We may not familiar with option but we are sure that most of us know what is stock and bond. Stock is an equity that representing a company value. By purchasing stock, you are actually buying the ownership of a public listed company, which means that you are one of the owners of the company. There are many purposes to purchase stocks. It can for long term investment, short term investment, really intending to own a company or speculation for very short term investment. No matter what is their purpose, usually, they will buy large amount of stock. Especially, for them who want to control the administration of a public listed company. This kind of investor will buy as many stocks as possible in order that they have a majority stock in their hand. In this kind of situation, he or she has the control power to the company administration and can do some modification to the processing and also the management of the company. By owning an amount of stock, you will be paid dividend if the company has declared it. Some company may not pay you any dividend depending to the company highest management decision. Some company may let you vote in their company election such electing a suitable CEO or MD. When you own a stock, you have the total control of this stock. You can sell it anytime if you think that you no longer intended to own it or you think that it is not worth to own it. You can also keep it for your whole life and use it as collateral to borrow money from bank or financial institution.
Bond is a debt that the bond issuer own you if you have bought the bond. When there is a project to carry out regardless it is a big or small project, if the people who intend to start the project do not have money, one of the sources for them to generate fund is by printing bond and selling it to public. By doing this, they can generate fund to carried out the project. This seem like the owner of the project borrows money from you and they give you the bond as evidence that they have borrowed money from you. By owning this bond, you will be paid interest and repaid all the money that you have lent to them at a specific date. Not anybody can print bond and sell it to public. People who want to do so have to apply to the government as a bond issuer. Usually, these people are from corporate agency, states, cities and federal government agency. As a bond holder, you have priority to have your money back compared to shareholder if the bond issuer goes broke. They will pay back the money for you as a bond holder before they pay to their shareholder.
Stock and bond have a tangible value that you can grasp and visualize. The ownership of a stock that you have purchased can last for a long time as long as you continue hold this stock and don’t sell it. The ownership of a stock can not be canceled unless the company goes broke (means that the company have declared bankruptcy). Bond usually has contract type repayment schedule and once they have paid back all the money that you have lent to them, the bond will end. The third type of investment does not give a whole life ownership and does not provide any tangible value. The validity of this investment has expiration date. Once the expiration date has over, the whole investment will become worthless. Apart from that, the value of this investment will decline when the time passes by. These are part of the features that options have. Due the lack of tangible value, worthlessness after expiration date and value declines due to the time has passed by; all these make options seem too risky to be invested for most of the people. However, there are still a lot of investors interested in option investment. Do you know why?
This is because not all methods that had been used in trading option are risky. What had been mentioned just now such as lack of tangible value, worthless after expiration date and option value declines after the time had passed by can work to our advantage. For an example, we can sell option that has a very short period of time to expiration date, which has a low possibility to become in the money option. Like this, when the time has passed by, option value that has declined will be our gain. There are limited strategies to trade stock but for option, there are a lot of strategies can be utilized. For stock, we either buy or sell stock. That’s all what we can do. But for option, we can combine a few positions together to form a synthetic position to earn money from the stock that move either up, down or side way. You will realize that options are very flexible after you have study more about it. You can use options in numerous situations and create numerous opportunities.
An option is a contract of agreement that allows you have a privilege in executing transaction involving 100 units of stock. This agreement only involves the option buyer and seller. This privilege includes a specific stock with a specific fixed price per share and also a specific date in the future for its validity. When we have bought a contract of option, we do not have any equity in the stock and any debt position. What we have is a contractual right to buy and sell 100 units of share at a fixed price within a fixed period of time. You will feel wondering why we need to purchase an option to gain the right since we can always buy or sell 100 units of share at the current market price. The answer is that option has fixed the stock price that you can buy or sell and this is the key to an option’s value. Stock price is unpredictable and this feature makes stock market investment interesting and also very risky. When we own an option, the stock price that we can sell and buy 100 units share is already frozen for as long as the option remains valid. Finally, the option’s value is determined by the comparison of the fixed price and the stock market current price.
Source: http://www.Free-Articles-Zone.com
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Tuesday, October 23, 2007
Stock, Bond and Option
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Monday, October 15, 2007
Forex Trading System - Beware Of Curve Fitting or Lose
By kelly Price
I would say that of the currency systems sold on the net, most are curve fitted on purpose, to allow the vendor to show a profit so they can sell the system - if you don't know what it is then you will lose.
