Have you ever heard investors mention speculating in futures of the commodity market and wondered what it they are talking about? While most of us are familiar with investing in stocks, commodities can be an interesting way to have your money make money for you.

But first, you might ask what is a commodity? commodities are goods we are each one portion is the same as the other. For examplee, oil is a commodity because one barrel of oil is the same as the next. Wheat is also a commodity each bushel of wheat is identical to every other bushel of wheat and anyone purchasing them could care less whether they get bushel number one or bushel number two. Gold is another example of a commodity. 1 ounce of gold is the same as the next.

There are some differences in some commodities to external forces such as shipping costs or differences in composition. For example, not all oil sells for the same cost because they may come from different sources were shipping is a consideration. Also they may trade on different markets where the pricing is different.

There are two ways that commodities are traded, in spot markets, or as futures.

Spot markets, refer to trades that take place literally on the spot. The commodity is traded right then and there, usually for cash but also could be for some other product or good. For example, if you want to buy an ounce of silver, you can go right down to the jeweler give him some cash and it will give you so. This is spot trading.

Of course, spot trading can be done in larger volume as well. Some traders exchange millions of ounces of silver or thousands of barrels of oil and then sometime later the actual goods are delivered.

When traders talk about futures or options it is not the actual good that is traded for rather a contract to buy or sell that particular commodity for a particular price a certain date in the future. This is how most commodities trading is done. This type of trading can have huge profits and also huge losses as it involves speculating on the future which can be full of risk and uncertainty.

this type of trading has been around in its present form since the late 18th century . Around this time farming became more modernized which allowed commodity trading to be profitable. Although this is an age-old way of making money, the basics remain the same today as they were in the late 1700‘s.

For example, wheat takes many months to grow. So at the beginning of the planning, the market price when the wheat is ready and speculated on. So if a farmer plants meet in May which will be delivered in September, the price at that time may be four dollars a bushel. If in June the price begins to fall, and the farmer feels the price will continue following, he may offer a contract on this week for the current price (lower than $4.00). Now if someone thinks that the price will go up over four dollars, then this contract will look like a pretty good deal and they may take them up on it.

Since no one knows for sure what that price will be, an actual prices based on such unpredictable things such as weather, this whole process Is called speculation. so now when September rolls around, the farmer delivers his wheat for the agreed on price. Now if the price has actually gone up to over four dollars and the speculator has made a profit. But, if in fact, it is fallen to wander the agreed-upon price he has lost money.

So there you have it, the basics of commodity trading.

If you read our “currency trading big profits for the week ahead” from Sunday and took the trades you will now be sitting on huge profits for the week.

Are we gurus or knew what was going to happen of course not! The lesson is in timing moves with a sensible strategy that anyone can use.

Lets look at how you could use the tools we used to pile up huge gains.

The Importance of entry

We all know this is the key how do you get in with the best risk reward with your currency trading?

The answer is the Bollinger band and simple support and resistance the bands give you targets and support areas to focus on.

Now for the hard bit, timing your entry!

Timing the entry

Many traders like to predict the market and get in early this is a mistake.

You should always wait for strength if you want to go long or weakness if you want to go short.

This is where the stochastic indicator is so effective. As a short term momentum indicator it is un rivalled and trading bullish and bearish divergence is extremely effective.

The result

We focused on 5 trades (while we gave advice on the yen we decided to stand aside although the advice was correct) but the other 4 we took and piled up huge gains for the week.

Focus on the long term

Our view last week was to get in to our trades focusing on the long term dollar downtrend.

We had a good dollar correction to the upside that was obviously running out of steam and acted accordingly and got some great profits.

Keep it simple!

Many traders will say or currency trading last week was simple strategy, we will take that as a compliment that’s what trading should be!

The more complicated your strategy is the more likely it is to fail. There is no correlation between a complicated strategy and profits in fact the reverse is true, the simpler the strategy the more robust it is in the face of brutal market conditions.

When trading currencies keep in mind the following:

1. Focus on the long term trend

This is the way to make huge gains forget small moves the odds are not on your side and profit potential is not there to cover your inevitable losses.

2. Look at charts for areas of support & resistance

Then use Bollinger bands and stochastics to define and implement your entry points and stop levels.

3. Hold on to the trends

Its always tempting to bank and snatch profits, but if you have confidence in your trading and the trend is in your favour hold on – keep in mind currency trends last many months or years and you need them to make big profits.

Is it really that simple? We think so. We were right last week on all our trades, ( and we did even better in energies check out our reports ) of course we could have been wrong, but our entries were timed well and had close stops for risk control.

Try the above for yourself and see if the tools and tips above can help you make bigger profits from your currency trading!

For more FREE advice

On how to trade currencies and commodities for huge profits get a FREE trading Newsletter and other valuable trading tolls including a 100 page CD packed with tips and strategies at http://www.wellingtoncr.com

1f6a

Remember that trading or investing is not a game just for playing. Some of the important rules which I have learnt from my more than 15 years of trading in stocks and commodity markets.

-Never venture into stock markets without a proper plan. You should know the money you are ready to invest, the risk you are going to take and know your expectations. Have a clear plan, as one wrong move in stock markets can take all your money away from you.

-Keep a notebook with you to note the amount you are losing and winning in trades. Never overtrade and trade only in limited quantity. Learn from the losses you make in trading. One important thing you learn from trading is patience. Failures are the stepping stones to success.

-A hard reality of stock trading is that good trader of today had been a loser in stock trading at one time.

-If you do not overtrade, you will never lose your temper. Losing patience and overtrading go hand in hand

-Don’t put all your eggs in one basket means i.e., do not put all your money in stock markets at one go. Put a part of it only.

-Do not give big losses and take small profits. It should be big profits and small losses.

