What Is An Option?

By Micheal Jones

When you understand the basics of what an option is and how it works you will then be armed for working with them in the real world. An option is simply the legal right, but not the obligation, for a person to call (buy) or put (sell) the stock?s future or index at a specified strike (price) before a set amount of time has lapsed.

Options are inexpensive when you consider the costs of buying a stock outright. As an example if you purchase stock in XYZ Corp. You might spend $10000 to own it as it is $1000/share and the stock is typically traded in groups of 100; conversely, if you option the stock you may be able to get it for $800 because it may be listed at 8 points.

Options are for a block of 100 shares, so at 8 points, or $8/share, you are paying a fraction of the cost at $800 for 100 shares. Options are sold in blocks of 100.

With an option you do not own the stock; you are simply leasing the potential profits for a set amount of time. The time value of an option decreases the longer you own the option. You should know the difference between the call options and the put options.

Put options will give the buyer the rights to sell a specified number of the underlying instrument; this is usually 100 shares per contract and the price is called the strike price which is set with an expiration date.

Call options will give the buyers the rights to buy a certain number of the underlying instrument; this is typically 100 shares per contract and the specified price, the strike price, is set with an expiration date.

Find out more about options from Andrew Baxter, an expert investor and hedge fund manager. He has some great advice on investing in the Australian Share Market. - 23221

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If you wish to learn the best information on investing today you need to check out this free video right now!

Developing An Investment Strategy

By Micheal Jones

There are a few things to take into consideration when developing your investment strategy.

Corporate Actions A good way that you can predict whether a specific stock may fluctuate upwards or downwards is by checking into the individual company with which you intend to invest. If there is an impending action on the part of the company such as a take-over or a merger then you may see a dramatic increase in the share price even if the market trends in general are taking a downturn. You can increase your chance of beating the market average by simply knowing a bit of information about a company.

Dividends Another great trick for knowing ahead of time in which direction the share prices will go is to know when the dividend payments will be paid. Some investors actually only invest for the purpose of dividend farming.

This simply means that they will purchase the stocks to take the dividend yields and then sell them when they become ex dividend. You may see a relatively cheap stock, but you should check to see if it is ex or cum dividend. Buying a stock ex dividend means that you are not entitled to the dividend allocation of the stock that you bought. The person who is selling that stock receives the dividend and then sells it at a lower price to you.

Opinions Finally, there is the fact that people are much like sheep; if one says sell then most of the herd will surely follow. If the media says to sell then you shouldn?t just sell blindly, you should investigate further and make your own decision.

Remember that the media is not paid to give you a good bargain or opportunity. The same is true for family and friends, too. Just be confident in your own investment strategy and don?t be afraid to go against the herd if you?ve done your homework and know your own mind.

Michael Jones is an expert investor and hedge fund manager; find out what he has to say about investing in the Australian Share Market and the best approach for investing. - 23221

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4x Currency Trading: Forex Money Management Basics

By Phil Jarvie

Gambling with 4x trading, God complexes of chasing losses, emotional investing - all the hallmarks of forex losers. The fact is that 4x trading is neither easy or hard. It is simply different to what we find in other parts of life. Most novices and experienced players came from share trading. This has barely any resemblance to 4x trading at all. So, to bring clarity to this different market, rule number 1 of 4x trading is:

Forex Money Management 101. Do not look for a holy grail of trading. Just don't lose money!

It should make sense that with the largest market place in the World - where in one week more money changes hands than the entire USA economy does in a whole year - that there is no such thing as a 4x robot, any super computer or an Albert Einstein of 4x trading. That's OK, this simply means we don't get to ride every blip and pip of movement with profits. We will miss opportunities and that's just fine. I am allowed to sleep, I am allowed to be cautious. But I am NOT allowed to lose money!

2% of your 4x account is more than you should be risking on a trade if you have proper and effective forex money management.

The first rule of Forex Money Management is to be used, not abused. Let me run you through a typical day for me in a volatile forex trading market. I have my $10,000 4x trading account. I am only allowed 4 pips for my stop losses because I am going to be trading with 5 lots. 5 lots is $50 per pip, and with only being allowed to risk $200, I must not lose more than 4 pips.

So far, I am sure you are thinking that only the rule of 2% maximum risk makes sense - that none of my plans for 5 lot trades seem reasonable at all. Well, lets look at a real trading day. Stop reading this now, and open up your metatrader charts or whatever platform you use and look at the H1 (hourly) EURUSD for 19th August, 2009. You will then see that the USD crashed after some bad and sad economic data came in. The Euro shot from 1.4111 to 1.4265 in 3 hours - 154 pips.

Not even a super computer could predict to buy at 1.4111. News traders would have got on board based on the USA problems sure. But actually, I was lucky enough to be already long a few hours earlier. But with only a 4 pips stop loss? Luck or stupid?

Fact is I was going out shopping with the girlfriend and I had trading signal software telling me I should be long. So I had placed 2 pending orders. The first was a 5 lots pending buy limit order at 1.4080 (in case of a dip in my favor), and to cover this potential and to obey forex money management rules, I also placed a 5 lots pending sell short order - one cancels the other out should they get executed.