Forget the track record you see, in most cases that's not what you're going to get!
Curve fitting in simple terms means optimizing the system to fit the data.
A trader I know once likened this to shooting at a barn door and then afterwards, drawing a bulls-eye around everyone, to make them look like a bulls-eye!
In currency trading a system vendor will simply find his system doesn't work on a segment of data, so he makes it work and bends the system (curve fits it) until it does.
The clue to a curve fitted system is:
Lots of rules and parameters, different rules for different types of market and different ways of trading individual currencies.
If you see a track record that shows extra ordinary profits with low drawdown it's probably curve fitted.
Many vendors don't realise that the more they bend the system to fit the data the more likely it is to collapse in real time trading.
No one bit of data is going to replicate itself exactly again.
If a currency trading system is soundly based, it should work across all markets and use the same rules all the time and be simple with few rules and parameters.
As long as a vendor puts this disclaimer on he is free to present any track record he likes here is the standard CFTC one:
"Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those show".
This allows un-scrupulous vendors to present any gains they like and they do!
They know that the system wont work but they know that the naive trader will fall for a track record of gains. The vendor makes a profit and the trader has a guaranteed loss!
Lets face it anyone can make a profit in hindsight but the problem is that we need to trade without knowing the data.
If you buy a currency trading system look for the evidence of curve fitting.
The majority of systems use it whether it's done on purpose or in error.
Stick with simple systems which are easy to understand, where the logic is fully revealed - or even better, insist on some evidence the system works, by asking for a real time track record over at least two years.
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The popularity of investing in the stock market is increasing constantly. Today, investment in stocks and shares is not limited to the well to do; even the average middle-class is getting into it in droves. The opening up of markets with advanced trading technologies has made owning shares easy for everyone. However, if you are planning to invest, do not depend on luck to get you returns. Investment in stocks is considered a very risky affair. It requires a high rate of return. You need to use a well thought out strategy and necessary tools to invest in the share market.
The allure of investing in shares and stocks, however, does not mean that every would-be investor has the know-how of this often-slippery market. If you feel that the get-rich-quick theory applies to stocks and shares, then it is a misguided notion, because stocks are not the answer to instant wealth. Just like the real estate market, the share market also involves a lot of risk. Yet, people are often under the misconception that they will get rich instantly if they invest in shares.
You can buy a share in a stock when a company first enlists on the stock market – that is, at flotation or privatization. Alternatively, you can purchase shares once they are in circulation and are traded.
You could go to a stockbroker if you want to buy stocks. Stockbrokers do business with the stock exchange. They hold the shares in an account that is created in the name of the nominee. You can also keep your shares in the form of a paper certificate. Once the buying and selling of shares is over the transaction is made complete through an electronic system. This system is responsible for linking all the banks along with the stockbroker and registrars of the respective companies.
You can invest in international stocks as well. When a company performs trading in a stock market of another country, their stocks are known as International stocks. These stocks are traded like the UK stocks or, for that matter those traded in the Nasdaq in the US. All the stock exchanges in the world work in the same manner.
There is no guarantee when it comes to Investment in stocks but if you are ready to take a big risk then you can expect great returns on your investment. Despite the risk factor this form of investment has outperformed other investment options like bonds or saving accounts. So if you have the right strategy and you make the right moves in the stock market then nothing can stop the money from rolling in.
Source: http://www.Free-Articles-Zone.com
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Saturday, October 13, 2007
The basics of investing in STOCKS and shares
By Joseph Kenny
The popularity of investing in the stock market is increasing constantly. Today, investment in stocks and shares is not limited to the well to do; even the average middle-class is getting into it in droves. The opening up of markets with advanced trading technologies has made owning shares easy for everyone. However, if you are planning to invest, do not depend on luck to get you returns. Investment in stocks is considered a very risky affair. It requires a high rate of return. You need to use a well thought out strategy and necessary tools to invest in the share market.
The allure of investing in shares and stocks, however, does not mean that every would-be investor has the know-how of this often-slippery market. If you feel that the get-rich-quick theory applies to stocks and shares, then it is a misguided notion, because stocks are not the answer to instant wealth. Just like the real estate market, the share market also involves a lot of risk. Yet, people are often under the misconception that they will get rich instantly if they invest in shares.
You can buy a share in a stock when a company first enlists on the stock market – that is, at flotation or privatization. Alternatively, you can purchase shares once they are in circulation and are traded.