-Try and judge the effect of news. It is generally seen that good news bring the market down and bad news take the markets up. Treat market to be supreme and do not think that market will go as per your wishes. You will have to go as per the wishes of the market.

-Do not fall in love with any particular stock. It has been seen that if a person has lost in a particular stock, then that person wants to earn from that stock only.

-Treat stock market trading as a business and not a “do or die” act.

-Do not try to buy stocks at the bottom and sell at the top, be prepared to buy stocks at the top, and sell at low. There is no end to a top and no end to a fall also. We believe that if one is trading with the trend, then only one will earn.

- It has been seen that investors go to the stock exchange terminal or their brokers office with a view that they want to sell a particular stock but the investors sitting there convince him to rather buy that stock. Investor should not be influenced by judgment or opinion of others. Investors must believe in themselves and do their own home work, after all it is their money at stake.

- Know your limits in trading i.e. you should know the maximum loss you are ready to give. A trader or an investor who does not care for the stop loss will ultimately lose all his money and then a stage will come where he will only blame his luck. So a clear cut stoploss is a must before buying or shorting.

-Do not enter the stock market just because you want to play something. Remember it is not a toy. Wait for the clear opportunity to enter.

-Beginners must not do intraday trading.

-Trading is like a war, always have a set of rules which you are going to follow before venturing into trading. Do not sing praises of your winning trades.

-Do not try to earn all profits in starting. Have realistic expectation and know it clearly that Rome is not built in a day.

-Remember that even the best of traders are still learning, so one can never be a master of trading. It is an ever learning process. After 15 years of education a person become a graduate and you expect to be a master of trading in just an year. Impossible.

-Risk Management is another important thing in trading. Test the waters before swimming in deep. Do not worry if good opportunity has gone by today, it will again come up tomorrow but if you think today is the end of world, it might really be.

- Cut your loss before booking your profits. If in one stock you are having loss and in the other profit, then cut the one which is giving you loss before booking your profits. —Never borrow money for trading. Trade with money which you can spare to lose.

-Do not let success go to your head. It has been seen that the best of traders who earned for years lost everything once they became over confident.

The author Rajesh writes for http://www.crnindia.com has an experience of more than 15 years in trading and giving advise to people. To know more about his thoughts you may visit http://www.crnindia.com.

Professional traders use the term “lean” to refer to one’s
perception about the directional strength of the stock. When you
own a stock and intend to hold it for a period of time, you are
aware that you will probably be holding it while it goes up and
while it goes down.

This means that at any given moment in time, you might have a
different opinion of the potential movement of that stock.
Knowing this, there is a way to address your present level of
confidence or “lean.” You do this by your choice of which option
you sell.

While it is true that the at-the-money option has the most
amount of extrinsic value, it might not always be the ideal
option to sell in every situation.

For instance, if you feel that the stock itself has a very high
chance of producing capital appreciation above the potential
amount of premium you could receive from selling an at-the-money
call, then sell an out-of-the-money-call so you can allow
yourself a little more room to the upside on the stock.

For example, let’s say the stock is trading at $27.00. Normally,
you would sell the 27.5 calls at say $1.00. If the stock were to
rise quickly and eclipse the $28.50 mark, then with the
buy-write strategy, your position would have maxed out at
$28.50, and you would have a $1.50 one month gain. Not bad, but
if the stock went to $29.50 then you would have missed out on
another $1.00 profit. However, if we had sold the 30 calls for
$.30 then we would have another outcome. You bought the stock at
$27.00 and sold the 30 calls for $.30 and the stock goes to
$29.50.

You would have made $2.50 in capital appreciation and $.30 in
option premium for a total of a $2.80 return.

So, if you feel the stock has a real good shot at taking a run
up, you can lean your position long by selling an
out-of-the-money call.

If you have a more neutral view on your stock you would sell an
at-the-money-call in order to receive a bigger premium which
allows for greater downside protection if the stock trades down
and higher potential profit if the stock becomes stagnant.

This strategy also works on the downside. If, by chance, you
feel that the stock may trade down a bit during the life of the
option, then you can sell an in-the-money-call. The effect of
this would be to provide you with a little extra premium to
cover more downside risk.

Remember when you sell an option you seek to capture extrinsic
value. An in-the-money option not only has extrinsic value but
also some intrinsic value.

When you feel that you want to lean your covered call strategy
(buy-write) a little short, choose to sell an in-the-money call
so you can also have some intrinsic value to cover your
downside.

As an example, say your stock is trading at $29.00 and you feel
that your stock may trade down a little but still remain in an
uptrend cycle. You don’t want to get rid of the stock but you
also don’t want to lose any money so you sell the 27.5 call at
$2.00.

The stock starts to trade down and finishes at $26.00. If you
had owned the stock naked, then you would have lost three
dollars since you owned the stock at $29.00 and it closed at
$26.00 on expiration.

However, because you sold the 27.5 calls at $2.00, you would
only realize a $1.00 loss in the stock. The premium received
will offset the loss due to the fact that you identified and
adjusted for a likely move.

As you can see, the buy-write strategy can be altered to fit any
directional view you have on your selected stock.

Finally, if you intend to use the buy-write strategy
successfully, you generally need to sell the calls against your
stock on a consistent, recurring interval, over a period of
time.

This means that you will have to be prepared to “roll” your
calls out to the next month come expiration. Sometimes, all
you’ll need to do is to sell the next month out call.

Amazing Options Trading Strategies For Safer Investing
and Explosive Profits. Discover how to protect your
investments with the leveraged power of options. Step
by step video tutorials show you how. Click here now:
http://www.options-university.com

Traditionally, commodities were things of value that were produced in huge quantities by a lot of different producers for commercial sale. Despite being produced by different producers, the value of the commodity was equivalent.

Trade in commodities, ranging from agricultural produce like corn to natural resources like oil, is done in the mercantile exchanges like the New York Mercantile Exchange and the London Metal Exchange.

