Option Strangle Magic » Free Stock Picks

Could You Be the World’s Greatest Stock Trader?

admin — Mon, 25 Jan 2010 22:16:07 +0000

Maybe you would like to be a stock trader, but you’ve always been scared to give it a try. After all, laying your hard-earned money on the line is a frightening proposition, especially if you have no experience as a trader.

But how can you possibly get experience as a stock trader without first becoming a trader? It’s a Catch-22 – or is it?

Paper Trading – Be a Risk-Free Stock Trader

A great way to get started as a trader is through paper trading. Paper trading, despite the fancy name, is really just “imaginary” trading. You become a stock trader on paper only, with no money on the line.

Here’s how you do it: First, buy a journal. You’ll record your trades in it. Next, determine how much of a “fantasy” budget you’ll give yourself as a paper trader.

If you want to become a stock trader for real, you should probably give yourself a realistic spending limit – whatever you might be able to start your real career as a trader with.

Then, each day you should record your trades in the journal, with the date and time of the trade at the stock’s real price – no cheating!

Do You Know Another Wannabe Stock Trader? – Get Your Friend Involved

The best thing you can do to keep yourself honest as a paper trader is to enlist the help of a friend. Instead of using a journal from the office supply store, create an online journal.

This can be your very own stock trader blog, or perhaps just a simple, free message board. No matter what format you use, make sure that your posts are time-stamped. Then, enter your buys and sells on the message board, so that the real time is displayed.

You’ll stay honest because your friend could go on Yahoo! Finance and find out what the real price of the stock was at any given minute.

Don’t Limit Yourself to Buying and Selling – Use Advanced Strategies Too

Another great thing about being a paper trader is that it allows you to try out advanced strategies. Have you ever wondered how options work? You can give them a try. How about shorting stock?

Record a short on your stock trader blog and then reap the imaginary rewards as the stock goes down, instead of up.

You can even do things like trade foreign currencies, buy and sell commodity contracts, and get involved in futures – the possibilities are limitless! Just make sure that you keep yourself honest.

Otherwise, you aren’t doing yourself any good, and when you finally graduate to being a real trader, you could lose your shirt.

You Can Be The World’s Greatest Stock Trader – But It Will Take Work

Paper trading is a great way to learn about the market, and it’s a ton of fun too. Other opportunities to test your trading skills are always popping up – CNBC regularly runs “fantasy portfolio” contests that work sort of like fantasy football or baseball. Last year, they even gave away a brand new sports car to the winner!

But to be a truly great trader, you’re going to have to put in some serious work too. You need to read some of the classic investment books, such as How To Make Money in Stocks by William J. O’Neil, and Reminisces of a Stock Operator by Jesse Livermore.

You should probably start watching CNBC on a daily basis and subscribe to a couple of magazines like Forbes, Fortune, and SmartMoney. If you really want to be a full-time investor, you’ll have to first invest in a subscription to The Wall Street Journal, or better yet, Investor’s Business Daily.

Being the world’s greatest trader will take a lot of work, but even if you fall short and you’re only the 500th greatest stock trader in the world, you’ll still be rich beyond your wildest dreams!

Online Brokerage – There Are More Options Out There Than You Think!

admin — Wed, 13 Jan 2010 21:01:44 +0000

Everybody knows the big online brokerages – Ameritrade, E-Trade, Charles Schwab, and Fidelity. Those in the know are familiar with the hot new online brokerage, OptionsXpress. And of course, there are the super-low cost online brokerages like FirstTrade, ScottTrade, and Sharebuilder.

But were you aware that there were many more online brokerages, and that some of them rated higher than their more famous counterparts in a recent study?

Online Brokerages – Some You Might Have Missed

One online brokerage you’re probably not familiar with is thinkorswim Webtrader. Despite it’s funny name, thinkorswim is an online brokerage that delivers serious service, or at least, that’s what Barron’s says.

Thinkorswim’s Webtrader platform ranked second, only to OptionsXpress, among the 14 most popular online brokerages in Barron’s most recent annual survey.

Another online brokerage you might not know is Muriel Siebert & Co. Muriel Siebert, the person, was one of the first women to become a big-time broker on Wall Street, and instead of retiring, she went on to found her own online brokerage.

Muriel Siebert & Co. ranked the highest of all 14 online brokerages in customer portfolio analysis and reports. This means that the company does a great job providing well-laid-out reports, updated in real-time, showing you your current balances and positions – definitely something to think about when selecting an online brokerage.

You know Ameritrade, but have you heard of Ameritrade Apex? It’s a special brokerage for premium accounts. E-Trade also has a premium brokerage called E-Trade Serious Investor.

Some of the lesser known online brokerages that you would be better off to avoid include Wall Street Electronics and Trade King. Each of these unknowns ranked in the bottom half of Barron’s survey.

Beyond the Web Browser

Serious, full-time traders tend to prefer software platforms over the more basic web-browser-based ones. With a software-based online brokerage, you install a program on your computer that has enhanced features and connectivity to the internet. Typically, these programs have a lot of charting capabilities that the browser-based online brokerages do not.

In Barron’s most recent annual survey, there was a tie for first-place among the software-based online brokerages. MB Trading and thinkorswim each scored 36.2 out of a possible 50.

MB trading was strongest in trade technology (advanced order routing strategies for big volume traders), trade execution (finding the best bid and ask prices), and costs. Thinkorswim fared best in research, customer portfolio analysis and reports, and customer service.