You could go to a stockbroker if you want to buy stocks. Stockbrokers do business with the stock exchange. They hold the shares in an account that is created in the name of the nominee. You can also keep your shares in the form of a paper certificate. Once the buying and selling of shares is over the transaction is made complete through an electronic system. This system is responsible for linking all the banks along with the stockbroker and registrars of the respective companies.
You can invest in international stocks as well. When a company performs trading in a stock market of another country, their stocks are known as International stocks. These stocks are traded like the UK stocks or, for that matter those traded in the Nasdaq in the US. All the stock exchanges in the world work in the same manner.
There is no guarantee when it comes to Investment in stocks but if you are ready to take a big risk then you can expect great returns on your investment. Despite the risk factor this form of investment has outperformed other investment options like bonds or saving accounts. So if you have the right strategy and you make the right moves in the stock market then nothing can stop the money from rolling in.
Source: http://www.Free-Articles-Zone.com
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1. Trade Less For Bigger Profits
Most traders think that they need to be in the market All the time in case they miss a move or the more they trade the more likely they are to be successful – but this is totally incorrect.
In Forex trading you make your money from being Right and that’s it – the effort you put in does not affect the amount of money you make. In fact in most instances the harder you try and more you trade, the greater your chances of failure.
Why?
Quite simply because the high odds trades don’t come around that often.
This philosophy is based on the famous Pareto principle the 80 / 20 rule.
The rule states that 80% of your results come from 20% of your activities.
This is true in many areas of life including trading Forex.
In forex trading by focusing on the trades with the best odds and ignoring the others, you can improve your profits overall.
By only focusing on this 20%, you will see bigger gains. This is really a common sense rule, yet few Forex traders stop to think about it. Most trade too much and try and force profits but if they were disciplined, patient and only focused on the best trades they would win more.
I know a trader who only trades about 6 times a year and yet they make over 100% annualized gains!
Think about trading less and you will see the logic of the above argument.
2. Don’t Diversify
When you do this resist the allure of diversification, it may reduce risk but if you have a high odds trade, why dilute its potential profit by diversifying with a marginal trade?
If you have a high odds trade go for it and this leads directly on to the next point.
3. Risk More Per Trade
As you only have one trade to focus on and it’s a good one risk as much as you can afford on it forget the accepted investment wisdom of 2 or 5% risk 10 25% minimum – if you believe in the trade go for it.
This is not being rash – its simply acknowledging an investment fact:
Risk goes with reward and the more you risk the more you can make.
This doesn’t mean being rash but your better to risk a lot on a high odds trade, than risk a little on a number of trades with poor profit potential.
Finally – To Make BIG Profits Learn To Love RISK!
The reason most traders never make any money is they are so afraid of risk they actually create it. They trade marginal trades, don’t risk enough and dilute their profit potential.
The fact is if you want to trade currencies you need to enjoy risk and be a speculator and confront and conquer risk – If you do you will make a lot of money. On the other hand if you don’t enjoy risk – don’t trade Forex.
Source: http://www.Free-Articles-Zone.com
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Wednesday, October 3, 2007
Forex Trading – 3 Simple Tips To Make Money Fast
By kelly Price
1. Trade Less For Bigger Profits
Most traders think that they need to be in the market All the time in case they miss a move or the more they trade the more likely they are to be successful – but this is totally incorrect.
In Forex trading you make your money from being Right and that’s it – the effort you put in does not affect the amount of money you make. In fact in most instances the harder you try and more you trade, the greater your chances of failure.
Why?
Quite simply because the high odds trades don’t come around that often.
This philosophy is based on the famous Pareto principle the 80 / 20 rule.
The rule states that 80% of your results come from 20% of your activities.
This is true in many areas of life including trading Forex.
In forex trading by focusing on the trades with the best odds and ignoring the others, you can improve your profits overall.
By only focusing on this 20%, you will see bigger gains. This is really a common sense rule, yet few Forex traders stop to think about it. Most trade too much and try and force profits but if they were disciplined, patient and only focused on the best trades they would win more.
I know a trader who only trades about 6 times a year and yet they make over 100% annualized gains!
Think about trading less and you will see the logic of the above argument.
2. Don’t Diversify
When you do this resist the allure of diversification, it may reduce risk but if you have a high odds trade, why dilute its potential profit by diversifying with a marginal trade?