Commodity is defined as an object with a use value, an exchange value and a price. The first form of futures trading was commodity futures trading. It is also the most volatile amongst the futures markets since most of the goods traded are primarily perishable in nature and highly sensitive to a lot of factors, including weather and political elements.

That being said, money can be made in the commodity trading markets if you have done your research carefully and are willing to invest large amounts into playing the markets. You will need to be well-versed in the history and future of market trends and have in-depth knowledge of the commodity you seek to trade.

Like most futures markets, investors can be divided into hedgers – those who have a need for the commodities being traded and have an interest in keeping prices fixed for their benefit, and speculators who try to make a profit by predicting the movement of markets and buying commodities “on paper”, without having any real need for them.

Online commodity trading has developed quickly thanks to advances in technology. Now you can sit at home and play the mercantile markets, selling and buying as you wish in order to turn a profit for your investment. A number of brokerages provide online trading services, and you can open accounts with these firms and use their trading platforms to carry on the buying and selling of commodities. They also provide up-to-the-minute information and research so that their clients can make informed decisions regarding trades.

Online Commodity Trading provides detailed information on Online Commodity Trading, Online Commodity Trading Analysis, Commodity Futures Trading Online, Commodity Trading Online Brokers and more. Online Commodity Trading is affiliated with Online Forex Trading.

Although most investors are solely familiar with equity trading, such as stocks or mutual funds, or investing in debt, such as bonds, commodity trading tends to be ignored despite the fact that it possesses many advantages over other types of investment instruments. Let’s begin by defining what a ‘commodity’ is in the first place. Commodities can come in many forms. Most commonly traded commodities include lean hogs, live cattle, oats, wheat, metals, and even currencies.

One of the attractions of trading commodities is the potential for gaining large profits in a considerably short amount of time. Nevertheless, commodity trading is considered by most as being extremely risky since most investors tend to lose money. However, by performing your due diligence and determining whether the commodity that you’re interested in is either under- or overvalued, say if you want to go long or short, respectively, you may be able to minimize the risk involved in commodity trading. It may also help to have an experienced commodity trader by your side to guide you.

When you’re trading commodity futures, you’re not truly purchasing nor owning anything, unlike other types of investments, such as stocks or bonds. You’re simply speculating on where the price of a given commodity will be headed. If, after doing your research, you believe that the price of coffee is going to rise, you would purchase future contracts, or go long. On the other hand, if you were under the impression that the price of sugar was going to drop, then you would sell future contracts, or go short.

As was mentioned earlier, one can also purchase futures in currency or market indices, in addition to buying or selling futures on commodities like cattle and hogs. One advantage of trading futures on market indices is that you don’t need to invest a lot of money, as opposed to having to invest a considerable chunk of capital if one were to purchase individual stocks. Let’s illustrate with the following, a $10,000 futures contract on the Nasdaq is equivalent to about $200,000 dollars in stock. Let’s assume you expect the market to rise shortly, you could potentially buy many of the stocks that form part of the Nasdaq stock index (the herd mentality) or you could purchase a Nasdaq futures contract. Suppose you invested $200,000 in stocks in the Nasdaq, and if the index had risen, you would have made a profit of say, $25,000. However, if you instead purchased a $10,000 futures contract simultaneously, rather than investing $200,000, you would have made the same $25,000, by investing with a lot less capital in the first place.

A disadvantage to commodity trading is that it is usually done on margin in order to leverage your investment, so a small drop in the price could potentially cost you your whole investment. It is for this reason that one must perform his/her due diligence and decide for him/herself if a given futures contract will be a prudent investment. Although commodity trading can be fun, albeit not without risk, it offers investors another way to diversify their investment portfolios.

Webster’s Dictionary defines the term strategy as ” 1 a) the
science of planning and directing larger scale military
operations, specifically (as distinguished from TACTICS) of
maneuvering forces into the most advantageous position prior to
actual engagement with the enemy b) a plan or action based on
this. 2 a) skill in managing or planning, especially by using
stratagems b) a stratagem or artful means to some end.

When applying a definition to investing in the market, we want
to pay particular attention to the words “maneuvering into the
most advantageous position prior to actual engagement” and the
words “skill in managing or planning especially by using
stratagems.”

Picking a stock or group of stocks is only half the battle.
Making the most from the chosen investment opportunity is the
other half. This is where your strategy comes in.

The wrong strategy even when applied to the right opportunity
can produce increased risk, decreased profits and even potential
loss. Therefore, understanding and applying the proper strategy
is critical.

The actual selection of an investment opportunity from those
offered normally depends on the type and style of research the
investor favors and deems necessary.

This selection process, or “investment selection protocols,” is
a checklist of different types and pieces of data that are
favored by the individual investor. These pieces of data can
consist of charts, indicators, oscillators, fundamental
analysis, news or even tips.

Each investor has his/her own investment selection protocol. As
an investor, once you complete this process and choose your
investment opportunity, your strategy takes over. Inherent in
the selection of the stock is expectation.

Every investor has some expectation for any chosen opportunity.
Therefore a strategy must be selected which best fits those
expectations.

The proper strategy will be the strategy thay allows for the
highest possible return with the least amount of risk and the
best possible protection that can be afforded.

Obviously, since every opportunity will have a somewhat
different expectation along with different variables surrounding
it, each opportunity should have a different “ideal” strategy.
By and large, when choosing a stock to invest in, most investors
look to purchase a stock they think will go up. The directional
play is as good a place as any to start our discussion of option
strategies.

Amazing Options Trading Strategies For Safer Investing
and Explosive Profits. Discover how to protect your
investments with the leveraged power of options. Step
by step video tutorials show you how. Click here now:
http://www.options-university.com

On the back of record highs for gold, copper and nickel, the Australian stock market has overcome concerns about higher oil prices, consumer debt and real estate slowdown.

