Posts Tagged ‘trading’
How to Make Money in This Mess
| How to Make Money in This Mess |  |
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| Written by Jared Levy, Editor, Option Strategies Weekly | |||||
| Tuesday, 09 August 2011 09:10 | |||||
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Savvy investors can use volatility to make lots money in a bear market. There is a secret about the Volatility Index (VIX) that can potentially make you thousands of dollars. What Does the VIX Really Symbolize?Think of the VIX as a “fear” indicator. Most investors — and even some experts — don’t know how to actually use it. You may hear things like “if the VIX is high, it’s time to buy” or that when the VIX is high, people are scared. But the real question is, how does it affect my financial investments? Let’s first take a look at how the Volatility Index tends to react with the markets. Below you see a chart of the S&P 500 (SPY in green) compared to the VIX (in black). The two generally have an inverse relationship. When the market is rallying, the VIX is dropping and vice versa. To put it simply, the Volatility Index has a direct relationship with options prices. As people buy options and the VIX goes higher, options get more expensive. When people sell options and the VIX drops, options get cheaper. So here’s the thing… What if you bought a call option, had the stock rise, and either lost money or didn’t make as much as you thought you would? Did you ever think that a falling VIX was eating away at your profits? If so, then you have discovered part of the secret. If you’re loving this article, sign up for Smart Investing Daily to receive all of Jared Levy and Sara Nunnally’s investment commentary.
Here Is How It WorksWhile you might think that Wall Street is manipulating Read more |
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Investors are scrambling to figure out which way is up and what the market’s next move will be. The one thing that we can bet on in the near term is more volatility.
Get Options Trading Secrets From “Behind the Curtain”
Friday, 29 April 2011
We have received a number of emails this week asking about Taipan’s trading services. A couple of readers wanted more information on my service, WaveStrength Options Weekly, so I thought I would take a couple minutes to explain what it is I do.
(You also should know that Taipan offers many different services. They specialize in different markets like commodities, futures options and stocks, but also focus on different risk tolerances and strategies. I encourage you to take a look at all we have to offer.)
A Little About Me
Before all this, my life was very different. I was a member of several stock exchanges, and it was my job to trade options and make lots of money for my company. I had huge monthly costs and even bigger expectations from my bosses to deliver serious results. At every turn, Wall Street’s best and brightest traders were breathing down my neck, waiting for me to make a mistake so they could take my place.
It was my job to make money trading any order that came into my pit. When the public was buying, I was selling and vice-versa. It was a completely different frame of mind than most investors have today. I learned techniques there that cannot be learned anywhere else.
Most people with my skill set usually end up at a hedge fund, brokerage or bank, or on some major trading desk. In my opinion, it is much easier to be a trader and work Read more
Earnings Season Survival Guide
by Jared Levy on July 12, 2010
Buy, sell, hold?
The days of reckoning are upon us! So earnings season officially kicks off today with Alcoa’s (NYSE:AA) report. CSX Corporation (NYSE:CSX) and Novellus Systems (NASDAQ:NVLS) are on today’s schedule as well. As I write this at 6:00 a.m. Monday morning, futures in the S&P, DJX and Nasdaq are lower after a week’s worth of gains.
I wanted to take a couple of quick minutes today to highlight some things to remember and consider during earnings season as you make your decisions to buy, sell or hold. These things are also important to remember if you plan on employing an options strategy. Some high-profile companies that are scheduled to report this week are:
- INTC, YUM and FAST on Tuesday
- MAR on Wednesday
- AMD, JPM and GOOG on Thursday
- BAC, GCI, C and GE on Friday
There are many others reporting; the above issues are simply some of the more heavily followed. If you are wondering when a company of interest reports earnings, check out the OptionsHouse Research tab to locate the next earnings date under the “Events Calendar.” If none is posted, go to the company’s website, as some corporations may announce changes close to its report date or wait to disclose their exact earnings date.
Now that you know the relevant earnings date for your stocks, here are some factors to examine when deciding how to proceed:
- What are EPS expectations?
Take a look at not only the consensus estimates, but the range of EPS estimates and commentary offered by analysts.
- What has the stock done in past earnings reports?
Why We “Geeky” Options Traders May Have an Edge over Stock Traders
by Jared Levy on July 1, 2010
When you think of stocks, you probably think of buy, sell, or hold when it comes to your investing choices.
When you take a position in a stock, it must move in your desired direction for you to be profitable.
Depending on your opinion toward a particular company, you are really limited as a stock trader to more of a full “on or off” sort of sentiment. Of course, you can choose to only allocate a certain percentage of your account to the trade (to manage your risk) or you can even diversify your portfolio to mitigate volatility and/or create a partial hedge in your account.
Here’s a diversification example:
The fact of the matter is that if you were to have bought ETFs in five different S&P 500 sectors in late April (April 28, to be specific), you would most likely have net losses in every one of your positions. Below you will see the price changes from April 28 through June 29, 2010 in these popular sector ETFs:
If you had allocated 20% of your account evenly into these 5 sectors, you would have a net loss of 13.2% over that time period. Individual stocks may have done better or worse, but ETFs may also in and of themselves offer another level of risk reduction through diversity.
By diversifying, this particular strategy helped to moderate the major losing trades, but also worsened the better…
Economic News Could Mean More Bumps in the Road
by Jared Levy on July 1, 2010
So if yesterday’s ADP report didn’t take the jam out of your doughnut, tomorrow’s job report just may. I wrote last month about the relationship between the two and also addressed the importance of job growth. The market is much like a large, very stretchy rubber band attached to the unemployment rate, as it is a lagging indicator. The market can certainly rise for a while without jobs following in lock-step. But if the market begins to move higher and the unemployment rate remains high or climbs higher, there has historically been a downward force applied to equity prices. This is partially the situation now, with other factors like Europe, China, consumer confidence, and more indicators preventing a sustainable rise in the marketplace.
The stock market is the uber leading indicator of economic growth (or the perception thereof) for many investors and economists (there are several others, such as building permits and the money supply). When the equity market begins its march higher, market participants look to coincident indicators like personal spending, consumer confidence, GDP, retail sales, etc. and earnings for confirmation, justification, and acceptance of the higher stock prices. Finally, economists and investors want to see the lagging indicators such as the unemployment rate, and consumer price index come in line with other indicators, in addition to performing based on historical observations. Generally by this time, according to Econ 101, the economy may be well on its way to recovering.
I have a great respect for economists. Like doctors, they are constantly “practicing” what they were taught. Each day, as more and more data is observed and crunched, regression models created and articles written, they learn a bit more. Past observations and methods can indeed help us to understand the future, but as we evolve globally, certain theories may not hold like they once did. Relationships between indicators may become disconnected and once-normal occurrences or deviations that we look for may become exaggerated or muted.