash (dividends on the basket minus the implied carry) and still be in the conversion (inter-market spread), or buy the same strike puts a lot cheaper than they have recently been trading for. Conversely, if there is an after-cash-market rally, traders will sell...

How did you get started writing investment software

The first thing 1 did wras read Edwards and Magee (Technical Analysis of Stock Trends, see Appendix 3), and memorise that. 1 was basically using that to trade options at 20 years of age, and at the same time still doing my real estate stuff. When I was 21, I developed a residential apartment complex in Texas, near where 1 was studying, and made some money out of that. Basically 1 was making money out of real estate and at the same time starting my stock market trading.

Six Basic Rules to Follow When Negotiating with Property Owners

Please keep this in mind the next time you get the urge to speak out of turn while the other party is still talking. Rule 3 Limit the use of tall tales, little white lies, and fibs to describing fishing and hunting exploits and not your background. The fastest way to lose credibility during negotiations is to get caught in a boldfaced lie. I immediately cease negotiating with anyone who tries the old dazzle them with brilliance and baffle them with bullspit technique on me. I do this because I have adopted a zero tolerance policy, which prevents me from negotiating with people who employ games, gimmicks, and bullspit as a major part of their negotiating strategy. Years ago I made a solemn vow to myself that I would never again waste my valuable time and energy negotiating with ethically challenged people who cannot make the distinction between fact and fiction. Rule 4 When negotiating with property owners, use the time-tested KISS principle Keep it simple,...

Five Negotiating Tools You Can Use to Obtain Lower Prices and Better Terms

If you followed my advice in Chapters 10 and 11 and thoroughly researched the property and its owner when performing due diligence and if you had the property thoroughly inspected, you should have a pretty good idea as to what information you can use to help negotiate favorable terms. Here are five negotiating tools that savvy real estate option investors can use to their advantage to negotiate low-cost real estate options and below-market purchase prices on buyer-friendly terms

Options and Conclusion

Track 'n Trade Pro is a great overall program for almost everyone. The program, however, is not the best for straight system development. In its defense it was not designed for that purpose. Options traders, or those who use options in conjunction with futures, may find Gecko somewhat lacking in specific help for options trading, but Gecko Software is working on resolving this issue with their upcoming options plug- in, available late 2003. Traders interested in day-trading futures will not find the use of end-of-day data sufficient for their needs, but longer term position traders will rejoice in finding day session only data available.

Buy 57shares Borrow 22

Maturity A call (put) with a shorter time to expiration should never sell for more than a call (put) with the same strike price with a long time to expiration. If it did, you would buy the call (put) with the shorter maturity and sell the call (put) with the longer maturity (i.e, create a calendar spread) and lock in a profit today. When the first call expires, you will either exercise the second call (and have no cashflows) or sell it (and make a further profit). Even a casual perusal of the option prices listed in the newspaper each day should make it clear that it is very unlikely that pricing violations that are this egregious will exist in a liquid options market.

Option Indicators Td F And Td Dollarweighted Options

It's amazing to observe the behavior of an apprentice option trader. The pattern of trading such an individual exhibits is reminiscent of our old next-door neighbor. Totally immersed in this trader's psyche was the belief that his option trading profits would grow faster than he could count. Excited and fantasizing about the imminent wealth he was to acquire, he initially traded with reckless abandon following every whisper buyout situation or rumored news event. As time progressed and his losses accrued, our disappointed and disenchanted option-trading neighbor finally abandoned following his emotions and withdrew from trading altogether, cursing his first trade in what he believed to be a rigged market. Our hope is to short-circuit your replay of this course of events and protect you from becoming another market fatality statistic like him. By following the list of option trading rules previously described, the risk of having the news and one's emotions dictate and influence one's...

Changes in the Optionto Stock Relationship

By understanding each of the key factors of options theory described here, a trader will be able to make an informed decision on how to incorporate options into the construction and management of his portfolio. These factors form the basis of all options trading and should provide a sufficient foundation to begin a discussion of specific applications and strategies. Once these basic strategies have been understood, it will be appropriate to relate both the theory and the application to pairs trading so as to determine how a manager may use options to augment his trading arsenal. Options are a very powerful tool by which a manager may both improve returns and manage risk within his portfolio. In order to lay the foundation for relating pairs trading to options trading, it will be helpful to understand several basic options strategies. Each options strategy presented will be specifically applicable to pairs, will provide the reader with some insight into how the two relate, and will...