The Australian iShare ETF (EWA) started the year slowly as international fund flows pulled back but has rebounded nicely up 9.69% in the last 30 days and 13.55% for the year.

The perception that Australia is nothing but a commodity and China play is wrongheaded. The Australian economy is well diversified with 5% of GDP attributed to mining, 5% to tourism and 80% to services. It also represents the third largest stock market in the region and is a leading regional financial center.

While labor rigidities and the growth of government could slow down Australia’s juggernaut economy, it is taking some measures to address these issues. It recently enacted a $17 billion cut in personal income taxes over three years and the independent central bank is raising rates. The leadership has also introduced a package of “radical” labor reforms which if enacted would also be a big plus. The aim is to give employers more flexibility and to bring labor negotiations down to the local level. The measures would increase probationary period for new employees from 3 to 6 months, exempt businesses with less than 100 employees from unfair dismissal laws and favor individual contracts over collective bargaining. All of these measures will be fought by the Labor Party and trade unions.
The market is not especially expensive – 12-month forward p/e ratio is about 16x, in line with average over past three years and below high of 18x. However, keep in mind that this low multiple is based on forward and aggressive forecasts of corporate profits.

The Australian iShare (EWA) is an excellent play on continued Australian growth. Its largest exposure is to the banking sector followed by the materials area. BHP Billiton, Ltd. (BHP) is its largest holding at 12.6% and it has also reached a record high this week. The company is the largest mining company in the world, has a larger market capitalization than Coca-Cola Company and earned $6.5 billion in profits in fiscal 2005. BHP the company recently announced plans to return some $2 billion to shareholders in the form of stock buybacks. It also increased its dividend by 30%.

Unlike past boom and bust cycles, companies like BHP are trying hard to avoid the risks of overexpansion and overcapacity. The consolidation in commodities has resulted in just a few companies controlling the bulk of trade in minerals such as iron ore. BHP’s advantage over rival Rio Tinto is that it has oil and gas operations benefiting from higher prices.
The MSCI All Country Index weights Australia at just 2.27%, I suggest that you consider doubling this allocation for your own global portfolio

Delfeld has 20 years of global investment experience including stints in Hong Kong, Sydney and Tokyo and served on the Executive Board of the Asian Development Bank in Manila. He was also a consultant to the U.S. Treasury and the U.S. Congress on international investing and is a columnist on global investing for Forbes Asia magazine.

For more information about Chartwell’s ETF investor advisory services, please go to http://chartwelladvisor.com/etf_investing.html or call Carl Delfeld direct at
(719) 264-1503.

2060

Investment mistakes happen for a multitude of reasons, including the fact that decisions are made under conditions of uncertainty that are irresponsibly downplayed by market gurus and institutional spokespersons. Losing money on an investment may not be the result of a mistake, and not all mistakes result in monetary losses. But errors occur when judgment is unduly influenced by emotions, when the basic principles of investing are misunderstood, and when misconceptions exist about how securities react to varying economic, political, and hysterical circumstances. Avoid these ten common errors to improve your performance:

1. Investment decisions should be made within a clearly defined Investment Plan. Investing is a goal-orientated activity that should include considerations of time, risk-tolerance, and future income… think about where you are going before you start moving in what may be the wrong direction. A well thought out plan will not need frequent adjustments. A well-managed plan will not be susceptible to the addition of trendy, speculations.

2. The distinction between Asset Allocation and Diversification is often clouded. Asset Allocation is the planned division of the portfolio between Equity and Income securities. Diversification is a risk minimization strategy used to assure that the size of individual portfolio positions does not become excessive in terms of various measurements. Neither are “hedges” against anything or Market Timing devices. Neither can be done with Mutual Funds or within a single Mutual Fund. Both are handled most easily using Cost Basis analysis as defined in the Working Capital Model.

3. Investors become bored with their Plan too quickly, change direction too frequently, and make drastic rather than gradual adjustments. Although investing is always referred to as “long term”, it is rarely dealt with as such by investors who would be hard pressed to explain simple peak-to-peak analysis. Short-term Market Value movements are routinely compared with various un-portfolio related indices and averages to evaluate performance. There is no index that compares with your portfolio, and calendar divisions have no relationship whatever to market or interest rate cycles.

4. Investors tend to fall in love with securities that rise in price and forget to take profits, particularly when the company was once their employer. It’s alarming how often accounting and other professionals refuse to fix these single-issue portfolios. Aside from the love issue, this becomes an unwilling-to-pay-the-taxes problem that often brings the unrealized gain to the Schedule D as a realized loss. Diversification rules, like Mother Nature, must not be messed with.

5. Investors often overdose on information, causing a constant state of “analysis paralysis”. Such investors are likely to be confused and tend to become hindsightful and indecisive. Neither portends well for the portfolio. Compounding this issue is the inability to distinguish between research and sales materials… quite often the same document. A somewhat narrow focus on information that supports a logical and well-documented investment strategy will be more productive in the long run. But do avoid future predictors.

6. Investors are constantly in search of a short cut or gimmick that will provide instant success with minimum effort. Consequently, they initiate a feeding frenzy for every new, product and service that the Institutions produce. Their portfolios become a hodgepodge of Mutual Funds, iShares, Index Funds, Partnerships, Penny Stocks, Hedge Funds, Funds of Funds, Commodities, Options, etc. This obsession with Product underlines how Wall Street has made it impossible for financial professionals to survive without them. Remember: Consumers buy products; Investors select securities.

7. Investors just don’t understand the nature of Interest Rate Sensitive Securities and can’t deal appropriately with changes in Market Value… in either direction. Operationally, the income portion of a portfolio must be looked at separately from the growth portion. A simple assessment of bottom line Market Value for structural and/or directional decision-making is one of the most far-reaching errors that investors make. Fixed Income must not connote Fixed Value and most investors rarely experience the full benefit of this portion of their portfolio.