If you have a high odds trade go for it and this leads directly on to the next point.
3. Risk More Per Trade
As you only have one trade to focus on and it’s a good one risk as much as you can afford on it forget the accepted investment wisdom of 2 or 5% risk 10 25% minimum – if you believe in the trade go for it.
This is not being rash – its simply acknowledging an investment fact:
Risk goes with reward and the more you risk the more you can make.
This doesn’t mean being rash but your better to risk a lot on a high odds trade, than risk a little on a number of trades with poor profit potential.
Finally – To Make BIG Profits Learn To Love RISK!
The reason most traders never make any money is they are so afraid of risk they actually create it. They trade marginal trades, don’t risk enough and dilute their profit potential.
The fact is if you want to trade currencies you need to enjoy risk and be a speculator and confront and conquer risk – If you do you will make a lot of money. On the other hand if you don’t enjoy risk – don’t trade Forex.
Source: http://www.Free-Articles-Zone.com
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Bonds & Surety Bonds
Holman Insurance Brokers Ltd. are able to place the following types of bonds: (For Surety Bonds See Below)
Bid Bond
A bond filed with a bid meant for a construction otherwise the other project which promises that if the contractor has the stumpy bid and is awarded the job, the necessary performance bond will be provided.
Contract Performance Bond
Contract bonds swear owners that the surety considers with such conviction that the principal will Satisfy his contractual assure that the surety guarantees fuss so, for free, if the principal doesn't.
If you look in to performance bonds, the surety assures the obligee-owner that the principal-contractor will carry out his promise depending upon the specifications. If the obligor (principal contractor) defaults by not performing arts, the obligee (owner) is liable, at the choice of the surety, to either:
Have the surety accomplish the contract with the actual contractor or a new contractor OR
Have the surety fund the actual contractor so he conclude OR
have the surety shell out to the bond penalty, i.e., be indemnified, equal to the bond penalty amount, for the surplus, if any, of the cost to have an additional contractor finish the job more than the balance of the contract price not so far paid the original contractor.
Financial Institution Bond
Hardly any industries have crime loss experience equal to those faced by financial institutions. More than a few different financial institution bonds are available to cover these experience and are used for the following:
Stockbrokers along with investment bankers
Finance companies
Insurance companies
Commercial banks, savings banks and credit unions
Commercial banks
Surety Bonds
Commercial Surety Bonding symbolizes a wide diversity of bonds which usually respond to an act/law as well as can be part of a licensing prerequisite. As a general rule commercial surety bonds protect the consumer not in favor of fraud, misrepresentation, and recompense of monetary loss as well as are required by the Courts, financial institutions, Government bodies, plus private corporations.
Commercial Surety Bonds can be divided into four categories:
Customs & Excise Bonds
Customs and excise bonds are necessary by Federal plus the Provincial Government and sure payments of duties/taxes on goods which will be fetch into Canada. They as well grantee the customs insurance broker performance, knowledge plus specialize in customs clearance plus ensure that regulations governing clearance of goods will be adhered to. One of the more general customs plus cut out bonds is the Bonded Highway Carrier, Freight Carrier, plus Air Carrier Bond.
License & Permit Bonds
License and permit bonds are necessary by both Federal as well as Provincial Government and which are a part of a government body that stand for the consumer. The bond will safeguard and protects the consumer from fraud, misrepresentation and compensates the consumer against possible monetary loss. The bond as well ensures the applicant's compliance with the policy governing that sector. An instance is the Auctioneer License Bond.
Fiduciary Probate Bonds (filed with courts)
These bonds are essential by the courts or Public Trustee when a person breathe his last or becomes unable of looking after them.
A Guardian Bond is essential in the case wherever a person has not made a provision to appoint someone to take care of his/her affairs in the event of incompetence. The bond promises that the Guardian(s) will take care of the incompetent's welfare plus well being, and will not use wrongly the estate funds.
Foreign Executor Bonds, Administration Bonds, Administrator de Bonis Non, etc. are necessary when an individual breathe his last breath without making a will or else the trustee named in the will does not desire to serve as the perpetrator. The bond guarantees that all creditors of the estate will be salaried and that the assets of the estate will be separated amongst the legatee of the estate according to the terms of the will, if there is one, as well as in accordance with the act
Trustee Bonds are necessary by the court when insolvency occurs. The bond guarantees the trustee's compliance with the act as well as it also make certain that the debts of the estate will be treated in an equivalent and fair manner as agreed by the laws governing bankruptcy.
