Archive for October, 2008

Options and Futures

Posted on October 20th, 2008 by admin, under Forex Bonds Options and Futures.

Options and Futures

Short Call Option

Option contracts is a contract which, in exchange for a premium, gives the purchaser the right (no obligation) to buy or sell financial assets at a price at a specified date (expiration date) or earlier.

Futures contract is a contract to buy or sell (futures) or that represent rights (options) to buy or sell a foreign currency at a particular price within a specified period of time.

The main difference between the options and futures is that futures is the obligation, as an option is the right

Options is the right either to buy or to sell an asset (in our case - futures) at a fixed price at any time during a certain period of time.

An option that gives the right to buy an asset - futures, known as CALL; option, which gives the right to sell futures, is called PUT.

At any given time, the buyer (holder) of option can fulfill it. In this case, recorded the sale of a futures contract at a price equal to the price performance option, this means that the option shares on the futures contract.

In the case of the execution of CALL option buyer of an option becomes buyer of futures and the seller of an option becomes the seller of futures. In the case of execution of PUT option buyer the option becomes a seller of futures and option seller becomes a buyer of futures.

In addition to the buyer’s ability to execute the option at any time, there is also an opportunity for both the buyer and the seller of option to close its position through the backward transaction (as futures).
One must distinguish the price for the option execution and the price of the option itself (premium).

When a contract price of the option (premium) the buyer of the option always pays the seller as a reward for the right to continue to execute this option. Price is an option as a result of stock market trading.

Price of performance (Strike) is the price at which the option entitles the holder an option to buy or sell futures underlying the option, the price performance are standard and are established by exchange for each option contract.
Thus, the design option includes a choice of one, but two prices. The Bidder first determines the appropriate option to him at the cost of execution, and then in the bidding process is determined by the price of the option (premium).

Option strategies can be used in any situation in the market and any predictions as to make market participants. There are many strategies for the use of stock options - both for hedging or speculation.

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Stock

Posted on October 15th, 2008 by admin, under Stocks.

Stock is issue security fixing the rights of its owner (shareholder) on reception of a part of profit of joint-stock company in the form of dividends, on participation in management of joint-stock company and on a part of the property remaining after its liquidation.
A shareholder (or stockholder) is an individual or company (including a corporation) that legally owns one or more shares of stock in a joint stock company. Companies listed at the stock market are expected to strive to enhance shareholder value.
Shareholders are granted special privileges depending on the class of stock, including the right to vote (usually one vote per share owned) on matters such as elections to the board of directors, the right to share in distributions of the company’s income, the right to purchase new shares issued by the company, and the right to a company’s assets during a liquidation of the company. However, shareholder’s rights to a company’s assets are subordinate to the rights of the company’s creditors.
Shareholders are considered by some to be a partial subset of stakeholders, which may include anyone who has a direct or indirect equity interest in the business entity or someone with even a non-pecuniary interest in a non-profit organization. Thus it might be common to call volunteer contributors to an association stakeholders, even though they are not shareholders.

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Shares outstanding

Posted on October 9th, 2008 by admin, under shares.

Shares outstanding are also called outstanding stock. It is a very easy concept to understand. Basically it is the number of stocks that are held by investors. This includes restricted shares owned by company officers and insiders, as well as common shares held by the public. If a company buys back stock, these shares are not considered outstanding. Anotherwords this is shares of a corporation’s stock that have been issued and are in the hands of the public.
Number of common shares that have been authorized, issued, and purchased by investors is very important in calculating many more advanced metrics. For example to find the market cap you have to multiply the price per share by the outstanding shares, and to find the EPS you divide the net income minus dividends by the outstanding shares.
Number of shares of a firm held by its shareholders (shares outstanding) equals the total number of shares issued less the number of shares repurchased. It can be calculated as either basic or fully diluted, with the effect of such diluting securities as options or convertibles. Shares outstanding can be obtained from quarterly filings with the SEC (United States Securities and Exchange Commission).

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Trading Systems

Posted on October 2nd, 2008 by admin, under Forex Strategies.

Forex Trading System is a complete set of rules, which one must follow in order to reap maximum benefits from accumulating Forex market. It helps person to make the calculations and provide instructions on how to create his own Forex trading portfolio. Many trading systems are available in this regard but it was observed that approximately 95 percent of them actually do not meet expectations.

But it is not necessary that the more sophisticated trading system provides the possibility of striking success. In fact, the less complex trade system is, the lesser is the possibility of failing. Simple systems work better, because they have fewer elements to break. These simple systems are more heavily in the brutal and ever-changing environment of real trading. So you should try to keep the system as simple as possible. One major thing that must be taken into account: only those systems actually work that have been created while keeping in mind the personality of an individual. Trading strategy could work for someone, but it not necessary that it would also work for another person.

Also please keep in mind that different mechanical trading systems have no drawbacks which are connected with psychological peculiarities of concrete trader. This is because such systems operate in automatic mode requiring no active participation of human. Mechanical trading systems almost always calculate and reach a decision using complicated but strict algorithms to know what how much where and when to buy or to sell. Using such systems provides point monitoring so that you are fully insured against incorrect decision on market when griped of deep emotion. You may not even fully understand how and why the trading system works – just test it on historical data to insure that it works. Always remember that even good manual trading strategy may be incompatible with your personality.

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