8. Many investors either ignore or discount the cyclical nature of the investment markets and wind up buying the most popular securities/sectors/funds at their highest ever prices. Illogically, they interpret a current trend in such areas as a new dynamic and tend to overdo their involvement. At the same time, they quickly abandon whatever their previous hot spot happened to be, not realizing that they are creating a Buy High, Sell Low cycle all their own.

9. Many investment errors will involve some form of unrealistic time horizon, or Apples to Oranges form of performance comparison. Somehow, somewhere, the get rich slowly path to investment success has become overgrown and abandoned. Successful portfolio development is rarely a straight up arrow and comparisons with dissimilar products, commodities, or strategies simply produce detours that speed progress away from original portfolio goals.

10. The “cheaper is better” mentality weakens decision making capabilities and leads investors to dangerous assumptions and short cuts that only appear to be effective. Do discount brokers seek “best execution”? Can new issue preferred stocks be purchased without cost? Is a no load fund a freebie? Is a WRAP Account individually managed? When cheap is an investor’s primary concern, what he gets will generally be worth the price.

Compounding the problems that investors have managing their investment portfolios is the sideshowesque sensationalism that the media brings to the process. Investing has become a competitive event for service providers and investors alike. This development alone will lead many of you to the self-destructive decision making errors that are described above. Investing is a personal project where individual/family goals and objectives must dictate portfolio structure, management strategy, and performance evaluation techniques. Is it difficult to manage a portfolio in an environment that encourages instant gratification, supports all forms of “uncaveated” speculation, and that rewards short term and shortsighted reports, reactions, and achievements?

Yup, it sure is.

Steve Selengut
http://www.sancoservices.com
http://www.valuestockbuylistprogram.com
Professional Portfolio Management since 1979
Author of: “The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read”, and “A Millionaire’s Secret Investment Strategy”

Two kinds of Options are Calls and Puts

A call option gives the buyer the right but not the obligation
to buy a specific security at a specific price by a specific
date. It’s a way of “locking in” the purchase price of the stock
for a period of time.

A put option gives the buyer the right but not the obligation to
sell a specific security at a specific price by a specific date.
It’s a way of “locking in” the sales price of a stock for a
period of time.

The specific date is known as the contract’s expiration date. On
or prior to the expiration date the holder of the option
contract has the right to “exercise” the option.

The term exercise means the process by which the buyer of an
option converts the option into a long stock position in the
case of a call or a short stock position in the case of a put.

The term assign or assignment means the process by which the
seller of an option is notified of the buyer’s intention to
exercise.

Buyers of options exercise. Sellers of options are assigned.

The strike price or exercise price is defined as the price at
which the holder has the right to buy (for a call) or sell (for
a put), the underlying security. Strike prices are quoted in
dollars, i.e. May 50 calls means May $50.00 strike calls.

There are several other important terms in an option contract:

A long position is defined as any position which will
theoretically increase in value should the price of the
underlying security increase. Vice versa, the position will
theoretically decrease in value should the underlying security
decrease.

The buying of stock, the buying of a call, or the sale of a put
all constitute a long position.

A short position is defined as any position which will
theoretically increase in value should the price of the
underlying security decrease. Vice versa, the position will
theoretically decrease in value should the underlying security
increase.

The selling of stock, the selling of a call, or the buying of a
put all constitute short positions.

The “option class” identifies the specific underlying security
the option is written on. The “option series” describes the
expiration month and strike price. As an example, let’s use the
Microsoft (MSFT) May 65 calls.

MSFT is the option class. May 65 call is the option series. May
is the expiration month and 65 is the strike price.

Let’s try one more. How about the Home Depot January 35 puts?
Home Depot (HD) is the option class. January is the expiration
month and 35 the strike price.

All stocks and options are identified by symbol. We have
discussed how the stock itself has a symbol (stock symbol HD =
Home Depot, while MSFT = Microsoft.)

Options have symbols too. These symbols are standardized for all
exchange traded (listed) options. A different letter identifies
each specific month’s call or put. The chart below shows which
letters coincide with which month’s calls and which month’s
puts.

Month Calls Puts
January A M
Febraury B N
March C O
April D P
May E Q
June F R
July G S
August H T
September I U
October J V
November K W
December L X

Following the month symbol is the strike price symbol. A letter
represents each different strike price. These strike prices are
also standardized for all listed options, as follows:
A = 5 H = 40 O = 75 V = 12.5
B = 10 I = 45 P = 80 W = 17.5
C = 15 J = 50 Q = 85 X = 22.5
D = 20 K = 55 R = 90 Y = Not Assigned
E = 25 L = 60 S = 95 Z = Not Assigned
F = 30 M = 65 T = 100
G = 35 N = 70 U = 7.5

For example, let’s look at this symbol HD GF:

HD is the stock symbol that represents Home Depot
G signifies the month and type which is July calls
F indicates strike price that is 30

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Currency trading or forex (foreign exchange) as the name suggests refers to the act of exchanging the legal tender of one country for another. “In finance the exchange rate between two currencies specifies how much one currency is worth in terms of the other”. For instance an exchange of 200 Japanese yen to dollar indicate that 120 yen is worth the same as 1USD. Exchange rate is also called as foreign currency rate.

Currency trading is a very ancient phenomenon. Its existence can be traced back to time before money and Internet were discovered. The custom of currency trading began with the bartering system i.e. our ancestors commenced trading of goods against other goods. This bartering system was quite incompetent and needed lot of negotiation and investigation to be able to strike a deal. In the years that followed the important metals such gold, silver and bronze were standardized and graded to make easy the exchange of merchandise. The grounds for these mediums of exchange were acceptance by the general public and realistic variables such as durability and storage. As the middle age came, a variety of paper exchange started taking place and that became quite popular as an exchange medium.

