What Are Binary Options?
Binary options or digital options are a simple way for a trader to track price rise and fall in the international market. Although this type of options trading is relatively less complicated than other trading methods, the trader still needs to understand the rewards as well as risks before getting into it and using up his financial reserves.
The Very Basics of E-Mini Futures Trading for the Very Beginners
Day trading e-mini futures markets can be a lucrative home business available practically to everyone who can afford $5000 or so to launch it. How to start it if you are a total trading newbie? That’s what this article is about.
The Complete Guide to Using Tick Charts
While most traders are accustomed to looking at time based charts, there is another option, the tick chart. This way of looking at the markets is incredibly effective for day traders.
Ground Rules for Speculators Using Hedging Techniques As a Risk Management Strategy
While hedging techniques are great, there are no guarantees when it comes to trading. These techniques are designed to help minimize your losses. At the same time, you must have realistic expectations of what they can do for you.
Who Is Called a Speculator?
One definition of a speculator is someone who wants to profit from the price discrepancy between hedgers. Speculators fall into two categories: large speculators and small speculators.
Analyzing Your Opponents and the Market
Futures predate stocks by several thousand years. One of the earliest recognized futures transactions was the Chinese rice futures of 6,000 years ago. In the seventeenth century, Japan instituted the first organized rice futures exchange. Japanese merchants would store rice in warehouses for future use. Warehouse holders would in turn sell receipts against the stored rice.
Convert a Collar Trade Into Ratio Backspread
There are three potential scenarios for the collar position here: We can hold it until expiration, we can walk away from the trade once our target price has been hit, or we can convert it. In the preceding example we converted the collar trade into a bull call spread. In this example we will convert the collar into a ratio spread, also known as a call backspread.
Spread Trading: Great Opportunities For Traders
If it can be said that one concept that has influenced every seasoned trader’s idea of what risk management can be like, that concept would be spread trading. The idea of seasonal spread trading has been around since the inception of the commodities exchanges in the United States. Based on the dual impact of storage and planting, seasonal spread trading has greatly influenced the way all types of traders, retail and commercial, interact with various commodities.
Preparing to Speculate
There are a great number of speculators turned traders. They purchase courses and attend seminars, and they all maintain fantasies of becoming the next George Soros or the next “oracle of Omaha,” Warren Buffett. While these dreams are important to have, they also become an impediment to traders forming their own opinion and view of the markets. It also lays the foundation for reckless behavior and inability to grind it out.
Replacing Traditional Options With Synthetic Options
Option trading can be very liberating for individual traders. Options offer traders the opportunity to have unlimited profit potential with limited risk. No matter who you are, small trader or money manager, if you can limit your risk up front it becomes more comfortable to take the risk. Options have the ability to provide a high level of comfort. There is simply no misunderstanding what you are getting into when you purchase an option. If you invest $400 to purchase a call or a put, your risk is limited to the $400-no more than that, but possibly less if you sell the option early. This is not the case when it comes to all investment products.
Collar at the Inception of a Trade
The collar requires three components: the initial trade, long or short; an out-of-the-money option that is purchased to lock in profits, either a call or a put; and an out-of-the-money option (which sits ahead of your initial trade) that you sell. For instance, if you have a long collar trade on the euro, you purchase a put at support, go long the market, and sell a call at some point of resistance.
Using Options As a Secondary Stop Loss
The second way to use a protective option is in conjunction with a stop. The closer an option is to its underlying asset, the more expensive it will be. It stands to reason that an option placed at a 2 percent loss threshold will be more expensive than an option placed at a 10 percent loss threshold. Whether because of account size, number of contracts placed on the trade, feeling a premium is too expensive, or simply looking for a way to stagger your trades, having a stop loss order in the first position and a protective option as a secondary stop loss can be an advantage.