Forex Options Trading – How to Read Forex Price Quotes (part 2 of 3)
To read a forex price quote consisting of two different currencies you have to note that the first currency is known as the base currency while the second currency is called the quote currency. Another point of note is that the first currency value is always 1 (one).
To further illustrate, the price quote or exchange rate tells us how much of the quote currency we must pay to obtain one unit of the base currency. Likewise. The price quote or exchange rate tells us how much we will receive in the quote currency by selling one unit of the base currency.
For example, if you wanted to buy the EUR/USD a price quote of EUR/USD of 1.3550 means that 1 EURO dollar (EUR) is equal to 1.3550 US dollars (USD). This means that to buy 1 EURO dollar (EUR), you would have to pay 1.3550 US dollars (USD).
In the above case, if the currency pair’s prices rises (i.e. the EUR/USD price goes up) it would mean that the EURO dollar (EUR) has appreciated against the US dollar (USD) which has weakened. If the EUR/USD has now risen to 1.3850 from 1.3550 it will mean that the EURO dollar is stronger now compared to the US dollar (USD) as 1 EURO dollar can buy more US dollars (USD) than before.
Likewise if the EUR/USD has now dropped to 1.3350 from 1.3550 it will mean that the EURO dollar has become weaker relative to the US dollars as 1 EURO dollar now can only purchase lesser US dollars
To be continue… on Forex Options Trading – How To Read FOREX Price Quotes (Part 3 of 3)
I will like to offer you a Free “Getting Started Trading FOREX with Options” course when you subscribe to my newsletter on Non Direction Trading. You will get your instant access at http://www.NonDirectionTrading.com
From Timothy Stevens – The Forex Options Guy who provide valuable Forex Options Training at http://www.NonDirectionTrading.com
What Is Index Option Trading
Option trading is not restricted to individual stocks. The large commodity market is an option market that deals in all manner of commodities such as grain or cattle. There is also another type of investment known as index option trading.
An index is a listing of a number of different stocks that share something in common, and it represents the composite value of all of them. An example is the Dow Jones Industrial Average which represents the value of the 30 largest and most widely held industrial stocks on the New York Stock Exchange. The Standard and Poor’s 500 is another index that represents 500 different stocks. These two well known indices are used frequently to gauge the progress of the economy and the general health of the stock market. They are familiar to most people, even those with little or no interest in the market, as they are widely quoted on news broadcasts.
They represent just two of a large number. There are broad based ones that reflect a wide range of widely different stocks, and there are ones that are very specific to a certain group. As the Dow Jones tracks industrial stocks, another index called The Morgan Stanley Biotech Index tracks 36 different stocks of companies engaged in biotech research. An index can list companies with similar products, and even similar management styles. There are also a wide variety of foreign indices that reflect the composite value of foreign stocks.
An index may also be classified as to how it is weighted. Some regard every stock equally, and a price fluctuation in any stock in the index will have an impact of the index price no matter how large that individual stock’s share of the index might be. Other indices “weight” the index based on the size of the company. In other words, small companies that experience even a large price change will not have as much impact on the index as a small change in one of the largest companies.
Index option trading is popular in part because the risk is considered to be lower than with individual stock. This is partly because the index, representing a variety of stocks, is less likely to be subjected to the same adverse pressures that may cause an individual company to experience a very rapid decline in its value. The index is seen as much easier to subject to trend analysis, and this makes it a popular part of most Mutual Fund portfolios.
There is another classification of indices that might be of interest to investors with certain social and environmental sensitivities. They are known generally as Ethical Indices as list stocks that satisfy certain criteria in their business operation. An example of one such index is the Wilderhill Clean Energy Index. Sadly, in the current market there is no direct connection between environmental sensitivity and profit, but with an Ethical Index, you can at least feel good about yourself while you make money, or even feel somewhat good if your investment turns out the opposite way.
Among the Many Investment Opportunities that Exist, Option Trading Stands as Both One of the Most Exciting and Risky as well as One that Offers Some of the Best Chances for a Substantial Return. Learn Options Trading Basics, Strategies and Pricing here at http://www.option-trading-fortune.com
Options Trading – What Are the Advantages (or Disadvantages)?
