All about investment

By: Ben Ang

We often hear people saying that trading or investing in options is very risky. Yes, it is certainly no mean feat to trade or invest, using options as your investment vehicle. But is it really that risky in the first place? If trading or investing in options is really risky, then why are there so many individual traders or investors who make money from it? The only possible explanation is that those people had spent a lot of time and effort to study, understand and learn all they can about options in addition to the basic technical knowledge of how the market functions. They would have learnt how to increase their probabilities in making a profit and also reduce their risk to the minimum.

So what actually are stock option greeks? Why is it important to understand how they can affect the profitability of your trade or investment? Stock option greeks are actually sensitivities of the stock option to risks characteristics. These risks are actually factors that affects the pricing of the option. By learning how the stock option greeks relate to risk characteristics in addition to other basic technical analysis skills such as identifying the market trend, knowing when to and not to trade or invest according to timing ( Eg. Not to trade during lunch hours ), interpreting technical indicators correctly, have a risk and money management system to assist in making decisions when trading or investing ( This helps to eliminate and not involve your emotions that affect your trading decisions ) ...etc We are able to have certain control over our risk exposures to leverage, time decay, volatility and interest rate risks. Each option risk characteristics, is represented by a greek word and they affect the option pricing differently. It is important to know whether you are purchasing a stock option at a under or over priced value as this can be another factor that will affect profitability of your trade or investment. You do not want to be in a disadvantage position at all times when trading or investing as the majority of the factors are against you and you have absolutely no control over them. ( Eg. Interest rates )

Mastering each risk characteristics will certainly help to reduce risk tremendously when trading or investing in stock options, what's more, there are lots of stock option strategies that can be utilized once you understand the mechanics of the stock option greeks and make them work for your trade or investment.

Ben was an average person whose life changed a lot after being inspired by a book which taught him to be financially free. He went into trading to achieve that goal and is now on the road to success. Besides that, he is also doing internet marketing and articles. To find out more, please visit Ben's investing blog at The Investor Portal

Article Source: http://www.ArticleBiz.com

By: Vikram Kuamr

In the stock market, there are stocks that can be sold at a very low price. This is what is called a penny stocks and this can be sold as low as 5 dollars per share. These stocks are traded over-the-counter in quotation services like the OTCBB and the Pink Sheet. Investors trade on this due to its very low price and possible fast growth in just several days. They can buy even millions of these. However when they trade, it is based on speculative conditions. Moreover, they can be at risk for such things as no sufficient financial information and limited liquidity. For this reason, there are only few traders for penny stocks.

The stocks that are normally priced are the common stocks or preferred stocks. Usually investors spend considerable amount of money to buy shares of stock. Prices that are high are considered most in demand therefore investors get interested in buying the shares. Before they buy these shares, they need to know more about the company first. Unlike penny stocks whose information is limited, the stock picks for regular stocks are detailed to stockholders, lowering the risks that penny stocks has.

Finding Penny Stocks

Penny stocks are hard to find because these are is little dollar volume at times. Besides, there are only few traders who buy such stocks because of high risk. Nevertheless, there are still those who prefer to buy these because of its low price and potential rapid growth.

If you want to start investing in penny stocks, you can start looking into Featured Profiles. Here, you will see penny stock picks where you can start out. Since the nature of penny stocks has limited financial reports and you’ll have to invest at your own risk, you will only see the companies that sell penny stocks. Generally though, Featured Profiles is a reliable resource of anything related to stock trade. You can see stock picks for the week where they describe the company in relevant details. You will see information for your fundamental or quantitative analysis in their stock picks. The stock picks usually have stock updates about how it was like in the trade the day before. Moreover, you can also get stocks newsletter upon subscription. The alerts can serve as your guide in the stock analysis and market analysis. But it will be at your own evaluation based on the information presented by the site.

Overall, if you want to start out with stock investment, whether it is with penny stocks or regular stocks, you can start out with the information provided by Featured Profiles. Instead of you doing a lot of research about a possible company where you can invest, you can start out with the stock picks in the said site.

