In stock market, option is a contract between the buyer and seller of the stock. This contract contains the agreement about the right of the buyer and the obligation of the seller. The buyer right is that he/she has the right to buy the stock at the price that had been agreed by the seller. The seller obligation is that he/she has to sell the stock to the buyer at the price that had been agreed by the buyer. Option in stock market is just a contract between stock buyer and seller about the transaction stock price within a specified period of time. Option can be used to hedge portfolio or protect position just like how the insurance does to the property. Option can be used to protect your money that has been invested in the stock market. Besides stock protection, by utilizing option, we can carry out arbitrage strategy, which can earn profit no matter the stock price is going up, down or side way. Arbitrage strategy is a risk-free strategy and it can let you earn profit without incur any loss.

Conversion is one of the arbitrage types option trading strategy. This strategy involves buying stock, selling call option and buying put option. These three steps are carried out simultaneously. Call and put option strike price has to be the same and the amount of the money that has been received from selling call option must be enough to buy the put option. So, in this strategy, it seem like you just buy a stock only because the amount money that has received after selling call option is more than enough to buy the put option and usually, it has extra more remaining after selling call option and buying put option. The requirement for this strategy is that the difference between call option bid price and put option ask price has to be less than the difference between current stock ask price and the option strike price. The equation that represents the requirement is as follow:

call option bid price - put option ask price > current stock ask price – option strike price

There are three ways for us to place order for this strategy. We can use collar strategy, covered call strategy by triggering one put option and combo strategy by triggering one stock. All the orders must be placed using limit. After executing this option trading strategy, what we need to do is just left these positions until expiration date. You can close all these three positions one or two days before the expiration date of the option by buying and selling to close or exercising the options.

As an example, we sell CAT company 60 may call option at USD 4.90 and we buy 60 may put option at USD 3.10 and also buy the CAT company stock at USD 61.35. The difference between the call and put option price is 4.90 – 3.10 = 1.80. The difference between the stock price and the option strike price is 61.35 – 60 = 1.35. So, the difference between the call and put option price is more than the difference between the stock price and the option strike price. The net of both differences is our profit that is 1.80 - 1.35 = 0.45. If we buy one contract, our profit is 0.45 x 100 unit = USD 45. However, the commission of the transactions for this strategy is usually USD 90, depending to which broker firm service we are using. So, we need to buy at least three contracts in order that we can earn a profit.

So, how actually this strategy works? When we buy put option, we actually protect the stock that we have bought. The purpose of selling call option is to generate money to buy put option. Seem like after selling call option and buying put option, it has extra money in the account. But, actually, we still need an amount of deposit to execute this strategy. So, after executing this strategy, if the stock price drops, we have put option protecting our stock. If the stock price really has dropped on the expiration date, we can sell or exercise the put option to recover all the loss from buying stock. If the stock price has gone up on the expiration date, we just leave both call and put option expire worthless. However, because we sell call option at 60 strike price, the buyer of the 60 may call option will come to us and ask for a stock at USD 60, even though current stock price is higher than this price. Because we sell call option at 60 strike price, we have the obligation to sell the stock to this buyer at USD 60. If we do not own any stock, we have to buy stock from the market at higher price and then sell it to the 60 may option buyer. This will cause us lost money. However, don’t worry, because we own stock, so what we need to do is that we just sell the stock at USD 60 to the 60 call option buyer. Even though the current stock price is higher, we do not lose anything from this strategy. Moreover, we still earn a small amount of profit. Why this can happen is due to the discrepancy of the stock and option price. This is because stock and option price are affected by their own supply and demand. That means the stock may have more demand but its option may have less demand.

The advantage of this option and stock trading strategy is that it is totally risk free. No matter how the stock price changes, the profit is fixed. It won’t go away. The second advantage of this strategy is that it can be multiplied by buying more contracts. If we accidentally see a penny on the road side, that all we have if we pick it up and keep it. But in stock market, when we see this discrepancy, we can multiply this small amount by buying more unit of stock. However, there are actually got a lot of disadvantages in this strategy. The first disadvantage is that the profit is very little, usually 10 to 50 cent per unit option. The second disadvantage is that only high-price stocks have this opportunity. The third disadvantage is that the commission to execute this strategy is high, usually is USD 90 for the whole transaction. However, this disadvantage can be overcome by using the broker firm that charges less commission. The fourth disadvantage is that huge capital is needed to execute this strategy. This is because a few contracts of high-price stock have to be bought in this strategy.