While I was shopping, the market dipped to 1.4069 and I was losing $500 on the long position which was balanced out by the $500 profit on the short position. Think about it. The market could do whatever it wanted and I could not lose. The first rule of forex money management was safely in place with the risk of loss limited to the 0.9 pip spread to do the trades. it only took an hour to close out the short position at zero loss and then I was free to let the long position have as much as it wanted.

I closed out with a 20 pip trailing stop at 1.4245 up $8,250 for the day on a $10,000 account. That's 82.5% profit for the day I went shopping.

Hedging your positions is just one essential technique that a professional trader will use to enforce the forex money management rules. - 23221

About the Author:

Phil Jarvie is a professional forex trader expert in 4x trading, 4 software and using 4x hedging for forex money management and may wish to visit his website to consider his reviews on trade foreign currency

US Dollar (Part II)

By Ahmad Hassam

Role of monetary and fiscal policy in strengthening or weakening the US Dollar or that matter any other currency is important. The Federal Reserve Board (FED) is responsible for making the monetary policy of United States. Through its Federal Open Market Committee (FOMC), FED sets and implements the monetary policy. The voting members of FOMC are the seven governors of FED plus five presidents of the district reserve banks. Eight meeting of FOMC are held every year. These meetings are widely watched by the analyst for interest rate announcements and changes in growth expectations.

FED has the mandate for long run price stability and sustainable economic growth. FED has a high degree of independence in setting the monetary policy. FED uses the monetary policy to control inflation, unemployment and balanced growth. The most important tool used by FED is its Open Market Operations.

FED controls the short term interest rate through its open market operations. It involves FEDs sale or purchase of government securities that includes treasury bills, notes and bonds. Increase in FEDs purchases lowers the interest rates while selling of these securities raises the interest rate.

Federal Fund Rate is the key policy target of the FED. It is the interest rate at which the banks lend overnight to one another. The primary interest rate that is affected by these operations is the Federal Fund Rate.

Fiscal policy means the amount of taxes and government spending for a given year. The US fiscal policy is in the control of US Treasury. In fact it is the US Treasury that actually determines the US Dollar policy.

You should always try to watch the US Treasury views as changes to that view is very important for the currency markets. For example, US Treasury can give instructions to the New York Federal Reserve Board to intervene in the forex markets by actually buying or selling US Dollars if the US Treasury feels that the US Dollar is under or overvalued.

The heavily traded currency pairs in the global currency markets are EUR/USD, USD/JPY, GBP/USD and USD/CHF. These currency pairs represent the most frequently traded currency pairs in the global markets. So the most important economic data for the global currency markets is the US Dollar fundamentals. Over 90% of all currency deals involve the US Dollar. As you can see, all these currency pairs involve US Dollar on either side of the pair.

The relationship between Gold and US Dollar is very important for you to understand. There is an almost perfect negative correlation between the US Dollar and the gold prices. The US Dollar moves in opposite direction to the gold. This inverse relationship stems from the fact that gold is measured in US Dollars.

When US Dollar depreciates due to global economic uncertainty like the present, gold appreciates. Similarly when the US Dollar will appreciate on the news of US economic recovery, gold prices will go down. Gold is commonly viewed as the ultimate safe haven commodity by the investors all over the globe. You must know that the gold prices are going up right now and have reached very high levels. Gold trading and currency trading can be a very powerful combination. - 23221

About the Author:

Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading stocks and currencies. Try Strignano's Forex Signals free. Discover a revolutionary Forex Robot Trading System!

How To Invest In The Australian Stock Market

By Michele Perdue

The heart of the stock market system in Australia is the Sydney Stock Exchange. The exchange lets investors both foreign and domestic supply the regional companies with the funds that are needed in order to expand the economy of Australia. You can be among the investors that deal with the yop-performing companies in the Australian market in just a few simple steps.

Your first step is to hire a broker that is registered with the Australian Stock Exchange; this stockbroker will be able to help you fill out the agreement forms, set up your international account for the trades and give you valuable advice on the changes and trends before you begin to invest.

Investment clubs are popular because they let the investors share the learning experience of how the stock exchanges work; you should gather some friends and fellow investors in an investment club to follow the Australian stock market together. When your club meets you should discuss your individual portfolios as well as observe the rising stocks.

In order to counteract the riskier investments it is advisable to purchase some futures in the Australian stock exchange. The people who invest in the futures will sell their shares back at a predetermined time with the price established before any transactions are made. Using this investment too you can have longer range stocks mixed in with the day trading.

One of the rapidly expanding industries in which to invest is the biotechnology industry. Take advantage of the rapid expansion of the biotechnology industry by investing in some of the hundreds of publicly owned and traded biotech firms that are accessible to the foreign investors. These are the ideal stocks if your intent is to invest over a long term in an industry that is gradually growing.

There are other things to consider and more investing options, Andrew Baxter who is an expert investor and hedge fund manager can offer you some great insights about investing in the Australian Share Market. - 23221

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If you wish to learn the best information on investing today you need to check out this free video right now!