What Featured Profiles Provides

The stock picks at Featured Profiles can be your guide on where to start investing. From there you may want to avail of other services of the site such as stock updates, newsletters, daily stock notes and other stock information in real time. You don’t necessarily have to decide solely from the information provided and expect real profit. However, it can be a good resource where you can conduct you stock analysis and market analysis.

Featured Profiles is a site that provides stocks picks including penny stocks . You can start your stock search here.

Article Source: http://www.ArticleBiz.com

By: Jose D. Roncal And Jose N. Abbo

Lost in all of the media frenzy surrounding Wall Street, the “meltdown” and the sub-prime lending debacle are certain lessons from history that can offer some useful perspective — and even have a calming effect. Economic “bubbles” are nothing new, and contrary to what the media might have you think, they don’t signal the end of Western Civilization, either.

In his book, Memoirs of Extraordinary Popular Delusions and the Madness of Crowds, Charles Mackay wrote, “Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.”

That fact is as true today as it was when originally penned in 1841. Even then, speculative market bubbles had come and gone. One of the most curious spread through Holland some 200 years earlier, in the early 17th century. It was a financial epidemic that’s come to be known as “Tulipmania.”

When Carolus Clusius planted that first tulip bulb in the Botanical Garden in the Netherlands in 1593, no one could have predicted the absurd financial maelstrom that would eventually culminate in the “Great Commodity Crash of 1637.” By 1620, tulips had become a status symbol in the wealthiest of circles.

About that time word spread among high society that a mysterious plant virus had infected some of the bulbs. But rather than spelling the imminent demise of the tulip, the virus actually created unusual and beautiful streaks of vibrant color throughout the petals, making the new varieties even more coveted. The rich and famous always clamor for the rare and exclusive, so the prices for all tulip bulb varieties shot sky high. Greedy speculators came from far and wide looking to make a profit; the stage was set for a thundering herd approaching on the horizon.

There was so much excitement that tulip bulbs began trading on the local market exchanges, which operated much like modern-day commodity exchanges. Soon, the fever spread to the Dutch middle class, and everyone from noblemen to chimney sweeps was jumping on the tulip bulb bandwagon. They hadn’t suddenly developed green thumbs or a desire to take up floral arranging — far from it. They were swept up in the mass hysteria, hoping to strike it rich by buying low and selling high. A few did, but most did not.

A single bulb cost as much as a house

The bulb market rocketed out of control so fast it was not uncommon for the price to escalate 20-fold in a single month. In 1637, a single bulb of a particularly popular variety cost 10,000 florins. To put this in perspective, the same amount of money would have bought a nice little house along a canal in Amsterdam.

People who had worked their entire lives for the few possessions they owned began trading everything they owned — including that nice little house on the canal — just to purchase a single bulb. According to journals kept at the time, one person offered the fee-simple of twelve acres of building ground for a single Harlaem tulip. An Amsterdam variety fetched 4600 florins, a new carriage, two grey horses, and a complete suite of harness.

Munting, an author of that day, preserved the following “bill of lading” delivered in exchange for a single root of a rare species called the Viceroy:

Two lasts of wheat
Four lasts of rye
Four fat oxen
Eight fat swine
Twelve fat sheep
Two hogsheads of wine
Four tuns (barrels) of beer
Two tuns (barrels) of butter
One thousand lbs. of cheese
A complete bed
A suit of clothes
A silver drinking cup

As the mania spread, major local exchanges continued trading the bulbs without letup, and even expanded the market by offering option contracts to speculators. In essence, this gave those with less money to spend an opportunity to lose even more. Using leverage, one could purchase an option for a fraction of the cost of the actual bulb.

Leverage is risky business, especially if you’re putting your prize possessions on the line and hoping that the price will rise enough to not only make up for what you still owe but also to return a sizable profit when you sell.

But people swept up in herd mentality don’t stop to consider the risk/reward ratio — or, rather, the risk/ruination ratio. Otherwise, they might never have leveraged themselves so fully. They would have stopped to think that the slightest drop in price could mean not only losing their initial investment but going into debt — or even complete ruination. But of course, bolstered by lusty and mindless hope, people were mesmerized into believing that prices could go nowhere but up.