Time passed by and the simple bartering system evolved into a complex and huge industry of foreign or currency exchange. Though with the use of money and banks the system developed to a large extent but it is still developing with the aid of Internet.

Currency exchange is not a simple task. It requires enormous time, market knowledge, ability to study the current market and predict its future course and also immense self-control. But the currency exchange market is extremely volatile and fast. There is no guarantee either of profit or of loss. To be successful in this market a trader has to take into consideration technical and fundamental data and make an informed decision on behalf of his observation of forex futures trading market sentiment and market expectations. Proper planning in timing a trade correctly is perhaps the most crucial factor in successful currency trading. However yet there are times when a trader misses the mark i.e. when his timing will be off.

Besides timing factor being rightly handled, patience of a trader is also quite essential. Perseverance is one of the essential characteristics of a trader. He or she might not be academically qualified enough but must have the potential to stand for a good time in the market. It is only after spending a good amount of time that you understand the intricacies of the market and start accruing some gains.

You should not hesitate to take the help of an experienced trader whom you know and trust. It is very difficult to survive in this currency trade market without the help of qualified professionals. So in the beginning it is better for any naïve trader to take the help of professionals.

If you are not incurring gains for a long time and do not hope that in near future, stop for sometime. This will give you mental peace and entitles you to get out at certain points on trade.

At the end of the day don’t forget that in the market of currency exchange, experience is the biggest teacher of all.

Mansi Aggarwal recommends you visit Currency Trading for more information.

Online currency trading takes on more than just a speculators or investors role in today’s complex markets. If you are running a multi-company trading business, or even if you are ‘just’ a property investor, moving currencies around different exchanges at the right time can add quite a considerable amount to your bottom line.

As most property transactions are in many hundreds of thousands of dollars, a few points alteration on the exchange rate of the day could actually make or break the profitably of a deal.

However, many people regularly invest on the Foreign Exchange markets as a pure investment. Well, I say many, but actually FOREX is the largest market in the World, but it doesn’t have an actual home.

There are a number of workshops available that are ideal if you’re new to the Forex market and have some experience trading stocks or other products. Whether you’re looking to diversify your portfolio, learn a new skill, or supplement your income, you’ll find out if the Forex market is right for you. Have a look at forex.com for more information.

Online currency trading is all done through the Foreign Exchange or FOREX. It is the largest market in the world with about $1.9 trillion going into different hands everyday. Unlike all other financial markets on the planet, FOREX doesn’t actually have an actual physical location.

That is because it is all done on the Internet and through banks with individuals trading their local currency for another. Or, if they have come back from a different country, then they might be changing from that currency into their home currency. Because FOREX is all based on the Internet, you can use online currency trading services to work within the market 24 hours a day.

But to be able to use the FOREX service, you have to sign yourself up to one of the many companies that offer these trading accounts to customers. You can open an account with any one of the hundreds of companies available; and then immediately begin trading currencies.

You will not want to use this service if you only exchange currency once a year, as you can do that at your local bank. Although this choice of account is available, large corporations mostly use online currency trading and they are the ones that will use this service the most.

However, in many cases, there are agencies available that you can sign up with ,that for a low percentage return will actually take care of all this for you.

For the really serious investor, there is a lot of money to be made, and often a lot of money held on risk. There is so much information that is now readily available, that with laptops and a wireless connection, anybody can trade basically anywhere in the world.

Also, on these online currency trading websites, you will get up to minute exchange rates from all over the world, so you will know the exact amount that you will get from your money. This also enables you to know the best time to use the online currency trading services. When the rates are just right for you, then that is when you can exchange your money.

However, it is important to note that some currency trading companies will need two days advance notice before you withdraw your money, so it is always wise to plan ahead if your goal is to make money with FOREX trading then use that money to pay bills or to pay for living expenses.

Have a look, you may well find that this is an interesting, and potentially, a very profitable new area of investing for you to look at.

A stock, also referred to as a share, is commonly a share of ownership in a corporation. A stock exchange is a market in which securities are bought and sold, and it is an essential component of a developed capital market. It is indispensable for the proper functioning of corporate enterprise. It brings together large amounts of capital necessary for the progress of a country. It is the citadel of capital and the pivot of money markets.

There are two important types of trading on the stock exchange; namely, ready delivery contract and forward delivery contract. Ready delivery contracts, also known as cash trading or cash transactions, are to be settled either on the same date or within a short period that may extend at best up to seven days. Forward delivery contracts are discharged on fixed settlement days. Ready delivery contracts can be made for all securities, whereas forward delivery contracts are confined to those securities which are placed oft the forward list.

Stock exchange transactions are made either for the purpose of investment or for speculation. Investment transactions are made with the intention of earning a return on the securities by holding them more or less permanently, whereas speculative transactions are made with the intention of making short-term gains by disposing of the securities at favorable prices.

The nature of the investment transaction and speculative transaction differs. The investment transaction requires the actual delivery of securities on the part of sellers, and the payment of their full price by the buyers. Speculative transactions, on the other hand, do not involve full payment for and taking delivery of the securities that the speculators have contracted to transfer. As the speculative transactions do not call for the payment of the full price but can be made by the deposit of a fractional part of the price, the volume of speculative transactions usually far exceeds that of the investment transactions on any stock exchange. It is, therefore, argued that speculation is necessary to ensure sufficient volume and continuity of business in the stock exchange.

Invest provides detailed information on Investments, How To Invest Money, How To Invest In Stocks, How To Invest In Real Estate and more. Invest is affiliated with Bank Trust Investments.

