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Options Trading Made Easy – Learn How To Profit

Apr 5

Posted by admin in Structured Settlements

If you’re trading stocks or bonds, there are a whole range of strategies you can follow, which range from the long term buy and hold, right through to day trading using technical analysis. Options trading is very similar.

Understanding exactly what an option is one of the trickiest things to understand when you’re starting out. Basically, an option is a contract that gives you the right to buy (a call option) or sell (a put option) a stock or bond at a set price (the strike price) on or prior to a set date (the expiration date). You might need to read that a few times to get the hang of it!

There are different types of options available in the marketplace, with ‘American’ options able to be exercised anytime between purchase and expiration, and ‘European’ options only able to be exercised on the expiry date. Although the terms are geographical, nowadays the location where you buy options doesn’t automatically mean you’ve bought one type or the other. As a general rule of them, American-style options are mostly used for stocks and bonds, whereas European-style options are for indexes.

Officially, options expire on the Saturday after the third Friday of the expiry month of the contract. However as US markets are shut on Saturdays, that makes the Friday the effective expiry day. Talk about confusing!

Now that you have a basic understanding of what an option is and how it works, let’s take a look at some basic strategies. I’ll just focus on American-style options for stocks.

When you buy or sell an option, you basically have two choices – you can hold it to maturity, or you can choose to exercise it prior to expiry. A large proportion of investors do hold their options until maturity before exercising it to trade the underlying asset. Let’s look at an example.

You’ve purchased a call option for $1, with a strike price of $25. As options contracts are generally for 100 share lots, your purchase (ignoring commissions) would cost you $100, and you’d have the right to purchase $2500 of stock through the option. Now, if the expiry date arrives and the stock is worth $27, it makes sense to go ahead of buy the stock, because you only have to pay $25. That means you’ve made an immediate profit of $2 per share if you sell them again immediately on the stock market. However you still have to factor in what you paid to buy the option, which was $1 a share. So after your purchase costs are deducted, your overall profit is $1 a share. Well done!

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What Is The Average Mortgage Value In The United States?

Feb 16

Posted by admin in Loans, Real Estate

The standard price for a house fell–% to $169,000 in the first quarter from a year earlier, the National Association of Realtors reported. This is an unprecedented drop that no one has seen in thirty years.

The reason for this drop is said to be the fact that first-time home buyers accounted for half of all purchases in the quarter, and many of them zeroed in on foreclosed homes. That dragged down the average one realtor group said. With previously house sales going up, many realtors can now offload these older houses off their lists and concentrate on the newer houses. Many of these older houses are from empty nesters and retirees.

The largest rise was in the Cumberland area of Maryland and West Virginia, where the price climbed 21% to $114,900. Long & Foster a real-estate broker in Cumberland, Md., said the area is favorable retirees and second-home buyers, a lot of the buyers seem to be coming from Washington and Baltimore.

The largest rise was in the Maryland area and West Virginia, where the price climbed 21% to $114,900. Long & Foster a real-estate broker in Cumberland, Md., said the area is favorable retirees and second-home buyers, a lot of the buyers seem to be coming from Washington and Baltimore.

While rising joblessness and a recession economy in the United States has played an important factor in the median for the housing market, what this has also done has made a buyer?s market for families who are just starting out. These used homes are in many cases like new, only having been lived in a few years at best. The time to buy is not just now but for the next ten years or more.

While rising unemployment and a flagging economy in the United States has played an important factor in the median for the housing market, what this has also done has made a buyer?s market for families who are just starting out. These used homes are in many cases like new, only having been lived in a few years at best. The time to buy is not just now but for the next ten years or more.

While this is a boon to many first time home buyers it is a nightmare for a already teetering American economy. These old houses will have to be sold on the cheap in order for realtors to get the inventory off their hands.

It has been projected in the next few years the prices will drop. This may alarm a lot of investors and first time home buyers, but the indicators are that the prices are actually going back to pre-Bush government levels. As the middle decreases and the current houses on the market are bought you will see a steady increase in house prices and the resale value. It will take time but time is all you have once you have bought a home.

It has been estimated that in the next 10 years prices will stabilize and then begin to rise again. So buy a house now!