When a few of the more savvy speculators heard rumors that the Dutch government would soon attempt to set controls on the market, they started pulling out. Thus began the big unraveling. Buyers balked, sales slowed and prices faltered. But nothing can stop Mother Nature; there were still bulbs in the ground ready to be harvested.

Soon the bulb supply outweighed demand, and a slow downward price spiral began picking up speed. Panic set in. The once vibrant, if unrealistic, market for tulip bulbs quickly lost its luster. In less than six weeks, it ended in a resounding crash.

After sorting through all the bankruptcies and defaults, the supreme judges of Amsterdam simply declared tulip bulb speculation nothing more than gambling. All contracts negotiated during the frenzy were made null and void. In other words: worthless.

There were winners, of course — those who jumped in early, understood the psychology of the herd mentality, and got out in time, leaving fools in the rubble. When you compare Tulipmania to the recent “bubble” in real estate, you’d be hard pressed to find a more fitting aphorism: “Those who fail to learn from history are destined to repeat it.”

About the Author
Co-authors Jose D. Roncal and Jose N. Abbo share some 50 years of senior executive experience in international business, finance and economics. Both have authored numerous articles on business strategy, finance, accounting, capital markets and the global economy. For more on the authors and their book, The Big Gamble: Are You Investing or Speculating?, visit: Financial Speculation.

By: Contrarian Profits

– Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS), the two last major investment banks left standing after the carnage Wall Street, have ended the era of investment banking by changing their status to bank holding companies. The change means the two firms can now create commercial banks that will be able to take deposits.

– The move marks a sea change on Wall Street 75 years since the Glass-Steagall Act that separated them from deposit-taking banks. The Federal Reserve will now take over from the Securities Exchange Commission as regulator of the two banks.

– "The decision marks the end of Wall Street as we have known it," said William Isaac, a former chairman of the FDIC. "It’s too bad."

– Concern is growing that Hank Paulson’s vast rescue plan for Wall Street may "crush" the dollar. According to Bloomberg: "The combination of spending $700 billion on soured mortgage-related assets and providing $400 billion to guarantee money-market mutual funds will boost US borrowing as much as $1 trillion […] While the rescue may restore investor confidence to battered financial markets, traders will again focus on the twin budget and current-account deficits and negative real US interest rates."

– For investors who want to bet against the buck, on Friday Taipan Daily editor Justice Litle recommended four real assets set to profit from the death of the dollar.

– Worries are also mounting over the fate of hedge funds. "Hedge Funds Face Chaos," warned The New York Times on Sunday.

Hedge funds usually thrive when markets turn volatile. But Even these fast-money investors are struggling to cope with the wild swings in the markets, raising concerns that some may not survive.

Even before the Bush administration proposed its vast bailout for financial institutions, the hedge funds - those secretive, sometimes volatile investment vehicles for the rich - were on course for their worst year on record. The average fund is down nearly 5 percent so far this year.

– According to the fine print of the administration’s statement on its latest bailout, which will receive intense scrutiny this week, Uncle Sam will buy toxic debt from foreign-based banks with large US operations. Hank Paulson confirmed this on ABC’s This Week program, saying that coverage of foreign-based banks is "a distinction without a difference to the American people."

– The $700 billion figure Paulson has put out as the cost of his latest bailout measure is just $100 billion shy of the $800 billion price tag of the Iraq war so far.

– As the reality of the proposed bailout sets in US stock futures are pointing down. According to MarketWatch this morning: "S&P 500 futures fell 6.9 points to 1,239.10 and Nasdaq 100 futures dropped 10 points to 1,729.50. Dow industrial futures fell 78 points."

– Paulson also echoed John McCain’s much-derided view that the "fundamentals of the US economy are strong." Paulson told NBC’s Meet the Press: "I wouldn’t bet against the long-term fundamentals of this country." Although he didn’t specify whether he meant fundamentals such as inflation, jobless rate house prices or the hardworking American people, as John McCain later said he was referring to in his own statement.