Other Commercial Surety Bonds
This category of marketable surety bonds is what is referred to as "the sky is the limit". The bonds that fall beneath this category are those bonds that are not component of a law or lisencing requirement. There are several types of bonds that drop under this category with the most widespread being Lost Document Bond plus Waiver of Probate Bond.
Source: http://www.Free-Articles-Zone.com
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Bonds And Surety Bonds
By Ron victor
Bonds & Surety Bonds
Holman Insurance Brokers Ltd. are able to place the following types of bonds: (For Surety Bonds See Below)
Bid Bond
A bond filed with a bid meant for a construction otherwise the other project which promises that if the contractor has the stumpy bid and is awarded the job, the necessary performance bond will be provided.
Contract Performance Bond
Contract bonds swear owners that the surety considers with such conviction that the principal will Satisfy his contractual assure that the surety guarantees fuss so, for free, if the principal doesn't.
If you look in to performance bonds, the surety assures the obligee-owner that the principal-contractor will carry out his promise depending upon the specifications. If the obligor (principal contractor) defaults by not performing arts, the obligee (owner) is liable, at the choice of the surety, to either:
Have the surety accomplish the contract with the actual contractor or a new contractor OR
Have the surety fund the actual contractor so he conclude OR
have the surety shell out to the bond penalty, i.e., be indemnified, equal to the bond penalty amount, for the surplus, if any, of the cost to have an additional contractor finish the job more than the balance of the contract price not so far paid the original contractor.
Financial Institution Bond
Hardly any industries have crime loss experience equal to those faced by financial institutions. More than a few different financial institution bonds are available to cover these experience and are used for the following:
Stockbrokers along with investment bankers
Finance companies
Insurance companies
Commercial banks, savings banks and credit unions
Commercial banks
Surety Bonds
Commercial Surety Bonding symbolizes a wide diversity of bonds which usually respond to an act/law as well as can be part of a licensing prerequisite. As a general rule commercial surety bonds protect the consumer not in favor of fraud, misrepresentation, and recompense of monetary loss as well as are required by the Courts, financial institutions, Government bodies, plus private corporations.
Commercial Surety Bonds can be divided into four categories:
Customs & Excise Bonds
Customs and excise bonds are necessary by Federal plus the Provincial Government and sure payments of duties/taxes on goods which will be fetch into Canada. They as well grantee the customs insurance broker performance, knowledge plus specialize in customs clearance plus ensure that regulations governing clearance of goods will be adhered to. One of the more general customs plus cut out bonds is the Bonded Highway Carrier, Freight Carrier, plus Air Carrier Bond.
License & Permit Bonds
License and permit bonds are necessary by both Federal as well as Provincial Government and which are a part of a government body that stand for the consumer. The bond will safeguard and protects the consumer from fraud, misrepresentation and compensates the consumer against possible monetary loss. The bond as well ensures the applicant's compliance with the policy governing that sector. An instance is the Auctioneer License Bond.
Fiduciary Probate Bonds (filed with courts)
These bonds are essential by the courts or Public Trustee when a person breathe his last or becomes unable of looking after them.
A Guardian Bond is essential in the case wherever a person has not made a provision to appoint someone to take care of his/her affairs in the event of incompetence. The bond promises that the Guardian(s) will take care of the incompetent's welfare plus well being, and will not use wrongly the estate funds.
Foreign Executor Bonds, Administration Bonds, Administrator de Bonis Non, etc. are necessary when an individual breathe his last breath without making a will or else the trustee named in the will does not desire to serve as the perpetrator. The bond guarantees that all creditors of the estate will be salaried and that the assets of the estate will be separated amongst the legatee of the estate according to the terms of the will, if there is one, as well as in accordance with the act
Trustee Bonds are necessary by the court when insolvency occurs. The bond guarantees the trustee's compliance with the act as well as it also make certain that the debts of the estate will be treated in an equivalent and fair manner as agreed by the laws governing bankruptcy.
Other Commercial Surety Bonds
This category of marketable surety bonds is what is referred to as "the sky is the limit". The bonds that fall beneath this category are those bonds that are not component of a law or lisencing requirement. There are several types of bonds that drop under this category with the most widespread being Lost Document Bond plus Waiver of Probate Bond.
Source: http://www.Free-Articles-Zone.com
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