You can find a lot of information about Trading Options if you simply Google one of any number of Options related terms. You can pull up sites providing anything from basic definitions to those claiming to make you rich in a very short period of time. Be very careful of those offering quick riches. Like they say, If it sounds too good to be true, it probably is. Sure, there are some who have the understanding that allows them to consistently invest their money through options strategies and realize nice returns within a relatively short time frame, but you must realize that they have been doing this long enough to know what they are doing. And if you ask them, they would tell you that they made plenty of losing trades when they first started learning the business. (Hopefully, they paper traded at first so they could learn with fake money.) I have known some who got interested in options trading and actually made winning trades right out of the gate. Of course, they immediately thought this was an easy way to make money and then put a large portion of their capital into the next trade — only to lose big. The moral of the story is; if you plan to pick your own trades, do your research and know what you are getting yourself into. Never assume you have the market figured out, it will humble you eventually.
So, what are the advantages or disadvantages of trading options? The advantage mentioned most often would probably be the way options allow you to leverage your money. For example, if you have $1,000 to invest and you want to buy some XYZ stock that is trading at $100 per share, you would be able to buy 10 shares. Or, you could take that same $1,000 and invest it in 5 options contracts, allowing you to control 500 shares instead of just 10. (Remember, with options, each contract controls 100 shares.) So, if you simply bought the 10 shares of stock, and the stock value increases by $1.00 per share, you gain a whole $10.00. But if you bought the 5 option contracts and the value increased by .20 cents, you would realize a gain of $100 (.20 x 500 shares).
Another advantage is their flexibility. By this I mean that you can make money in up (Bull), down (Bear) or sideways markets. Please realize that before you jump into trading options, you need to understand how options work and which strategies to use at the proper time. Without going into great depth here, just suffice it to say that if you expect the value of a stock to go up, you buy a Call Option. If you expect the value to drop, you buy a Put Option. Call and Put Options are the most basic types to be traded, and definitely carry risk. There are a multitude of different option strategies which can get very complicated, so remember the moral of the story — if you plan to pick your own trades, do your research and know what you are getting yourself into.
This article is not meant to encourage or discourage you to enter the world of options trading. More so, it is written to introduce you to some of its advantages while stressing the reality of its risks. If this avenue of investing interests you and you want to give it a try, we can offer you a place where an experienced trader is picking the trades. Year-to-date in 2008, we have better than a 100% portfolio gain with our investments. Please visit our site to read more about our services.
Disclaimer: Trading financial instruments of any kind including options, futures and securities have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the options, futures and stock markets. Don’t trade with money you can’t afford to lose. Nothing in this article should be construed as investment advice or recommendations. Past performance is of indicative of future results. Get the advice of a competent financial advisor prior to investing your money in any financial instrument.
Author: Scott McDaniel
Article Source: EzineArticles.com
Low-volume PCB maker
Using Options Trading
A contract to buy using options’ provides the buyer a right but not an obligation to either buy or sell a pre-specified quantity of a given asset. This is set at a specific price before hand on or before a predetermined date. Different than future trading, the options’ purchaser has no obligation to either buy or sell for the exercise price and will do so only if it is profitable. Should the option be allowed to lapse, the initial purchase price of the option or (option money) is all the purchaser loses.
The option’s specified exercise price, or (strike) is the predetermined price to which an asset could be bought or sold for, if the buyer of the option exercises his right on the option on or before its date of expiration. On options’ trading, the buyer’s price used to acquire rights of buying or selling the asset is called the premium. The obligation of the person to buy (put option) or sell (call option) the underlying asset should the buyer decide to make use of his position to exercise his option in the option seller (writer). Trading options in this manner make his profits limited to the premium he receives from the buyer.
The danger here is that potentially his losses can be unlimited. Fluctuations of the premium are in response to the current market value of the exercise (security) price, the period of time between the expiration and the strike, along with supply and demands in the market. The options’ holder is the one who can call or put the option. The potential for his profit is unlimited and he has limited risk of loss held to the premium he paid the writer of the option.
This is the very basics of using options trading. Be sure to continue your education.
Thanks for reading. If you found this article helpful you can get more information, options trading tips, and more articles on my website: www.LearningOptionsTrading.com
Be a Money Spinner with Call Option Trading
You could be a money spinner with call option trading. Several traders in the market try to make a difference by adopting complex call option techniques. However, at times when you look around for complex solutions, the solution may actually be one that is absolutely simple.
Similarly sometimes it is the simple or the basic call option trading that is just right for the prevailing market trends. The below mentioned guidelines would be of great help to make a good profit with call option trading:
The secret to success with call option lies with understanding the pulse of the market. You should be able to correctly understand and predict the direction in which the market would move. Call option trading is actually playing with the direction of the market although your money meter would start ticking only if the market moves upwards. It is being able to predict the movement of the market and capitalizing on the upward movement.