– Paulson’s boss, President Bush, however struck a far more alarmist tone. After earlier calling the meltdown on Wall Street an "adjustment," the Commander in Chief said officials in his administration finally realized that "the house of cards was much bigger" than just the mortgage-finance system, or even Wall Street and that they worried about "the whole deck going down."

– The next card could well be the $62 trillion market for credit-default swaps, says Shah Gilani in Money Morning. The derivative instruments - which offer insurance against default - are neither transparent nor regulated. But they are all at risk. And they are already causing huge writedowns in the banking sector…

– Amid all the talk of bailouts, writedowns, credit-default swaps, subpime mortgages and the liquidity crisis, it’s easy to forget the reason for the current economic mess, says The Big Picture blogger, Barry Ritholz: the breakdown in the reason for ledning money in the first place…

Here is an oddly interesting observation: Over the entire history of human finance, the underlying premise of all credit transactions — loans, mortgages, and all debt instrument — has been the borrower’s ability to repay.

From 1 million B.C. up until the present, repayment ability was the dominant factor.

This goes as far back as when Og lent the guy in the next cave a few dozen clamshells in order to go and purchase that newfangled wheel. If Og didn’t think his neighbor would be able to repay him those clamshells, he never would’ve entered into what we can describe as the first commercial loan.

Since real estate loans are at the bottom of all of our current credit woes, let’s take mortgages as an example. The historical basis for making a loan for a home purchase was several simple factors: Employment history, Income, down payment, credit rating, assets, loan-to-value ratio of the property, and debt servicing ability. But for some crazy reason, those factors went away during the housing boom.

– Krugman in The New York Times points out the government’s latest bailout plan simply be to throw taxpayers’ money at distressed banks to convince Mr. Market that "everything’s OK" without ensuring that the taxpayer gets something of value in return…

The Treasury plan […] looks like an attempt to restore confidence in the financial system - that is, convince creditors of troubled institutions that everything’s OK - simply by buying assets off these institutions. This will only work if the prices Treasury pays are much higher than current market prices; that, in turn, can only be true either if this is mainly a liquidity problem - which seems doubtful - or if Treasury is going to be paying a huge premium, in effect throwing taxpayers’ money at the financial world.

And there’s no quid pro quo here - nothing that gives taxpayers a stake in the upside, nothing that ensures that the money is used to stabilize the system rather than reward the undeserving.

Contrarian Profits is a contrarian investing news and opinion hub, providing market-beating ideas from the world’s top investment gurus.

Article Source: http://www.ArticleBiz.com

By:Shaun Rosenberg

Stock Orders and Stop limit orders are the two most common ways to exit a trade. They are both designed to help you exit a trade once it turns against you. But which one works better? Let's compare.

A Stop Order is an order that you can set at a given price to let you exit a trade when that price is reached. This is often used to protect profit and reduce risk.

For example say you own stock XYZ which is trading at $47. You set a stop order at $45 and that allows you to exit the trade if that stop order is reached. So as soon as the order is reached you will automatically sell the stock.

The disadvantage to this is if the market is moving very fast. If the markets are moving fast the stock could hit your $45 stop order, but fill you at $43. The stop limit order was designed to stop that from happening by combining it with a limit order.

If you placed a stop limit order on the same stock for a $45 stop and a $45 limit it would look differently. In this case the stop would trigger if the stock hits $45. However rather than filling automatically it simply triggers the limit order for $45.

Now the order will only get filled if you can sell it at $45 or higher. That way you do not get filled far below the original stop price you wanted.

Even thought this does seem to solve the problem it neglects the whole purpose for setting up a stop in the first place. When you place a stop it should be the most you are willing to lose on a trade. It should be the amount that you give up on the stock and look for profits elsewhere.

If you have a stop limit at $45 and the market is moving fast you will not get filled. That means the stock could crash to $38 and you would not have gotten out of the trade because you didn't want to get filled if the stock went under $45.

Stop limit orders attempt to save you a few cents but can end up costing you a few dollars. Because of this I prefer to lose strait stop orders when placing a trade.

For more information about stop orders visit http://www.stocks-simplified.com/ stop_order.html

For more information about the types of stock orders visit http://www.stocks-simplified.com/stock_orders.html