Each commodity exchange has certain listed commodities and permitted commodities, which are traded on its floor. The trading on the floor is confined to the members or their authorized representatives. Investors interested in buying or selling place their orders with their respective brokers, who are commodity exchange members. The brokers and their authorized representatives assemble on the trading floor during the official session to execute the orders placed with them.

The trading floor consists of several trading posts for different groups of commodities. A member or his representative wishing to buy or sell a certain commodity reaches the trading post where that commodity is traded. Here he comes in contact with others interested in transacting in that commodity. Buyers make their bids and sellers make their offers, and bargains are closed at mutually agreed-upon prices.

What types of order can a client place with his broker? A client, while placing an order with his broker, may specify the price and time dimensions. As far as the price dimension is concerned, basically, two types of orders may be placed: market order and limit order. A market order is to be executed as soon as possible at the best prevailing price on the market. A limit order, on the other hand, is constrained by the price limits specified by the investor. In the case of a limit order to sell, the seller specifies the minimum price that the commodity must fetch and, in the case of a limit order to buy, the buyer specifies the maximum price that he is willing to pay.

The time dimension of an order reflects the time frame in which the order has to be executed. A day order remains valid only for the day when it is placed. If the order is not executed on that day, it automatically lapses. A week order is one which is active for a week. A month order is an order which is valid for one month. An open order remains in effect until it is executed or cancelled.

It’s a myth that most currency traders are mostly wrong about market direction – they get it right a lot but never capitalize on the profit potential.

The problem is traders get stopped out to soon, then they see the trade pile up tens of thousands while they have minor profit, or worse a loss.

Let’s look at how to catch and hold trends and pile up some big profits.

In currency trading the way to do this is threefold. First look for the big trends, secondly time your entry and place your stop correctly and last but not least, trail your stop correctly to protect yourself as well as keep you in the market.

1. Look to catch the big trends

In currency trading there has been a big move toward day and swing trading but looking for these short term moves reduces your chances of success.

Quite simply, the odds are against you and the profits are too small to cover your inevitable losses.

In currency trading the major trends last many months or years and these are the ones you need to focus on.

Start in your currency trading by looking at the weekly chart to spot the major trends and time entry via the daily chart – There are only a few really big currency trends, so you will trade sparingly.

You are only looking to trade significant breaks of support or resistance or these areas holding on strength.

2. Entry and stop placement

In your currency trading you need to place your stop as soon as you enter and this is normally on a break of support or resistance ( here a breakout will quickly move in your favour or reverse so stops can be close ) alternatively, you may see support or resistance hold and trade accordingly.

This is a bit more difficult, so follow these rules.

Say you are trading into support levels – Don’t predict support will hold, use an oscillator such as the stochastic (see our other articles) and use it to trade price momentum coming off support i.e. enter on strength.

This way you will have confirmation that support has held and price momentum is going your way before entry.

In currency trading NEVER predict whether support will hold wait for prices to confirm.

Once this is done a stop close below support should be your exit level.

3. The hard bit! Staying in the trend

This is really where traders go wrong all the time in currency trading.

They get market direction right in their currency trading but can NEVER stay in the trend.

They do one of two things and their both BIG mistakes!

Don’t move stops quickly

Traders immediately try and move their stop and get caught by normal market reactions against the trade.

By trying to reduce the risk in their currency trading, they actually create it as they get hit on stop and miss the major move.

They snatch profits

In currency trading when a trader sees a move develop they get excited as profits build. A few hundred is nice then a few thousand and the trader start have to panic.

Each reaction against the major trend eats into the traders open equity profit and this causes emotional turmoil.

The bigger the profit becomes in currency trading the more likely he will snatch the profit before it gets away or worse, turns into a loss.

The trader banks the profit and is relieved to have a minor profit and then sees the trade make $10,000 $20,000 or more and he’s not in!

It takes courage and conviction to hold profits

Many people focus on discipline and taking losses quickly but that’s easy, running profits is the hard bit.

Here is some advice on how to hold profits in your currency trading

1. If you have confidence in your currency trading method and you have isolated a potential big move, look at the long term and leave your stop where it is until the trade is well under way.

2. Only look to exit this trend if there is a reversal of the trend i.e. penetration of the 40 day moving average. Do not focus on normal volatility against the major trend.

3. When you have a big profit move to protect it but tail the stop only behind major support levels – the trick is to move it slowly

Focus on the long term and hold

Keep in mind in currency trading that the major trends for last months or years (they reflect the economic cycle of the country and by their very nature these are long term) and you are only focusing on these, not the market noise.

Doing this in your currency trading will mean you can lose 80% of the time and still make huge profits over time – as your correct trades will pile up mega profits in your currency trading.

For more free info on catching and holding long term trends for huge profits get a FREE Trading Opportunities Newsletter and also a 100 page FREE Trader CD packed with tips and strategies to make you a better and more profitable trader at http://www.wellingtoncr.com

What is an Option?

An option is a traded security that is a derivative product.

By derivative product we mean that it is a product whose value
is based upon or derived from the price of something else. Since
we are talking about stocks, a stock option is based upon, among
other things, the price of the underlying stock.

There are also options on other traded securities such as
currencies, indexes and interest rates, but here we will limit
our discussion to stock options, or options based on stocks.

A distinguishing factor of an option is that is a depreciating
asset in the sense that it has a limited life, and has to be
used before the date on which it expires. As time goes by, the
option loses value as it moves closer to its expiration date

When we speak of options in terms of volume, we refer to
contracts. Each stock option contract is equivalent to 100
shares of stock. When we talk about two contracts, we are
talking about 200 shares, 10 contracts; we are talking about
1,000 shares, 75 contracts 7500 shares and so on.

 Amount of Shares       Equivalent Amount of Option Contracts
 100                    1
 200                    2
 1000                   10
 7500                   75
 15000                  150
 50000                  500
 100000                 1000

NOTE: It is important to understand the dollar cost of options
before actually trading them. When an option is quoted at $1.00
per contract, the investor must realize that the $1.00
represents a price of $1.00 per share, not per contract.

