An option is simply granting someone the right to buy or sell
something in the future. In the case of Dow index futures
options, when someone buys a Dow call option they are buying the
right to purchase that underlying Dow future at a specific price,
known as the "strike price," at a future point in time, known as
the "expiration date." When an investor buys a put, they are
essentially selling the market; a call essentially buys the
market. Likewise, selling a put essentially buys the market;
selling a call essentially sells the market.
In order to receive the opportunity to buy an option on this
future, investors pay a "premium." If the market does not reach
the strike price of the option, then that option will expire
worthless on the expiration date. If the market does reach the
strike price of the option on the expiration date, then the
investor will be assigned the underlying future at that strike
price.
Advantages of Options Trading
Flexibility. Options can be used in a wide variety of
strategies, from conservative to high-risk, and can be tailored
to more expectations than simply "the stock will go up" or "the
stock will go down."
Leverage. An investor can gain leverage in a stock without
committing to a trade.
Limited Risk. Risk is limited to the option premium (except
when writing options for a security that is not already
owned).
Hedging. Options allow investors to protect their positions
against price fluctuations when it is not desirable to alter the
underlying positon.
Disadvantages of Options Trading
Costs. The costs of trading options (including both
commissions and the bid/ask spread) is significantly higher on a
percentage basis than trading the underlying stock, and these
costs can drastically eat into any profits.
Liquidity. With the vast array of different strike prices
available, some will suffer from very low liquidity making
trading difficult.
Complexity. Options are very complex and require a great deal
of observation and maintenance.
Time decay. The time-sensitive nature of options leads to the
result that most options expire worthless. This only applies to
those traders that purchase options - those selling collect the
premium but with:
Unlimited Risk. Some option positions, such as writing
uncovered options, are accompanied by unlimited risk.
Overall Options present a good opportunity to formulate plans
which can take advantage of volatility in underlying markets as
well as price direction. However for most traders the
disadvantages are significant and online futures trading is
usually a better option.
Tim Wreford runs Online Futures
Trading, a website that provides information and resources
for traders. Tim also provides a free
day trading system, the results of which are updated daily on
the site.
Sri Lanka Rupee, Stocks Drop After Currency Trading Band Removed Bloomberg The central bank narrowed the currency's trading band against the dollar on Feb. 3 and Feb. 6 and today, prior to announcing its removal. The monetary authority raised benchmark interest rates for the first time since 2007 on Feb.
India Eases Currency Trading Limits for Some Banks Wall Street Journal By SUDEEP JAIN MUMBAI -- India's central bank has asked banks to approach it individually for relaxing some foreign currency trading limits and has already eased restrictions for some banks, a top official said Monday. "Some limits, based on their ...
iFOREX Adds Oil to its list of Tradable Commodities MarketWatch (press release) ROAD TOWN, Tortola, Feb 09, 2012 (BUSINESS WIRE) -- Leading currency trading company, iFOREX, has recently expanded its services, giving all Forex trading accounts direct access to oil CFDs. Targeting an audience that has little or no experience with ...
This January Azerbaijan's exchange currency trading totaled $82.5 million Azerbaijan Business Center Baku, Fineko/abc.az. The Baku Interbank Stock Exchange (BBVB) has renewed statistics of its operations. BBVB reports that in January 2012 the nine participating banks concluded 28 deals in 36 trading sessions in e-trading system (BEST).
FOCUS: Technology Buoys Retail Currency Trading, Reshapes Old Models Wall Street Journal By Eva Szalay Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Retail foreign-exchange trading is emerging as one of the biggest growth areas in the currencies space, and some of the trading firms that facilitate these flows are building up a whole new ...
Morgan Stanley Currency-Trading Head Stephen Mettler Leaves Bank BusinessWeek By Michael J. Moore Jan. 26 (Bloomberg) -- Stephen Mettler, who oversaw Morgan Stanley's interest rates and foreign-exchange trading businesses, has left the bank. Mettler, who joined the firm in 1997, retired, according to an internal memo obtained by ...
Bank of England and ECB Hold Steady, Indonesia Cuts CNBC.com [CNBC] ----------------------- MULTI CURRENCIES VS THE DOLLAR Tune In: CNBC's "Money in Motion Currency Trading" airs on Fridays at 5:30pm and repeats on Saturdays at 7pm. Learn more: The essential vocabulary for currency trading is on Key Currency ...
RELATED ARTICLESFinancial Crises, Global
Capital Flows and the International Financial
Architecture
The recent upheavals in the world financial markets were
quelled by the immediate intervention of both international
financial institutions such as the IMF and of domestic ones
in the developed countries, such as the Federal Reserve in
the USA. The danger seems to have passed, though recent
tremors in South Korea, Brazil and Taiwan do not augur
well.
