Options Trading FAQs

Options trading involves, buying securities such as currencies at a particular time, with a hope to resell it later at a higher price. The profits or losses incurred are determined, by these price changes that are in relation to the price fixed, at the beginning of the contract. Options trading generally deals with trading treasury bonds, stock indexes and foreign currencies. Speculation in options trading is on the rise with the availability of technology and services.

As the options market is very volatile, traders prefer to opt for a fully managed account with the brokers. The most frequently asked questions (FAQs) are, what are the types of options trading products, how can people begin trading, and where can they find help regarding their trading strategies.

Standard options contracts that are traded over-the-counter and are generally referred to as plain vanilla forex option products. They have very good liquidity for major currencies. The brokers who offer this product are known as plain vanilla forex option brokers. However, many option brokers offer plain vanilla forex option only over the phone and not online.

Another type of options trading is exotic option trading. They are termed as exotic as these options usually deal with currencies that are not traded too often. These products are also known as non-vanilla, and their structure may be quite different from the standard option. These exotic options do not offer much liquidity and are generally designed to suit individual needs.

Options brokers offer the investors a quick and inexpensive way, to trade from the comfort of their homes or offices, day and night. For beginners, many online websites of these brokers offer, demo or trial accounts that help the investors, practice their trading skills. These accounts also help increase the understanding of the functioning of the real time trading market.

There are many different options trading products available. It is very important to understand all the risk factors, associated with all of them before choosing a suitable one. Options brokers help the investor select the product that will give them best returns.

Options Trading provides detailed information on Options Trading, Stock Options Trading, Futures Options Trading, Options Trading Software and more. Options Trading is affiliated with Options Trading.

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Japanese Candlesticks Are Calling For a Bounce in Index Prices

The Dow Industrials Index has been in a fairly steady slide since it made a double top in May.

The Dow has already spiked down beneath its March low, which may turn out to be an important waypoint. The S&P 500 has tagged along in quite the same overall pattern. The declines in the NASDAQs, the S&P 600 SmallCaps, and the Russell 2000 have been more chaotic. All of them are at or near lows of about two months ago.

The patterns that we are seeing today in the Candlesticks and in the various Indicators for the Dow Industrials and for the S&P 500 suggest "indecision" and the possibility of a trend reversal.

The price patterns in the NASDAQs, the S&P 600, and the Russell 2000 are much more persistently downbeat. They are "leading the pack," as they often are wont to do.

No Candlestick pattern, or Indicator, or group of Indicators, is foolproof. However, based on the historical record we know that certain patterns are generally reliable in their prediction of the direction of price trend. We could be fooled this time, just as we have been fooled before; but the patterns are so clear and so prevalent across several Indexes that the odds seem to say that prices will bounce from approximately this point, or from moderately lower levels.

If they do rise, how far are they likely to go? Again, on the basis of historical precedent prices may be expected to retrace between 38% and 62% of the previous major decline. If history holds true this time, we might expect to see the Dow top out at between 12,270 and 12,600. The strength of the decline since last October may rule out anything much more than a very modest bounce. Likewise, the "drag effect" of the NASDAQs, the S&P 600, and the Russell 2000 may put an early stop to any rise in the Industrials and in the S&P 600.

Today is the first day of the two-day meeting of the Fed's Open Market Committee. We expect to hear the result of its deliberations tomorrow afternoon. Any spark of good news might tend to set the market off in an upward direction. There is ample speculation in the marketplace about the likely course of interest rates. The Fed is caught between a desire (on the one hand) to increase interest rates in an effort to tamp down inflation, and (on the other) to lower them as an attempt to light a fire under the housing market. Unfortunately, there is a degree of mutual exclusivity there; the Fed (and the country) cannot have it both ways.

Regardless of the outcome of the meeting, it does appear that the odds are increasing in favor of the proposition that we can reasonably expect to see a bounce in Index prices quite soon. We shall see.

William Kurtz June 24, 2008 http://www.candlewave.com/

The author is an experienced investor; a retired attorney and corporate CEO; has passed the NASD Series 65 Investment Adviser exam; and is the creator of the "Candelaabra" technical analysis system for use in all financial markets. He publishes free investment advisories three times per week at http://www.candlewave.com/ Come look! The latest issue is ready and waiting for you.

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Options Trading

An option is a contract that gives the buyer the right (but not the obligation) to buy or sell a specified quantity of a given asset, at a specific price, on or before a specified time. Unlike futures trading, the purchaser of an option is not obligated to buy or sell at the exercise price, and will only do so if it is profitable; if the option is allowed to lapse, the purchaser loses only the initial purchase price of the option (the option money).

The strike, or exercise price, of an option is the specified, pre-determined price at which an asset can be bought or sold if the option buyer exercises his right to do so on or before the expiration day. The price paid by the buyer to acquire the right to buy or sell is known as a premium.

The one who is obligated to buy (in case of a put option) or to sell (in case of a call option) the underlying asset in case the buyer decides to exercise his option is known as the option seller, or writer. His profits are limited to the premium received from the buyer, while his potential losses are unlimited. The premium fluctuates in response to the current market value of the security or exercise price, the time period between the strike and the expiry date, and the supply and demand in the market. The one who buys an option, which can be a call or a put option, is known as the option holder. His profit potential is unlimited, while losses are limited to the premium paid by him to the option writer.

Options Trading provides detailed information on Options Trading, Stock Options Trading, Futures Options Trading, Options Trading Software and more. Options Trading is affiliated with Options Trading.

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