Alexander Chong
http://www.articlesbase.com/investing-articles/free-money-in-stock-market-conversion-85664.html

Knowing the current support and resistance is easier, but I have no idea how to predict the next support and resistance once the stock breaks from its resistance or support. I’ve learned some of the indicators like MACD, Bollinger Band, RSI, and etc and I have no problem understanding those. But I still don’t know how to predict the new support and resistance.

So, how do I predict the new support and resistance of a stock? It’d be nice if I can do it myself instead of waiting for analysts to do it for me. If anyone can provide me with tutorial links or some tips that would be great.

Look at the chart. The most recent peak in the stock that is above the current price is resistance. The most recent bottom of a dip that is below the current price is the support.

Stock market investment is a risky stance, but it should not stop any aspiring investor from taking the first step. The choice to make the stock market endeavor succeed lies upon the investor.

1. Knowledge

A wise investor would only delve into stock market investment upon being apprised with the necessary and crucial information. It is a must to invest on companies only upon learning everything about it, from its past records, current performance and future plans.

Stock market investment advice should be sought considering the difficulty of locating that right stock that will give big returns. The investor must fully know the fundamental value of the stock he or she will buy.

Invest in a company which belongs to a familiar industry. The stock market investor must have a good understanding of the business in order to realize more the value of the stocks. This will also make the investor less dependent to analysts and advisers.

The sources of information to rely upon must be carefully chosen too. Tips offered in the market should be avoided as much as possible. These are usually given by people with vested interests.

2. Long-term goal

An important consideration in stock market investment is setting a long-term goal. The long-term goal would determine the approaches to be taken and influence the decisions to be made.

The adherence to that goal would ensure regularity in instances of indecision when the stock market gyration comes to play. It would avoid whimsical decisions adversely disturbing the finances. A long-term goal could result to a more stable financial future through steady purchases investments. The key word here is consistency.

3. Calculated Risks

There are risks in any business endeavors. However, this must be calculated to minimize the probability of loss and to increase the expectation of profits. Speculating is not an option.

Never gamble and risk losing big money in the stock market. Investments should not rake in huge losses. It is easy to buy stocks, but money lost would be difficult to gain back. One cannot afford costly mistakes.

The established system in realizing the long-term goal must be strictly followed then. This will reduce the probability of putting too much money just to incur big losses.

5. Discipline

To make the most of the stock market investment, the investor himself must possess the proper determination and discipline to continually persevere in realizing the long-term goals set.

Stock market investment today requires passion and courage to come out as a winner. The stock market gives the opportunities; all that is required of the investor is being prudent.

Nicky Pilkington
http://www.articlesbase.com/investing-articles/strategic-moves-on-stock-market-investment-10998.html

Outlook and Strategy of Indian Stock Market 2006-2007

Indian Stock Market occupied a top slot in 2006, together with an unexpected fluctuation with sudden rise and fall, but maintained the sensex mark. In 2006, the Bombay Stock Exchange crossed the 10,000 level mark. There were speculations amongst the bulls at the Dalal Street (Mumbai) that sensex might cross 14,000 marks, but unfortunately the year 2006 ended with the average 12,500 level. Fundamentally strong, the economy was the main key but raising inflation rate and high crude oil prices applied brakes on its acceleration.

The Indian stock market raised to dizzy heights in a span of 194 days, from October 28, 2005 to May 10, 2006, with the BSE sensex rising from 7686 points to 12612 points, a gain of 4962 points. It then fell very fast to a level of 8929 points on June 14, 2006, registering a loss of 3683 points in 35 days. It has again reached a level of 12010 on September15, 2006, again of 3086 points in a span of 93 days and presently the market is trading in the region of 13250.Like April 2006, some felt that when the market rose high, that time has come for a correction and the market was totally overheated. Investors were of the view that when the market started falling and a negative sign was taking up, it could reach up to 9000 level, but the sensex has bounced back and reached 12321 points on last September 27,2006.