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Steps To Lower The Interest Paid On Your Mortgage

Feb 1

Posted by admin in Loans, Personal Finance, Real Estate

If you are looking to lower your rate of interest on your mortgage, your bank will take several factors into consideration. They may need to find out if you are able to make the installments on time; and whether this deal is profitable for the bank or not. If you are capable of getting lower interest rates that help you clear your loan faster and also minimize your overall payments then it is really good for you to refinance your mortgage. Following are some suggestion to lower your rate of interest on your mortgage.

First of all, try to get a sound credit score. The credit score depends on your past record of your credit payments with different companies which report payments. But in many places companies only maintain reports for delayed payments, which makes it tough to get a good credit score. The best way of getting credit score is to get a credit card with fewer limits, and make early payments every month. But you must use small amount of money from your credit card to avoid yourself falling into more debt. If your bank finds you with good credit score your possibility of getting better interest rates will increase automatically.

Your earning is also crucial. If you are able to provide your income proof along with the proof of your savings, if any, it will help you seem less of a liability to the bank. But it is also important that you are earn a regular income and it must be sufficient enough to make your monthly bills.

Being in debt, at times helps in getting better rate of interest. It?s true; there are some banks, who are interested in your debt; as it implies you have skill to handling it. But if it is your first loan the bank may be unwilling to provide you the best deal. Of course, your income should be promising enough to clear your debts. Even extra debt means you can not manage to pay for the monthly Installments.

There are points available, which you can purchase from banks and these points can provide you lower interest rates. These points may require you to beg, but they can help you in saving lots of money at end. Each time when you purchase a point from the bank, it takes money from you and you will not see again. This type of deal is good for those who have extra money to spend.

After you have persuaded your bank to refinance, you must try to get the suitable deal for you. You can choose from a wide variety of loans, the best deal would be the one with lowest rate of interest and a short time period. The fixed rate mortgages generally have similar rate of interest in the end; but the flexible rate mortgages vary with along with the economy. It is advised that you get a flexible rate of interest only if you know for sure that the rates will remain low a period of time. You may also get a cap for your flexible interest plan that will keep the interest rate at a number it cannot go above but can go below it.

At times, getting a lower rate of interest is concerned with knowing when to look around. If you are sure that your finance company will allow you to refinance, then wait for the interest rates to fall and then strike a deal. Always ensure that your new plan of payment plan is best suited for you, and that you don?t have to pay more than what you can afford, or higher than the total worth of the property.

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Long Term Financial Vehicles

Aug 31

Posted by admin in Stocks Mutual Funds

Investing in long-term financial vehicles give you the most gains but it also puts your funds at greater risk. There is much truth to the saying, ?there is no gain if there is no risk?. Still you can reduce your chances of losing your hard earned money, by researching and taking time to understand what you are buying. Would you purchase a house you?ve only just seen on the outside? Both of these are serious investments and you need to arm yourself with the basic knowledge about the subjects.

So what are the differences you need to consider when investing in bonds, stocks or mutual funds?

What are bonds? When you are investing funds in bonds, you are technically lending your money to a borrower. Who can this be? Some of these are the U.S. government, a state, a local municipality or a big company like General Motors. All these institutions need money to expand, to fund a federal deficit or to finance new ventures. So they borrow funds by issuing bonds. The price you pay for a bond is know as its? face value. The issuer promises to pay you back in a particular day, at a fixed rate of interest stated on the coupon itself. You are safely investing in bonds; these bonds give you a yearly income until the maturity date. When the bond matures, the borrower pays you back the principal plus interest. In most cases, investing in bonds is a minimal-risk free decision.

What about stocks? A share of stock is a certificate of ownership purchased by individuals who are investing or buying a proportional share of the business. The more stocks you buy, the bigger the share of profits you will get and the bigger your financial stake becomes. A stock?s value is affected by the financial situation of the company. Historical trends in stocks have shown that their value rises over time, although there are no sure guarantees. Also with stocks the only assured return is if it appreciates on the open market. And while it is true that there are companies that give their stockholders dividends, they are not obligated to do so.

What are mutual funds? In this financial scenario, you join a group of investors in investing your funds to buy stocks, bonds, or anything else your fund manager decides is worthwhile. If you do sustain losses, these losses are subtracted from the fund\’s capital gains before the money is distributed to you the shareholder. The fund won\’t pass out capital gains to shareholders until it has at least earned more in profits than it had lost.

Remember it pays to do research before investing.

Timothy Gorman is a successful Webmaster and publisher of Debt-Relief-Solutions.com. He provides more debt relief, consolidation and financial planning advice that you can research in your pajamas on his website.