There are many key indicators that can be used to predict an upward movement like for instance the market news, fundamental information like a rise in the dividend of a company, charts and graphs like reverse head and shoulder, upside price breakout to name a few. Some traders use a combination of indicators to understand the market trends. You must be able to predict or estimate the target where the price movement is headed.
The time factor is another important element. You should be able to estimate the time when the upward movement would take place and how long will it take to reach your target price. Deciding your call option expiry would depend on these factors. Your broker can be of great help in providing information regarding the options chains and other market news.
You must be clear about details like which stock exchange you want to deal at. Being able to decide the expiration date is very important. For this you should be able to estimate the time in which your price movement would take place and by when would your target price be achieved.
Study the market scientifically. Make proper comparisons of the Delta, Gamma, Theta and Vega for different target prices in the same expiry.
Keeping a track of the open interest and also the volumes in the market is very important. Choosing the best call option is another important factor. You must be able to rightly estimate the exit point and also the stop loss. Looking at the market dispassionately and scientifically is essential.
Close the position on time keeping track of the market trends. For making a good profit it is very important to monitor the market on a regular basis and understand call option trading perfectly before making any deal. You must not be carried away by the sudden ups and downs and make impulsive decisions.
Learn Vertical Spreads and Time Decay and Volatility Trading Opportunities at options university course and software center.
Option Trading Tip – How to Leap Into Option Profits!
A LEAP (Long-term Equity Anticipation Product) is simply a long-dated option.
LEAP options that don’t expire upto 2 years into the future give the buyer much more time to be right about the future direction of a stock and at the same time offer tremedous leverage.
LEAP option trading has become quite popular in recent years because just like all options, LEAPs only cost a fraction of what it would cost to buy shares in the underlying stock itself, but give you the same amount of control.
As with all options though, time is the enemy (if you are a buyer) and over time options lose their value.
So how can we use LEAPS to speculate on the future direction of a stock (UP or DOWN) and at the same time reduce our risk of losing all our money on them?
Well let me share with you a couple of simple LEAP option trading strategies that have worked well for me over the years in both bull and bear markets…
TIP:
If you believe a stock will go UP over the next 1-2 years, then buy Call option LEAPs on it and at the same time sell the call options (at least one or two strike prices out of the money) that expire in the current month.
If you believe a stock will go DOWN over the next 1-2 years, then buy Put option LEAPs on it and at the same time sell the put options (at least one or two strike prices out of the money) that expire in the current month.
By doing this you will effectively be getting cash back on your investment every single month that you hold your LEAPs.
Over the long-term this will not only offset the time-decay of your LEAPs, but also offer you some downside protection, should the stock go in the opposite direction that you want it to.
This is known as a Calendar Spread and is a much more conservative way of speculating with LEAPs.
Important:
If the stock rises above your sold strike price for your current month Calls or below your sold strike price for your current month Puts, then you risk being assigned/exercised.
You should never allow this to occur because the moment you are assigned you will lose whatever time value is left on your LEAPs.
It is far better to close out the trade for a profit by buying back the sold option and selling your LEAPs for an overall profit or simply holding your LEAPs and then writing (out of the money) options against them for the next month.
James Thomas is a successful private option trader and creator of http://www.option-trading-tips.com – an informative resource full of useful option trading tips.
Option Trading for the Beginner
Any journey starts with a single first step. Everyone agrees that this is true, but what is the first step for the beginning option trader? The vast amount of information can appear to be overwhelming, and is full of terminology that might as well be ancient Greek for all the sense it makes. Everyone you meet, and every website you visit has some different advice. There are a few things to think about even before you ever make that first trade.
What are your Goals
It is important to have some idea of where you want to go before you begin. The field of Options trading is large, and there is a lot of variety in it. It is better to take a general look at the different types of investment opportunities available, and select the ones that interest you the most.
You are going to have to do a lot of research and a lot of study in order to be successful, and it is going to help if the topic is one that you find to be fascinating. Also, you need to have a good idea of how much time and effort you are willing to invest in your investment strategy.
Options are time critical investments, and if you are only planning to dabble a bit in the market, it would be better to either keep your Option portfolio very small, or even to seek a more long term and less interactive type of investment.
In For a Dollar or a Dime
One of the most important options trading terms a beginner needs to completely understand is risk capital. Most reputable brokers will advice you to invest in options with risk capital. Risk capital is that portion of your total investment capital that you can afford to lose. Long term bonds, savings accounts, mutual funds are the places for your retirement income, and your landlord’s checking account is the place for the rent money.