There are concerns over tight global liquidity and deteriorating trade balance. These may not check India’s strong economic growth. As India is getting younger and younger, its productivity is bound to rise. Investment in Indian market must be seen in a marginally different context. As much as 60 percent of the GDP is led by domestic consumption whereas other emerging countries are dependent on foreign market. For the next few months ending the financial year 2007,sectors like FMCG,pharma,retail,media and textiles looks attractive in terms of valuation.Basically,India ,a service driven growth story, has enough to offer since we are in the middle of a capital expenditure boom and rapidly expanding outsourcing.

India’s growth will be sustained and may reach greater levels if the government act on reforms front.Infrastructure, ports, roads, SEZ etc requires more attention and investment. Investment in 2007 will be the brighter period for any investor. Going by the fundamentals, most experts believe that for the next 6 to 8 months there is very limited downside risk at the current level. As per the Morgan Stanley’s report, technically speaking, this quarterly period (June2007), the Sensex would reach the point 14700.Also in the near future, the Indian stock market will see foreign companies raising funds through Indian Depository Receipts (IDR).But at the same time we can see that the Indian capital Market is characterized by its high degree of volatility which has been instrumental in both creating and destroying the wealth of many investors.

santosh lal
http://www.articlesbase.com/business-articles/outlook-and-strategy-of-indian-stock-market-20062007-139932.html

A newsletter is defined as a publication which is distributed on a regular basis and which discusses one main topic for the benefit of its readers. Newsletters are published by clubs and business companies to provide their clients with company relevant information.

A stock market investment market newsletter is published to provide stock market investors with insights on the current trends in the market. These types of newsletters are distributed by trading companies to their subscribers and clients. A stock market investment newsletter provides news, analysis, interpretations, and commentaries that are related to the market developments and which are relevant to a trading company’s subscribers and potential clients. It is meant to help the stock market investor to choose the right investment opportunities and how to invest sensibly.

An investment market newsletter is very similar to other popular newsletters. It is usually written for stock market investors and usually contains the following:

* Company profiles - this information includes the company’s description, trading history, and its recent stock charts;

* News articles - these articles inform the stock market investors on the current trends in the market and the company’s recent developments and milestones in the stock market;

* Stock portfolio - a stock portfolio is the compilation of the company’s stocks, bonds, and other investment related resources.

* Features articles - these articles may include features about the trading company, tips and other helpful hints about the stock market.

* Monthly top gainers and losers - this part of the newsletter is very helpful because it shows and compares the price movements of stocks over the previous month. It could also be done on a quarterly or annual basis.

* Stock performance tables - the investment newsletter can feature and compare all the stocks which are related in type and provide financial and other useful information.

Stock market investment newsletters are printed and are usually published online through the trading company’s websites. Subscribers can get a free copy for their own personal use, and potential clients can always view and download from the company websites. These websites also provide archives, or past copies of their stock market investment newsletters which subscribers can easily access and read from their personal computers.

Others say that stock market newsletters provide subscribers and investors with investment tips and present them with all possible styles and methods. Investors can now easily see which stocks to buy, which companies to buy stocks from, and what particular techniques work for him - all with the help of a stock market investment newsletter.

Nicky Pilkington
http://www.articlesbase.com/investing-articles/more-stock-market-investment-tools-the-investment-newsletter-11182.html

Those of use who like to play in the stock market are always looking for new and exciting investment opportunities. Many people have their niche that they like to stick with for investment purposes, but here are others of us who will go for hot new opportunities and enjoy the fun of find them. If you like to try new opportunities or if you are looking for ways to diversify your portfolio you should take a look at biodiesel stock.

Listen, I know the stock market is an intimidating thing for those of you who are not familiar with it. We have all heard the miracle stories and the horror stories of people gaining and losing money so quickly it makes your head spin. It seems so out of control and your money is in the hands of people you do not know for them to do what they will, it can be scary. But a lot of people swear by fuel stocks, especially alternative fuel stocks. Of particular interest is biodiesel fuel.

Before you buy any biodiesel stock be sure to do due diligence and research potential companies that are offering stock. There are not that many so this should not be an overwhelming task for you. If you are working with a financial planner who has you in the stock market you should talk to them about biodiesel stock. On your own you can find companies and relevant information on the Internet. Go to their website and read it through, do not just browse. Review their annual reports and look for the trends have been in their biodiesel stock. This way you can see if the investors are making money.

