"THE MARKET... consists of tough men and women who look for ways to take money away from you instead of pouring milk into your mouth." - Alexander Elder

Sunday, January 13, 2008

Back to school?

You CAN learn about options. Whether or not you can make any money...
Anyway, check out
OIC. They have lots of free podcasts, webcasts and do not
make their money scamming you, (they leave that to others).
Their institutional section has info on the
VIX, or "investor fear guage".

see also: Options Bonanza

1 comment:

pupkinus said...

from what I've read OIC is definetely a good educator.

Options can be used as hedges.
For instance, imagine you go long SMTH at $100 (i.e. - "something", it doesn't really matter what - stock, futures, spot fx) if you want some protection to the downside you can buy a put option, say at $5 premium with the strike of $90. If the hedge ratio is 1:1 than if SMTH goes below 85 (90-5) - you can exercise the put and your losses will be capped at $15 (100-85) per one unit of SMTH.
A lot depends on the volatility of the uderlying, your agressiveness etc.
I do not use options for hedging purposes, I sometimes use them as speculation tools.
Anyway, from my point of view it is worth spending some time understanding this stuff. I highly recommend any book of Mr.McMillan (e.g. "Options as a strategic investment") as a guide.

best regards,

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What is a Bucket Shop?

"Bucket Shop is a specifically defined term under the criminal law of many states in the United States which make it a crime to operate a bucket shop. [2] Typically the criminal law definition refers to an operation in which the customer is sold what is supposed to be a derivative interest in a security or commodity future, but there is no transaction made on any exchange. The transaction goes 'in the bucket' and is never executed. Without an actual underlying transaction, the customer is betting against the bucket shop operator, not participating in the market."
see: Wikipedia

The SEC believes that "internalization" is somehow different, and this affects ALL of your online trading, no matter what you are trading. Trades that are executed outside of the exchange, never reaching the main market, effectively hide data from technical analysis, and skew pricing.
see: Not a bucket?

"... internalization hurts retail customers and market quality"

see: EconPapers

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