A beginning investor in the option market needs to know exactly how much he is willing to invest, and once this amount is established, he needs to stick with it. There are practical reasons for this. One of them will be investor’s personal financial security concerns. If you are overly worried about loss, you would not be able to make decision with a clear head and in a confident manner. Determine what amount you are going to invest, and set it aside, and stick with it.
Do you Speak the Language
Calls, puts, strike price, margin, leverage, long position, expiration date, bid, and ask are all Option related terms. If you are unsure of the meaning of any of them then you need to go to Option’s language school for awhile. Investing has its own unique terminology, and you can not afford to be confused.
Take the time to learn what everything means. It is going to be important to give yourself a bit of education in quite a few different areas of trading. You are not going to be able to evaluate Broker’s websites, or decide on a personal method of analysis until the basic framework is in place. And the basic framework is terminology.
Start in First Gear
You have to crawl before you can walk. Learning to invest your money in any market, and even more so the complex Option Trading market is not the kind of thing that is best served by jumping into the deep end of the pool right at the start. You are almost certainly going to drown. Experience is very important here, and experience is only gained by the actual doing. Start slowly and make a few small investments.
It is good to have a sample option trading strategy in place. It should be on a rather small scale involving only a small percentage of your available risk capital. Once you gain a little confidence, you can increase the amount of your investments. How long this takes is going to depend completely on you. Remember that there is no magic formula here.
The beginning investor should not be too nervous. There may be a lot to learn and it may seem a bit confusing, but it is learnable. In the end, it is going to be his own intelligence, and his own instincts that are going to determine his success or failure. Most people would ask for nothing else, but to have their financial fate in their own hands. Remember the words of a wise old investor who once said, “Every Option Trader was a beginner at one time, even if for some, it was only a few minutes.”
Among the Many Investment Opportunities that Exist, Option Trading Stands as Both One of the Most Exciting and Risky as well as One that Offers Some of the Best Chances for a Substantial Return. Learn Options Trading Basics, Strategies and Pricing here at http://www.Option-trading-fortune.com
Master Options With the Best Futures Trading Platform and Option Trading Software
Option trading software is essential to creating wealth using options. The options market is a futures market meaning you are trying to pick the direction stock prices will go in the future. You can predict both up and down price fluctuations. The time frame can be 1 day, week, month or even years. Your futures trading platform needs to provide you with the tools and charts to make profitable trading decisions.
You will also need to decide on the country you plan to trade in before finding a futures trading platform. Option trading software for the US market is easily found. I trade on the US market as it provides great liquidity, there are simply more choices but also the contract size is relatively small. In Australia for example each contract is for 1000 shares. However, in the US it is only 100 shares per contract. This is a distinct advantage as you will not require huge amounts of cash.
After deciding on your country of choice your option trading software will need to conduct some sort of scan to reduce the trading possibilities. Each day there are thousands of potential trades but your futures trading platform needs to reduce this according to the criteria you have provided. This can sometimes be difficult to find but it will save you hundreds if not thousands of hours of research every year.
Your futures trading platform will also need the ability to back test and test future strategies. If your Option Trading Software [http://www.freefinancialinfoguide.com/option-trading/option-trading-software.php] provider does not provide data for the last year on each stock you are trading you should consider its suitability or not. The amount of data you require will largely depend on the length of time you plan to trade. For example if you are trading for 2 week stints then 3-6months data is all you will need. If you are a day trader then you will probably only need the last 20 days. It depends on your situation and strategy.
There is a lot of money to be made on the options market. If you do not purchase the most suitable option trading software then you are already on the path to failure. However, by choosing the best futures trading platform you will be placing yourself on the right path to wealth creation.
Author: Darron Martin
Article Source: EzineArticles.com
Pressure cooker
A Fanciful Way Of Illustrating The Basic Principles Of Option Trading
Among the many investment opportunities that exist, option trading stands as both one of the most exciting and risky as well as one that offers some of the best chances for a substantial return. In order to understand option trading, consider first the word “option.” An option is a choice. When you deal in options, you are making a contract that gives you the right, but not the obligation, to purchase a block of stock at a given price at a future date.
Let’s consider an example that could help explain how the option market works. In place of a block of stock, we will use a painting that we discover in a dusty corner of a flea market. The painting has a price of $50, but we do not have that much money available, and will not have it until the end of the week. So, we purchase an option from the owner to buy the painting for $50 by Friday afternoon. We pay him $5 dollars for that option.
Before the week ends, it is discovered that the painting is actually the work of a well known local artist, and has a value of $500. Since we have the option to buy the painting for $50, we quickly exercise our option. When we turn around and sell the painting for $500, we have realized a profit of $445. This is $500 minus $50 for the cost of the painting minus the $5 we paid for the option contract.
