Futures options trading: Know Facts About It
Dec0
The advance purchase of the commodity in the form of contract is called future contract. The contracts are traded on future exchange . Future contracts is like direct securities like stocks , bonds rights and warrants. They are known as securities on derivative contract. The contract is decided based on the requirements of supply and demand in the market. Future contract may be treated as tradition commodities for financial future. Currency is termed as the underlined asset, security, currency, financial future which is intangible asset , stock indexes and interest rates.
The future date of delivery is referred to as the settlement date. The settlement price for the day of business on the exchange is the price of the future contract at the end of the days trading session.A future contract gives the holder the obligation to make or take delivery under the terms of the contract whereas in option grants the buyer the right but no obligation to establish a position previously held by the seller of the option. Both parties have the obligation to fulfil the contractual obligation of the settlement date. In case of a cash settled future contract the asset is delivered to the buyer. Under such case the cash is transferred from the future trader to the one who sustained the loss to the one who made a profit. The future option can be closed effectively before the settlement date by selling a long position or buying back the short position.
ETF’s are also known as future contracts. The margin requirement and the crucial mechanism for settlement is set by the clearing house.
Asset need to be delivered at a pre arranged price in both future and forward contract. The only difference is future are exchange traded and forwards are traded over the counter. Futures are standardised and face an exchange and on the other hand forwards are customised and face a non exchange counter party.
Mail this postPopularity: 5% [?]
How To Buy The Best Stocks
Jul0
Although it may seem obvious to most stock market traders there are a number of simple rules that you can follow which will ensure that you have more success when buying stocks:
In the USA stock market there are 3 major indexes which are each made up of a basket of stocks, they are the S and P 500 (also known as the S&P500), the DOW 30 and the Nadaq 100. These stock indexes generally only contain major blue chip stocks, as long as you buy from these 3 groups you will at least know that you are getting a well known solid stock.
For example the DOW30 contains major industrials and large multinational stocks such as Home Depot (HD) and Johnson and Johnson (JNJ) whereas the Nasdaq 100 mainly contains techical companies such as Apple (AAPL) and Miscrosoft (MSFT).
Always buy a stock that is liquid, this means that it is a highly traded stock, this will enable you to quickly buy and sell at the price you want without having a delay. You will also get a smaller spread, thats the difference between the BID and ASK price of the stock. For a stock to be considered highly liquid it should trade at least 500,000 shares per day, ideally even more.
It is best to avoid stocks that are bellow $10 as this usually means the company is in trouble, although with the bear market of 2008 there have been a lot of good stocks at bargin prices between $5 and $10. Avoid buying a stock below $5 at anytime.
Another consideration to make is options, does the stock has options?, this will be important if you want to trade options around your stock, such as a covered call, or you may want to buy a PUT option in order to protect your stock.
Be very cautious about buying a stock just before it’s earnings release, stocks often drop significantly if you come out with a poor report. Earnings are released 4 times a year with one of them being the annual report.
If you are going to trade options make sure that you learn how to trade by getting some good education. There are many swing trading strategies that work well with stocks in todays volatile markets.
Mail this postPopularity: 14% [?]