Writen By : Tim Gorman

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A Good Fund Manager

Aug 22

Posted by admin in Investing, Stocks Mutual Funds

Every Wall Street analyst, financial planner and broker will tell you that the right way to pick a mutual fund is find a good money manager of a fund that has a long time record.

Yes, I believe that too, but it is amazing that when you go back in time to see what this genius did with the mutual fund, you will find years he has had some terrible losses. Would you want to own that fund then? In the year 2000 about 60% of all mutual funds declined. Many had losses of 30%, 40% and many over 50%. That is when they tell you things like: \”you have to be in for the long haul\”, \”this is only a market correction\” and \”the market always comes back\”. Among others.

One of the best-known mutual funds, Fidelity Magellan, dropped from a high last year of 146 to 100. That is a 32% loss. Yet this fund manager received a salary of over a million dollars. Did you know the average fund manager made $290,000 last year? How can that kind of money be paid to a person who loses your hard-earned cash? The great majority of fund managers today have not experienced a long-term bear market. They are too young. A few of them did go through the 1987 crunch in which the bottom was reached in 3 weeks. They did not have a chance to sell off their weakest stocks. Of course, they had plenty of time before that fateful 508-point one-day loss to unload some of their dogs. Unfortunately, fund managers are not taught to sell and they definitely do not understand that sometimes cash is the best position.

A major fallacy of mutual fund charters is that they must always be fully invested. There are many funds that have specialties such a Pacific Rim, Russia, real estate, indexes of various kinds, socially responsible, big cap, small cap and on and on. There are times when almost everything in that sector is going down and there is nothing to buy, but the fund charter maintains they must be fully invested. In defense of the fund manager he must buy even if it is garbage. He is not allowed to preserve the investors capital by staying in treasury bills.

If you think a fund manager who loses 30%, 40% or more of your money at any time is a good fund manager then you have been snookered by Wall Street. There is only one way to protect yourself from that type of money mismanagement and it is very simple. If the fund you own drops more than 15% from its highest price any time after you own it then you must sell it immediately even if there is a sales charge or redemption fee. The first rule of investing is \”protect your capital\”. You even have to protect yourself from \”a good fund manager\”.

Al Thomas\’ book, \”If It Doesn\’t Go Up, Don\’t Buy
It!\” has helped thousands of people make money
and keep their profits with his simple 2-step
method. Read the first chapter at
http://www.mutualfundmagic.com
and discover why he\’s the man that Wall Street
does not want you to know.

Copyright 2005

Writen By : Al Thomas

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The Inside Scoop On Mutual Fund Rip Offs

Aug 21

Posted by admin in Finance, Investing, Stocks Mutual Funds

The bear market that showed up at the end of 2000 has every brokerage house-as well as the entire mutual fund industry-scrambling to find creative ways to boost both their image and bottom line. Unfortunately, this is often at the investors\’ expense.

Fund managers are ever on the lookout for ways to spin the stats to hide lousy track records and to find ways to obscure fees. To add insult to (financial) injury, investors end up being penalized for selling. So what\’s an investor to do? In this case, knowledge is power. Here are some of the ways mutual fund investors are being taken advantage of:

  • Performance is always an issue for any investor. Formerly great funds, which I\’ve used myself during the 90s, are the junkyard dogs of this century. Janus Fund comes to mind and is one of many that buy-and-hold investors got stuck with. It\’s down 59%, since we acted on our Sell signal on 10/13/2000.

  • Most of the funds today have 12b-1 fees place, and some go as high as 1% of a fund\’s assets per year. Between fees, commissions and management charges, the mutual fund industry is always getting paid, even if you, the investor, are losing money. For example, if you had bought SunAmerica 2-1/2 years ago, you would have paid the above fees at 2.35% per year. And, if you finally decided your investment wasn\’t going anywhere, you would have been stuck with a 5% deferred sales charge.

  • If you hold a fund less than 180 days, plan on being hit with a redemption fee. It\’s almost standard. What\’s the deal? Brokers only get paid while you hold their fund. So, if you\’re going to sell, they get a last whack. It\’s a great deterrent for selling, too. Can this be avoided? Not completely, but if you have your money managed by an investment advisor, the holding period is reduced to 90 days.

  • Then there\’s the deceptive no-load rip-off involving B-shares. Sure investors don\’t pay anything up front for these, but you\’ll pay hefty surrender fees when you sell. Plus, they carry higher management fees.