Other software-based online brokerages include TradeStation, Interactive Brokers, Terra Nova Trading, RushTrade, and ChoiceTrade. Some of the ones you might want to avoid are Fidelity Active Trader, Preferred Trade, CyberTrader, and E-Trade Power.

The worst of the bunch are ScottTrade Elite and AB Watley, which were particularly bad in trade technology and customer service, respectively.

Don’t Forget About OptionsXpress

OptionsXpress has been making a lot of noise lately, but it still isn’t nearly as well-known as Ameritrade and E-Trade. For that reason, it’s probably prudent to take a closer look.

In 2006, OptionsXpress was recognized by Barron’s as the top browser-based online brokerage – for the fourth consecutive year. It rated a 4.7 in trade execution, 4.1 in usability, 4.3 in offerings (stocks, options, mutual funds, etc.), 4.8 in research, 4.7 in customer portfolio analysis and reports, 4.4 in customer service, and 4.0 in costs.

The only category in which OptionsXpress didn’t do well was trade technology (3.8).

Although OptionsXpress charges $13.95 per trade, versus $7-10 with other online brokerages, you get what you pay for. Amertirade, for example, charges an additional $9.95 per month for real-time streaming quotes.

OptionsXpress gives you the quotes for free. It can be amazingly frustrating to try to buy a stock on Ameritrade and not even know what the stock is selling for at that very moment.

The good news is that you’re not limited to using one online brokerage. Most allow you to open an account with as little as $1,000 (or less). There are no fees associated with opening an account, checking it out, and then switching if you’re not satisfied.

So with that in mind, don’t limit your choices – go out there and find the online brokerage that’s right for you!

So You Think You Know Option Trading?

admin — Fri, 18 Dec 2009 10:54:38 +0000

We all know that many opportunities exist in Option Trading today. Wherever you turn, someone is waiting to inform you of the tremendous profits to be realized within the stock and the futures markets. Nevertheless, many people are unaware of the derivative trading possibilities that are available within and across several different markets.
Option Trading is just one of the leading many ways to participate in such type of secondary markets. And in contrast to the popular belief, this potential trading arena is not limited strictly to the practice of selling or writing options.
Option Trading is an important element of investing in markets, serving a function of managing risk and generating income too.
Contrasting to most other types of investments today, Option Trading provides a unique set of benefits to its clients. Not only does Option Trading provide an economical and effective means of hedging one’s portfolio against adverse and unexpected price fluctuations, but it also offers a tremendous exploratory dimension to trading.
One of the foremost primary conveniences of Option Trading is that an option contracts enable a trade to be leveraged, allowing the trader to control the full value of an asset for a fraction of the actual cost.
Then since an option’s price mirrors that of the underlying asset at the very least, any constructive return element within the asset will be met with a greater percentage return resource within the option provides limited risk and unlimited reward.
With Option Trading the buyer can only lose what was paid for the option contract, and not a penny more, which is a fraction of what the actual cost of the asset would be. However, the profit potential is unlimited because in Option Trading the option holder possesses a contract that performs in sync with the asset itself.
If the outlook turns out to be positive for the security, so too will the outlook be for that asset’s underlying options. Option Trading also provides their owners with numerous trading alternatives. Option Trading can be customized and combined with other options and even other investments to gain the benefits of any possible price dislocation within the market.
Option Trading enables the trader or investor to acquire a position that is pertinent for any sort of market outlook that he or she can have, and then be it bullish, bearish, choppy, or silent. It doesn’t matter at all.
Risks Involved In Option Trading
While there is no disputing that Option Trading offers many investment benefits, it also involves risk and is not for everyone. For the same reason that one’s returns can be large, so too can the losses.
Also, while the potential for financial success does exist in Option Trading, the means of realizing such opportunities are often difficult to create and to identify. With dozens of variables, several pricing models, and hundreds of different strategies to choose from, it is no wonder that Option Trading and its pricing have been a mystery to the majority of the trading public.
Quite often, in Option Trading a wonderful deal of information must be processed before a knowledgeable trading decision can be reached. Computers and sophisticated trading models are often relied upon to select trading candidates.
However, as humans, we like things to be as simple as possible in Option Trading. This often creates a conflict when deciding what, when, and how to trade a particular investment. It is much more easier to buy or sell an asset outright than to challenge with the many extraneous factors of these derivative markets.
If an investor thinks an asset’s value will appreciate, he or she can simply buy the security; but if an investor thinks an asset’s value will depreciate, he or she can simply sell the security. In such scenarios, the only thing an investor must worry about is the value of the investment relative to the value of the prevailing market. If only Option Trading were that easy!
Generally, Option Trading is more awkward and complicated than stock trading because here the traders must consider many variables aside from the direction they believe the market will move.
The effects of the passage of time, variables and delta, and the underlying market volatility on the splendid price of the Option Trading are just some of the many items that traders need to gauge in order to make informed decisions. If one is not prudent in one’s investment decisions, one could potentially lose an enormous number of money trading options.
Those who actually ignore cautious and sound money management techniques often find out the hard way that these factors can promptly and easily grind down the value of their Option Trading portfolios.
Due to the risks and benefits, Option Trading offers tremendous profit potential above and beyond trading in any other device, including the underlying security itself. This is the moment at which theoreticians enter the picture. Once the benefits have been defined, it is then just a matter of determining how to matchlessly attain them.
Up till now, the vast majority of Option Trading techniques have been elaborate mathematical models designed to help identify when option writing or selling opportunities exist.
On the other hand, we hope to break used ground by introducing simple market-timing techniques to Option Trading that will enable the traders to buy options with greater confidence and with greater success in Option Trading.