Understanding Risk Reversals

Understanding risk reversals in currency options trading is an invaluable tool for both traders and hedgers. At this stage, it is important to review how options are priced in the over-the-counter market. Market makers in options make prices and trade off implied volatility. As an example, a sample of at-the-money forward volatilities might be Theoretically, out-of-the-money puts and calls with the same probability of exercise (delta) would trade at the same volatility price. However, directional spot foreign exchnage and volatility views held by the options market frequently distort the market. As a result, out-of-the-money calls may trade at a higher volatility price than out-of-the-money puts or vice versa. In other words, the options market is taking a view on the direction of the dollar. Risk reversals for out-of-the-money options might be quoted as

Implications For Traders

A view on the direction of the dollar. From the previous example, market demand for out-of-the-money dollar calls has exceeded market demand for out-of-the-money dollar puts causing out-of-the-money dollar calls to trade at a higher price than the out-of-the-money dollar puts. Option traders, therefore, believe that the dollar could trade higher in the near term. The stronger the conviction of a higher dollar, the higher the risk reversal. If the market has no strong view, the level of the risk reversal tends towards zero. This implies that out-of-the-money puts and calls would trade at similar volatilities. When the options market starts to believe in a lower dollar, out-of-the-money puts will start to trade over out-of-the-money dollar calls.

Aftermarket Short Squeeze

What happened to ADSP is another variation on a very strong short squeeze. We discovered ADSP early premarket on November 24, 1999, and issued a trade alert to buy at 5' premarket near 9 10 a.m. EST. Since this was the day before Thanksgiving, much ofWall Street was off, and this allowed for the ISLD boys and loose

Bad Creditor Borrowing Games

One of those hats comes with a three-piece suit and gold watch and chain. An options trader is a banker who borrows and lends. The premium trader, the directional trader, the skew trader, and the risk manager are other hats that the market maker wears from time to time. End

Convertible Arbitrage

Should create the equivalent of the convertible bond. Once you can do this, you can take advantage of differences between the pricing of the convertible bond and synthetic convertible bond and potentially make arbitrage profits. In the more complex forms, when you have warrants, convertible preferred and other options trading simultaneously on a firm, you could look for options that are mispriced relative to each other, and then buy the cheaper option and sell the more expensive one.

Diversifying I Stock Portfolios

If everyone, not just the booth owners, could sell as well as buy, this would be a better elemental model of an equities market. (I don't intend this as an historical account, but merely as an idealized narrative.) Nevertheless, I think it's clear that stock exchanges are natural economic phenomena. It's not hard to imagine early analogues of options trading, corporate bonds, or diversified holdings developing out of such a bazaar.

Nineteen Clauses That Must Be Included in Your Option Agreement

One of the biggest mistakes that I made when I first started out as a real estate option investor was that I did not include clauses in my option agreements that fully protected my rights and interests as optionee. However, I started to wise up when a property I had an option on burned to the ground, and I was left with

Stock Moves Higher Short Repair Strategy

Efficient risk managers who trade options have a better solution. We can add a put ratio spread to our losing position and implement the short repair strategy, which will serve to raise our breakeven point and perhaps earn a profit on a position that if left alone would produce a loss. The short repair strategy can be implemented at no additional cost, which means we can adjust our position without spending more money and increasing our risk.

Boutiques Regional Firms Foreign Firms and Specialists

These are typically floor-trading positions on regional or secondary exchanges. Options trading is a very entrepreneurial business all it takes is a seat on the exchange, a willing trader and a financial sponsor. The more developed a firm becomes, the more it is able to invest in a sales organization to solicit order flow. Even with a sales organization behind you, life on an options exchange is typically nasty, brutish and short. Traders on certain

Too Much Sensitivity To The Biggest Loss

This is where using options in a trading strategy is so useful. Either buying a put or call outright in opposition to the underlying position to limit the loss to the strike price of the options, or simply buying options outright in lieu of the underlying, gives you a floor, an absolute maximum loss. Knowing this is extremely handy from a money-management, particularly an optimal f, standpoint. Further, 'f you know what your maximum possible loss is in advance (e.g., a day trade), then you can always determine what the f is in dollars perfectly for any trade by the relation dollars at risk per unit optimal f, For example, suppose a day trader knew her optimal f was .4. Her stop today, on a l-unit basis, is going to be 900. She will therefore optimally trade 1 unit for every 2,250 ( 900 .4) in account equity.

Quick Site Tour New Visitors Tour Turtle Tradercom

Never borrow to invest was the maxim next broken as my stock trading account was recapitalized. My newfound financial literacy was a guaranteed recipe for success I could now short stocks and trade options, what more did I need Never mind that I still could read neither a cash flow statement nor a price chart

Always Obtain Title Insurance Coverage from a Reputable National Underwriter

A title insurance policy, like all types of insurance policies, is only as good as the company underwriting it. So, when you buy any type of title insurance, always use the services of a board-certified real estate attorney or a title or escrow agent whose title insurance policies are underwritten by a reputable regional or national underwriter, such as First American Title Insurance Company, Chicago Title & Trust Company, Lawyers Title Insurance Corporation, Old Republic Title Insurance Company, Fidelity National Title Insurance Company, or Stewart Title Insurance Company. However, I must warn you that most title and escrow agents are totally clueless when it comes to knowing anything about straight real estate options. This is why I highly recommend that you purchase title insurance through a board-certified real estate attorney or reputable title insurance company that has a competent real estate attorney on the staff of its underwriting department. Once you have the names of...