There is another way this story can end. Let’s suppose that before the week ends, we learn that the painting is known to have a famous curse, and every owner for the last one hundred years has died a horrible death within a week of purchasing it. We do not have any obligation to buy it, and simply by not doing so, we exercise the negative aspect of our option. We do lose our $5 investment, but that is the limit of our loses.
This fanciful example illustrates the basic principles of option trading. It is quite a bit more complicated in many ways, but these basic principles remain the same. Options are known as derivatives because the value derives from something else. In our example, the value of the painting is what has the underlying value, and the value of the option depends on it.
It is important to understand that options can also be the right to sell at a certain price as well as buy. An option to buy is known as a call. An option to sell is known as a put. Other useful terminology used in Option trading is the strike price. The strike price is the price that has to be reached before a call option can show a profit. In our painting example, the strike price would be $50.
There is much more that must be learned about option trading. It is in many ways an extremely risky investment. It is usually thought to be the kind of investment that is best suited for risk capital. Risk capital is exactly what it sound like, the money that you can afford to lose. With that thought firmly in your mind, you can investigate options in more depth, and you might find that the old adage of investing holds true. In order to really make a good profit, you need to be willing to take some risk. The more you understand about this fascinating investment, the less that risk will be.
Learn Options Trading Strategies, Basics and Pricing here at http://www.Option-trading-fortune.com
Some Fundamentals of Option Trading
Option trading is an ever increasingly popular form of investment. The wide spread use of online option trading has led to many newcomers to these risky, but potentially profitable opportunities. The following is a review of some of the fundamentals of Option Trading.
The Future
Options trading is sometimes known as “future trading”. In the commodity market, for example, options are commonly called futures. This points up one of the basic fundamentals of the market. You are making an investment now, based on what you think will happen in the future. Furthermore, you are making a contract to perform an act such as buying or selling at a future date. When you make an options contract to buy stock, remember, you are not buying, or paying for the stock, you are merely buying and paying for the contract to buy or sell it at a later date.
An Option is a Choice
The name option comes from the concept that your contract is buying the RIGHT, but not the OBLIGATION, to buy or sell stock at a future date. You pay for that right, but you can exercise your option or choice, by deciding not to buy or sell the stock before the future date arrives. This future date is known as the expiration date, and it means just that. Your choice expires on that date, and you have to exercise it then if you have not done so before it arrives.
What Goes Up Can Also Come Down
There are two kinds of options contracts. One is to buy stock, called a call, and the other is to sell stock, called a put. In each case, you are making a decision and picking a certain price. This price is known as the strike price. Your decision is basically this. In a call contract, you are expecting that the price will rise higher than the strike price by the expiration date. If you are right, you get to buy the stock at a price less than it is really valued at, and this difference is your profit.
In a put contract, you are expecting that the stock will drop in price more than the strike price by the expiration date. If you are right again, you get to sell it for a price higher than it is really worth, and again the difference represents your profit. The stock can go either way and the thing to remember here is that you make a call contract, or a put contract based on which way you expect it to go.
Options are not Death or Taxes
Death and Taxes are reputed to be the only “sure things”, and options certainly have no argument with that. There is risk here and uncertainty. The stock you think is going to go up, may go way down. You then have made a contract to buy the stock at a price a lot higher than the actual price.
Imagine you make a contract with Wal-Mart to buy a new pair of jeans for $20 dollars, and give them five dollars to reserve the right to do so in two months. When the two months is up, Wal-Mart is running a sale on your jeans for only $10 dollars a pair. You paid $5 for the right to buy them at double the price. This example illustrates the risk, but also the advantage of options. You are not obligated to buy the jeans, and can refuse to exercise the option. In this case, you lose the $5 dollars, of course, but still can buy the jeans at $10, which even when you add in the lost $5 still is less than $20.
There is still risk, but having an option can reduce it somewhat. Just make sure you understand that they are not a “get rich quick sure fire scam”, but a legitimate investment opportunity that shares the common features of all investment opportunities. This can be expressed as “The greater the risk, the greater the potential for profit.”
These are just some of the fundamentals of option trading. It is a very diverse and interesting field, but the facts are out there, and you are not required to be a stock broker or financial professional to take advantage of this market. It is open to all.
Among the Many Investment Opportunities that Exist, Option Trading Stands as Both One of the Most Exciting and Risky as well as One that Offers Some of the Best Chances for a Substantial Return. Learn Options Trading Basics, Strategies and Pricing here at http://www.option-trading-fortune.com