Remember that each contract is worth 100 shares. This means that
if you were to buy one option contract at a quoted price of
$1.00, your total cost will be $100.00 (1 contract x $1.00 per
share x 100 shares per contract). If you were to buy 10
contracts for $1.50 per contract, your total cost will be
$1500.00. Use the formula below when calculating total dollar
cost of the option.

Total Dollar Cost of Trade = Number of Contracts x Price per
Contract x 100

Option contracts are literally a sales agreement between two
parties. The two parties are the buyer (or holder) and the
seller (or writer). When you buy an option contract you are
considered to be long the option. When you sell an option
contract, you are considered to be short the option. This, of
course, is assuming you had no previous position in the said
option.

In an option contract, although it seems as though the buyer and
seller must be tied together, they are not. You see, the buyer
doesn’t really buy from the seller and the seller doesn’t really
sell to the buyer.

In reality, an organization called the OCC or Options Clearing
Corporation steps in between the two sides. The OCC buys from
the seller and sells to the buyer. This makes the OCC neutral,
and it allows both the buyer and the seller to trade out of a
position without involving the other party.

Amazing Options Trading Strategies For Safer Investing
and Explosive Profits. Discover how to protect your
investments with the leveraged power of options. Step
by step video tutorials show you how. Click here now:
http://www.options-university.com

In the investing world, trillions of dollars worth of shares are bought and sold each day on the major exchanges all over the world. On any given day, traders and investors can take part in the purest form of capitalism by putting their money at risk by buying into any of the major global corporations across the planet in the pursuit of profit. Yet, there is another way of speculating, trading options, which can be far superior to just trading the shares of a given company.

An option is a derivative on an underlying security that gives the right, but not necessarily the obligation, to buy the underlying security at a given set price. They come with different strike prices, expiration dates, and allow tremendous leverage as each option controls up to 100 shares of stock in a particular company. These advantages make options a far superior trading instrument than just trading stocks.

One advantage is leverage. Leverage is the ability to use a small amount of capital to control a huge asset. Like in real estate, where a small down payment allows a prospective buyer to control a huge piece of property, options allow the trader to control up to 100 shares of stock for with just a tiny bit of capital or, in this case, it is called the option’s “premium” which is the actual cost of the option.

Let’s look at an example of how options are superior to stocks in when using leverage. If you notice that ABC stock is set to rally higher and is trading at $50 a share and you then buy 100 shares of stock for a total of $5,000. A few weeks later, ABC stock has rallied to $60 a share and you sell all your shares you will have profited $1000 or a 20% return. Not too bad.

But a friend of yours sees the same setup in ABC stock and decides instead to buy an option with a $50 strike price which is priced a $2 premium for a total cost of $200 ($2 X 100 shares = $200). ABC stock rallies to $60 and your friend sells his $50 strike option for $1200 which is a 500% return! That’s the power of leverage when trading options.

Another advantage is that a trader can generate income by using credit spreads with options. If you see that ABC stock is in a trading range and is staying above support at say around $50 a share you can create a credit spread by creating what is called a Bull Put Spread. You sell the current month’s $50 put option and pocket the premium you received and then purchase the current month’s $45 put option for insurance in case the stock plummets unexpectedly. Then sit back and let the options reach their expiration date and you collect the difference between the premium received for selling the $50 put option and the cost of purchasing the $45 put option.

ABC stock can go up or stay around $50 and the position would make money. It could even decline below $50 equal to the cost of the premium that was received and the position would break even! The only time the position could lose money is if it declined below this breakeven point. Many option traders specialize in these types of option spreads only and generate often generate steady returns of 10% to 90% per position!

A third advantage is options also give you the ability to short stocks without the restrictions of short-selling stocks. When you short a stock in the anticipation that it will go down in price you not only have a larger cash outlay versus buying put options but you also have to pay interest on the stock you borrowed to short plus you have to pay the dividends back that the stock might pay during the time you hold it. With put options, you avoid all that plus you can make faster returns and much sooner since the stocks will usually fall twice as fast as they rise.

Additionally, if a stock is rumored to miss its earning projections you can make a lot of money quick by playing negative earning releases in the right market environment. The reason is that stocks can often gap down by 50% or more on bad news. That translates into a hug profit to a smart option trader without tying up a lot of capital.

That also brings up the most important advantage is that the most you risk is the actual premium you paid for the option itself. If a stock gaps up or down on news and you’re on the other side of that trade you only risk a small amount of you capital where if you had bought the stock you could lose half your position overnight! Early in 2006, Google reported strong earnings but not as great as Wall Street had expected and the stock was pummeled. Then a few weeks later, Google’s Chief Financial Officer spoke publicly about a temporary pullback in their future growth and the stock plummeted. If an options trader were long Google call options at that time that trader would have only lost a small portion of his overall trading capital versus someone who had bought the stock itself (Google’s stock had been as high as $475 before these events and then lost almost a 150 points in a couple of weeks as a result).

The advantages written here are only a few compared to the dozens that options afford traders who are disciplined enough to learn them. Stocks have been likened like playing the game checkers where options are compared to the game chess because of the tremendous opportunity and flexibility that they can give traders and investors. Stock and option traders that take the time to learn and apply a few simple strategies offered by options can better assess risks in the markets and potentially put themselves into positions to profit handsomely.

Copyright 2006 Billy Williams

Mr. Williams is a businessman who has been trading stocks, options, and futures for almost 15 years. He has extensive training in systemic trading and technical analysis along with the insight that comes from suffering the highs and lows from trading for many years. He trades professionally as well as operate an educational website with the goal of helping aspiring traders as well as experienced traders achieve their goals in the stock market. http://www.stockoptionsystem.com