Get a Title Insurance Policy Commitment before Buying a Real Estate Option

Search to determine if they will issue an owner's title insurance policy commitment to insure the property's title. You must do this so you do not waste your valuable time pursuing potential option properties with titles that are riddled with title defects that cannot be quickly and inexpensively cured. An owner's title insurance policy commitment, sometimes referred to as a binder, is a temporary insurance contract providing for the future issuance of a permanent owner's title insurance policy after a valid instrument such as a deed, contract, or agreement for deed, lease, or real estate option creating an insurable interest or right in real property is executed, delivered, and recorded. I know an option investor in Manchester, New Hampshire, who once made the mistake of buying an option on a small, non-working dairy farm without first getting a title insurance policy commitment from a title insurer. And to make matters worse, this guy did not even have a title search done before he...

How to Close on the Purchase of a Real Estate Option

I v othing happens in this business until an investor actually puts a piece of property under option. This is the first step that all would-be option investors must be willing to take if they are really serious about making money with real estate options In this chapter, you will learn all of the do's and don'ts of how to close on the purchase of a real estate option. I also tell you how to avoid the common closing mistakes that most uninformed investors make, which can come back to haunt you later when you are trying to resell or exercise your option. The trick to having a smooth closing is to have all of the details of the transaction hammered out and finalized before you and the op-tionor ever sit down together at the closing table. This way, the optionor will not be able to try to renegotiate the terms of your option agreement at the closing. I once had an optionor who showed up at a closing and refused to sign our option agreement until I upped the option fee another 3,000. I...

Dont Confuse an Industrial Cleaning with an Extreme Property Makeover

Whatever you do, please do not do like a rookie option investor in Dallas, Texas, who got carried away during a property cleanup and had new carpet installed in a house he had under a three-month option. I learned about this bigtime blunder when the investor sent me an e-mail, lamenting about how he lost 4,500 on his first option deal. As I told him in my reply, his first mistake was in paying 2,000 for a three-month option with no right to extend the option period. And then he compounded his mistake by having 2,500 worth of carpet installed in a house he did not own. The option expired before he was able to find a buyer and he was out 4,500, with nothing to show for the time, effort, and money he had spent on the property.

Key Principles of Forex Trading

1 - Asymmetrical Information - In other markets, such as equities and futures, there is a democracy in the distribution of information. price charts for these markets reflect all available information that is relevant to determining whether the market is pricing the instrument logically. Also, these markets have options that ensure the ability of the trader to evaluate sentiment on future values of prices. There is no centralized, accessible option market on spot forex. Options trading is available to the big boys who have an advantage by knowing where the calls and puts are concentrated. This represents an asymmetry of information. The average forex trader who believes that everything is in the chart is ignoring a core feature of how forex works. This creates the need to look at longer time frames of monthly and weekly charts that provide more perspective of support and resistance ranges that the market has registered.

Casey Getting Out When Youre Wrong

Before Casey traded crude oil futures on the floor of the New York Mercantile Exchange, he had been an options trader at the American Stock Exchange. At one time he was the youngest specialist, * making markets in very active options such as Motorola (MOT) and Digital Equipment (DEC). Casey traded on the stock exchange floor during the Crash of 1987. Motorola closed on Black Monday at 52. It opened the next day at 60. A half-hour later, Motorola plummeted to 30. For a while there was absolutely no bid for the stock Despite this frontlines market experience, when Casey moved to crude oil futures to try his hand in a futures pit, he was not prepared to handle the chaotic and volatile pit environment, compared with the orderly specialist system that prevailed in op

The Pros and Cons of Options

Major pro Buying options limits your exposure. The maximum you can lose is the value of the option the price you paid for it. If your option expires worthless, you lose your entire purchase price. This can occur from prices moving sideways and the time premium decaying to zero. If prices move sideways for the spot trader, he loses nothing and retains his margin funds. You may find prices of the currency moving in your favor but not fast enough to compensate for the time decay a discouraging predicament most options traders have experienced more than once. If the time on your option expires and the option is out-of-the-money, its value is zero. (See Figure 19.3.)

The Retail Forex Options Landscape

There is a substantial Over-the-Counter (OTC) FOREX options market this has been around for many years. But it is only open to banks, institutions, and large corporations. Fortunately large broker-dealers are beginning to tap into this arena and offer it to their customers. Some broker-dealers offering options trading Cfosfx, www.cfosfx.com and SaxoBank, www.saxobank.com. Oanda, www.oanda.com, offers something called a BoxOption with intriguing possibilities.

The Internet Investments Online

Http www.optionscentral.com The Options Clearing Corporation is the issuer and guarantor of all exchange-traded options contracts in the United States. Its home page allows users to download free software and videos. If features a Strategy of the Month for options trading and has a number of resource links to exchanges that trade options.

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