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Get this 49 page Quantum Swing Trading Report FREE. This shocking report shows you how to pick stocks in just 20 minutes every night for swing trading. Discover Forex Magic Bullet! Give 14 days RISK FREE trial to the Options University Trade Alert Service! This Options Trade Alert Service is being managed by Greg Loehr, who has the expereince of managing $100M options portfolios. In the last decade, options trading is become popular among the general investing public. Options is a derivative contract that gives you the right but not the obligation to buy the underlying asset at a fixed price till a certain date.
Options contracts are now available on most of the stocks, commodities, currencies and other assets. You can even trade options on futures contracts. Now, most of the people trade stock options. When you trade stock options, you need to know a few dates that are popularly known as the Witching Dates.
All stock options contracts expire on the third Friday of each month. Options on futures expire on different dates depending on the contract. Sometimes, different classes of options expire on the same date. These dates are known as the Double, Triple and Quadruple Witching Dates.
Double Witching Days are those when any two of the different classes of options contracts like the stock options, stock index options or the stock index futures options expire. Triple Witching Days is when these three classes expire on the same date. This date is the third Friday in the last month of each quarter. Quadruple Witching Days are those when these three classes of options contracts expire along with the individual stock futures options.
There is a difference between trading a stock options contract and the stock futures options contract. When trading the stock futures options contract, you need to know how to trade options in general coupled with the intricacies of trading that particular futures contract. A good example can be that of the S&P 500 futures options. This options contract is written on the S&P 500 stock index futures contract. Now, when you trade, the S&P 500 stock index futures, the value of the contract is obtained by multiplying the S&P 500 index value with $250. So, if the value of S&P 500 stock index is at 1,000 points, the value of the S&P 500 stock index futures contract will be $250,000.
Now, suppose S&P 500 stock index only rose 5 points in the day. So, you will be making ($250)(5)= $1250 in a single day. Not a bad amount. But the margin requirements for S&P 500 futures are high for most of the retail traders so they trade the E-Mini version of S&P 500 futures that has a value of only $25 multiplied by the stock index value. You need to know all these facts when you are thinking about trading S&P 500 futures options.
Tags: options, options on futures, options strategy, options trading, options trading witching dates
Posted in Stocks · April 4th, 2010 · Comments (0)
Using a mechanical trading system not only helps traders to make decisions and increase profits but it also provides great psychological comfort to the traders. At one point in your trading career that might come soon rather than later, you would want to switch over to a mechanical trading system.
You will realize the necessity of switching over to the systems trade in order to lower the psychological pressure experienced when making every market transaction. You will find most of the trader using a trading system approach to trading. Some of them may use a discrete trading system while others prefer a mechanical trading system.
The mechanical trading system lacks fundamental analysis capacity. However, the mechanical trading system set of rules may be translated into a computer program for automated trading.
The trading system then generates trading signals that can be used by traders having access to the trading system. The creator of such a mechanical trading system then becomes just another user of the trading system monitoring the computer generated signals.
These trading systems may be taken as grey and black boxes. Their prices might vary from a few hundred dollars to hundred of thousands of dollars. Many traders over their trading careers develop their own trading systems. Besides the traders using their own trading systems, there are now many actively developed trading systems for sale as computer programs.
The most significant thing about these programs is that the traders should be able to accomplish transactions in accordance with the signals generated by the trading system. Sometimes theses trading systems are developed for big banks and corporations.
Majority of the successful individual traders use self developed mechanical trading systems. However, it is very difficult for a mechanical trading system to cope with different market conditions.
Change of market behavior leads to negative results from a previously effective trading system which obviously would require replacement. For example, many trading systems that are satisfactory in trending conditions become highly ineffective in nontrending environment. How do you deal with the challenge of changing market situations? This is the most serious challenge that automated forex trading has to solve. One way is to use a diversified forex trading system.
Many trading systems now depend on complex mathematical formula which is not understandable by the trader if the trader is not the author of the trading system. The most common disadvantage of these trading systems is the negative balance between he profitable and unprofitable trades.
In other words, the average profit of each profitable transaction is greater than the average loss of each unprofitable transaction. Obviously the trading system can only be profitable in the long run if the ratio of the profitable trades is higher than the non-profitable trades.
Making correction in any mechanical trading system in the process of the trade is almost impossible. The trader must accurately and unconditionally follow the trading system without making any attempt to adjust it to the market conditions.
Mr. Ahmad Hassam is a Harvard University Graduate. Discover a Revolutionary Forex Robot Trading System. Read about a Forex Trading System with an ROI of 3000% per month. You can get a unique content version of this article from the Uber Article Directory.
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Posted in Stocks · November 17th, 2009 · Comments (0)