The idea is: you start a trade on your computer based on a signal, wait few minutes or hours, then exit with profit (or loss). High leverage, low brokerage and real time chart are all of the components of what so called “Day Trading” or “E-minis” Trading. Whatever the name it might be, you need to know few items below before decided whether it is all for you or not.
More and more people now embrace the day trading/e-minis trading opportunity as many professional day trader open their trading room to be piggy backed by bunch of amateur member. One of the main tools for such trading is the computer itself. Many computer shop exploits this niche market to get maximum profit from these capital rich day traders. But that’s really not necessary.
Let us see the main beauty of option in the stock market which make it very valuable investment asset. Something that make share market very unique compare to other investment. Understanding this benefit of option will make you understand a lot more of other derivative product available in the market.
Explain all important and MUST-to-know understanding when dealing with “Option” in share market and other market
If somebody tell you in the face that certain stock or instrument will go up or down with absolute certainty, then I can safely conclude that either he/she was telling you outright lie or he/she was involved in illegal price fixing or insider trading activity. Nobody ever can predict exactly the price movement of certain instrument in the open market. Simply cannot. Here is why…
If you are doing regular covered call / share renting / buy write strategy then sooner or later you will meet the condition that the stock that being optioned is giving shareholder some dividend. And there are some interesting interaction or behavior that you need to realize during this period. Knowing this little detail will help you adjust your strategy to maximize your profit.
As investor, you will find out that dividend is one of income stream on your investing portfolio. The higher the dividend, the happier is the investor. But for trader, especially short term trader and call-option writer, there is more factor to be factored-in in order to maximize the profit or prevent lost. Why? That’s because of the typical behavior of the stock price during the “Ex-Dividend Date”.
These days, the brokerage fee for trading, especially for the online broker, is trending cheaper and cheaper. In U.S market, for stock it’s not unusual to trade under $10 flat fee, for stock even in order of $1 a contract or less… And with fierce competition the price is heading down. But is it really as investor or trader we will significantly reduce our trading cost ? Probably, yes.. but you still need to consider the hidden cost in your trading that is experience by anybody without exemption: the spread!
Diversification is another concept that need to be really understood by all investor. By using diversification you are certainly reducing exposure to the risk of individual item. And this is a good thing to do. But on the other side of the coin, if you are using too much diversification, not only you induce additional transaction cost, but also you are limitting your profit that you could earn. Let’s found out exactly why and how it works
Care have to be taken for those who wants to borrow money to kick start their investing journey. When people wants to borrowing money, often they only see the bright side where everything is going as planned and the profit will accelerate. But what happen if the trade is not going to the direction we want ? You may not only lose all of your money, but on top of that you still need to pay additional amount plus also the interest.
Covered Call also known as “Buy Write” and “Share Renting” is getting more popular each day as more people know its true potential. This strategy is almost non-directional – means it doesn’t matter where the market goes (up or down or sideways) you still get the money , upfront.
It’s legal stock-market-related trade for public (means everybody can do it ). If you have stock / share investment, you should have this monthly income already, if you have not – then this article is for you.
Simply put, Profit/Loss Chart (PLC) is the easiest and quickest way to understand your strategy to make profit. It can be used in any kind of trading, but it’s commonly use to illustrate option trading strategy (which can be complex, but then become easier after seeing the PLC). Just with simple glance, you can see from PLC: your break even point, where is your maximum profit, when you start losing money, when you start making money. Or in other word, what need to happen with the price for you to make profit.
In printing/word processor, you can see the similar resemblances in understanding “margin”. Margin is a vacant space left as a ‘border’ between the edge of the paper and the content. That is also somehow similar to “margin” in trading, it’s a space between the end of your account and the real profit.
Has nothing to do with the world biggest miner BHP Billiton, BHP stands for “Buy, Hold and Pray” – it is the oldest and classic strategy that our grandfather or father or some of us still do when it comes to investing in share, but this time with a bit of twist. We set a protection against a downturn – 100% capital protected.