Experience
Throughout our course on futures trading, we have tried to
point out to you that there is a great difference between
having an investor attitude and being a trader. There are
also many similarities.
Be a Smarter FOREX
Currency Trader: Three Basic Principles
Below I will describe three basic principles that may come
in handy for currency traders. They are very easy to
implement and potentially take advantage of as you will
see.
Online Forex
Q1: When you consider that the foreign exchange market has
become the world's largest financial market, with over $1.5
trillion USD traded daily, where does it go from
here?A1:The FX market is unique, in the UK there is no
central exchange, we trade via the inter bank market.
Business and the
Forex
The business world is a complex web of supply and demand.
Money and goods, physical or otherwise, pass through the
global market every single day.
How To Handle A String Of
Losses
Everybody hates to lose and unfortunately no one is blessed
with the ability of foresight, therefore losses are an
unavoidable part of trading. When we enter a trade we will
either be right, or wrong, and even if we broke-even we'd
still be classed as being wrong - as nobody enters into a
trade just to break-even! When unsuccessful traders
encounter a string of losses they begin to engage in
self-destructive patterns that help them escape the pain
they are experiencing.
Creativity in
Trading
"Is it important to be creative in your trading?" I'm not
sure I can describe it in terms of importance. The creative
process is somewhat of a mystery, even to scientists who
study it.
A Fools Game
I received an email this week with a question (below) which
caused me to think about the wisdom of pursuing trading as
a career. Regardless of your trading time span, the skills
and concerns of active short-term trading are relevant to
all market particpipants.
Forex Signal, Forex
Signals Advice
There are lot's of Forex signals providers out there. New
Forex traders might be thinking of looking for a reliable
Forex signals provider.
Forex Training: Follow
Your Gut or Your Broker
Which way will the forex market move? Do you just follow
your gut feeling? Or do you have Neo's sixth sense that
would let you be one with the market and feel the
underlying currents. Trading forex is a non stop action
movie but a good one, where you really don't know who will
win at the end.
Stock Market Report: Day
Trading or Swing Trading Online? Stock Investing
Information
Profitable day traders recognize that momentum trading is
among the fastest & most effective ways to harvest BIG
piles of cash in the stock market.The problem is that if
you don't know what stocks to look for and how to approach
them while limiting your risk, you won't even get close to
making some profits.
Welcome to the World of
Currency Trading
Indeed large multinational and individual banks and other
major financial institutions have dominated FX trading
(also known as Forex trading), but there is a paradigm
change in the nature and type of investing. According to
one estimate, in the new millennium, there are over 6
million online investment accounts, up from 1.
E-currency Exchange
Trading
If you are reading this article you are probably one of the
many people who have spent countless hours searching for
unique ways to make money on the internet. Very few people
have gone on to succeed and most have failed miserably time
and time again.
Trading
Timeframes
Long term traders will work from end of day data
and look to hold trades for a few weeks up to many months.
Usually trend trading.
Forex Brokers - Helping
to Maximize Your Success
A Forex broker is a broker dealing in foreign exchange,
just like real estate broker who deals in real estate and
properties. Simply, a Forex broker is an advisor who
advises you about the forex market.
Adaptation to the
Realities of the Market
Do you think adaptation to the realities of the market is
the most important thing?Many times in the past I've
written about the need to adapt, the need to be able to
change your behavior relative to the market because the
markets are ever changing. I've stated that mechanical
systems may be workable, but for only a short time relative
to the life of markets.
Day Trading Course or
Day Trading Technique Seminar: Learn Day Trading
Education
Profitable day traders recognize that momentum trading is
among the fastest & most effective ways to harvest BIG
piles of cash in the stock market.The problem is that if
you don't know what stocks to look for and how to approach
them while limiting your risk, you won't even get close to
making some profits.
Forex Market
Overview
"FX" is an abbreviation of "forex" or "foreign exchange."
Foreign exchange is the largest and most liquid market in
the world trading approximately $2 trillion every day
(that's over 30 times the daily volume of NASDAQ and NYSE
combined).
Forex Made Easy for
Everyone
Forex made easy is as simple as you would want it to be.
The foreign exchange market is a worldwide market and
according to some estimates is almost as big as thirty
times the turnover of the US Equity markets.
Forex Broker
A broker is any person or firm that charges a fee in
exchange for executing trades for a trader. A Forex broker
does not charge a commission for placing a buy or a sell
order the way a real estate broker would charge a
percentage fee of the total price of a sale.
MORE RESOURCES updated Thu. February / 09 / 2012