If you are new to the stock market and decide to invest in biodiesel stock you should also invest in something else to diversify your money. That way if the alternative fuel market ebs and flows you will be secure in knowing that not everything you have is tied up in that one segment of the marketplace.

One thing is for sure and that is alternative fuels are here to stay. That is why I am such a strong proponent of investing in this type of stock. It is something the whole world is interested in because of the cost of oil. Biodiesel stock really will be a winner, in my opinion that is why I have already invested in that area.

Lee Wilson
http://www.articlesbase.com/environment-articles/make-money-in-the-stock-market-with-biodiesel-99722.html

Economic boom, stock market crashes, oil crises, upswings, triumphs Now you can become the greatest power in industry! Begin in the year 1900 with little money but large ambitions and through skilful decision-making you can build up an enormous business empire. Make critical decisions on which of

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Busted!   Another company cooked the books and caused a scandal that echoed throughout the downturn of the stock market. TOUGH TO GET CERTIFICATE!!!! Everyone knows the story! John Rigas’ printed signature (founder and (former) CEO)  highlights this piece of Wall Street history.

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Stock market proven to be the goldmine to most sophisticated investors. However, not many beginners really know how to start investing in stock market. As a result, they end up losing their hard earned money. In this article, I’ll share with you my personal insight on how beginners should start their stock investing career.

How to Start Investing in Stock Market with Long Term Stock Investing

From my personal stock investing experience, invest for long term growth proven to be the most profitable money-making strategy. Most importantly, due to its nature that prone to short to medium term price volatility can offer the least downside risk for most beginners. After all the wealthiest people in the planet (Warren Buffet) make fortune from this exact same strategy!

Sound’s too good to be true?

However, if you have significant short term financial commitment (retirement, children’s education, medical expenses etc) for your investment sum, it’s better to avoid this strategy in the first place. Reason being, you might lose money to short term price volatility should you cash out on such situations.

In order to make thousands if not millions from this simple strategy, you must first start with short listing great stocks that have huge growth and profit potentials. You may use several key financial ratios to begin with; such as Return on Equity (ROE), Earnings per Share Growth Rate (EPSGR) and Debt to Equity Ratio (D/E).

Secondly, determine how much the company worth for. You can do this by calculating its intrinsic value. As there are various ways to calculate intrinsic value, evaluate each of them with grain of salt. The truth is nobody knows exactly the intrinsic value of the company; including the CEO of the company itself.

Therefore, you must consider margin of safety when investing in such stocks to reduce risk exposure. Depending on your risk tolerance, buying stock that is below 40 to 60 per cent of its intrinsic value should be good enough. This will not only reduce the risk of losing money, it will also reward you with more than 15 per cent return per year!

How to Start Investing in Stock Market with Momentum Stock Investing

Despite huge benefits of long term stock investing mentioned above, the real challenge to new stock investors are buying great stocks at discounted price. I said it is the real challenge because you might have to wait years before the opportunities come to you or you can be sceptical when the opportunity nicely presented to you.

The first one should not be a big deal, but the second one is.

Reason being, great stocks can only drop in price when most investors pessimistic of the overall future of the country, industry or the company itself. At that situation, you must be tough on yourself and proceed with your investment plan. Otherwise, you have to wait for years before it can come back to you.

While waiting for the opportunities come, you can ride on the bull market with momentum stock investing strategy. If investing for long term is about “buy-low-sell-high”, momentum investing is about “buy-high-sell-higher”. With this method, you are basically betting on the trend as the stock price rallies.

The real challenge of this investing method is you don’t want to buy the stock at its peak since you can be the ultimate prey when the trend reverses. There are two ways to overcome this; keep yourself informed on news that relates to your stock and implement stop lose strategy. This will not avoid the risk of losing money though, but at least, you can minimize the losses.

Zainul Anuar
http://www.articlesbase.com/finance-articles/how-to-start-investing-in-stock-market-ultimate-guide-for-beginners-637777.html

Produce: Its not just apples and oranges anymore. Todays supermarket shelves are stocked with strange, exotic, and delightful items such as quince, jicama, kumquats, amaranth, yuzus, and wing beans. But you dont need a degree in botany to make sense of it alljust carry along Field Guide to Produce!

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