    • Keep in mind that mutual fund companies have market share in mind, not your best interest. If you think that might not be true, consider the skyrocket growth rate for pure technology funds. But look at them now: they\’ve crashed

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    How (NOT) To Buy Mutual Funds

    Aug 21

    Posted by admin in Finance, Investing, Stocks Mutual Funds

    When it comes to mutual funds, there is a lot more to success than just finding a good one. Sad investment stories like the following are all too common. I hope my sharing it with you will help you avoid making the same devastating financial mistake one of my former clients made.

    This story begins during the height of the investment madness in 2000, just prior to the bear market. I had been managing an IRA account for \”Bob\” for around six years, with a better than average record of success. So I was surprised when Bob sheepishly called in July, 2000 to let me know he was transferring his IRA account, which had done particularly well during our latest Buy cycle going into the year 2000.

    However, his tax preparer, a long time personal friend of Bob\’s wife?s, was now also offering investment services, having recently received his Registered Representative?s license.

    Fast forward to the end of September. It had become increasingly clear to me that the Bull market had run its course. So, in accordance with the Sell signal from our trend tracking methodology, we sold all of our mutual fund positions on October 13, 2000 and went 100% into money market. (See my article ?How we eluded the Bear in 2000? at http://www.successful-investment.com/articles12.htm). From our safe haven we watched the market crash and burn, causing most other investors to sustain double digit losses eventually reaching as high as 50 – 60% of their assets.

    In 2002 Bob unexpectedly stopped by my office. As it turned out, things had not gone well at all with his IRA investments. As most advisors would have done, his tax preparer/advisor had quickly moved all of Bob?s assets into a variety of ?load funds.?

    Of course, being newly licensed he was clueless (as were many licensed advisors) as to market behavior or analysis of any kind. The end result was that Bob?s portfolio lost in excess of 50% over the next 2 years. (Not to gloat, but my clients\’ losses in the same period were non-existent.)

    Unfortunately, the degree of loss Bob sustained was experienced by many investors who did not follow a disciplined and methodical approach.

    What I find particularly distasteful is that Bob\’s tax preparer misused his position of trust. He made financial decisions that he was not qualified to make, though his license implied that he did know enough to make them. So now we know what a piece of paper is worth.

    This is no different than letting a newly graduated medical student with a fresh MD behind his name perform heart surgery. Or, hiring a new MBA grad to Chief Financial Officer of a Fortune 500 company. Yet the financial services industry allows someone to get a license (after a fairly short course) and to immediately start making incredibly important and far reaching financial decisions for anyone he or she can sell their service to.

    This is a worrisome trend in this industry. A CPA friend confirmed that he has been approached many times by firms wanting him to offer investment services.

    Why? It?s easy money! Accountants and tax professionals have a great business base. They are in a unique position of trust, because of the information their clients disclose to them. Whether they are employed by a company or they maintain an individual practice, there is probably no other person (other than your spouse) who knows as many intimate details of your financial life as your accountant/tax preparer.

    To abuse this trust for personal gain?no matter how noble the motive may appear?is a total conflict of interest and a huge betrayal.

    The bear market of 2000 has shown that investing must be a disciplined endeavor. Even most professionals have failed to recognize this. What busy accountant, in the middle of tax season, can put the necessary time and attention to a volatile investment market that may require action at a moment\’s notice?

    As for Bob, he?s still with his accountant, and in the same investments that brought his portfolio down. He?s hoping for a miracle recovery. As of this writing, the stock market is engaged in something of an upswing and Bob, I\’m sure, is getting his hopes up that he will recover some of his losses. However, I shudder to think that this rally may come to an end and the bear market resumes. Where will Bob be then?

    At 58 years old Bob is still playing Russian roulette with his retirement. He\’s apparently unable to make a decision to move to someone who has the ability to make sense of market trends and the discipline to follow the signals they communicate. This is a decision that will have a profound affect on his financial future?and will determine whether his story has a happy or sad ending.

    About The Author

    Ulli Niemann is an investment advisor and has been writing about objective, methodical approaches to investing for over 10 years. He eluded the bear market of 2000 and has helped countless of people make better investment decisions. To find out more about his approach and his FREE Newsletter, please visit: www.successful-investment.com; ulli@successful-investment.com

    Writen By : Ulli G. Niemann

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