Are Investments in Options or Stocks more Risky?

A typical situation for people who once put their name in a subscriber list, and now are identified as potential investors:

A call from a broker, mostly from a firm that I never heard about, and has the best program on earth, certainly making you rich in a short time and you just have to open an account.

Let u go through a short stereotypical outline of the phone conversation:

How are your stock market investments going?
Excellent (my answer)
The typical standard question of a phone sales person: What are you investing in?
Futures and Options – my answer.
The standard reply: Oh, you are taking on higher risks.
All broker telephone sales people are trained to say this sentence.
It is almost funny. When I reply: I don’t think so. That immediately separates pros from phone solicitors:
“Of course you do?”

Such ignorance usually brings those phone calls to a friendly end: “I do not spend time for that.”
Now let us bring means, background and facts into this case: Taking the telephone sales talk out, where the person on the other side is trained to play with our emotions of fear and excitement, we come to the following facts:

When I buy 100 shares of a stock with a value of $120/share, that moves about 1-2% a day, we want to calculate the risk or exit point, if the trade does not go our way. Capital preservation is a key essential for successful financial market investment. If prices break through a major support line or short term momentum line, this should define our maximum loss and exit point to the downside.
In our case, we assume support being 4% away from our point of entry. Then we know that we are risking: $480 on a $12,000 investment.

To control 100 shares one needs to buy 1 Call Option Contract, for: $1.20 x 100 = $120.

We now control for the duration of the call option contract the same amount of shares: 100 and what is the risk involved?
The maximum we can lose: $120.

Making things equal, we are going to risk the same $480 and buy 4 call option contracts.

With the same amount of risk, we are now controlling 400 shares for the duration of the options contract.

Talking about risk, always involves the worst case:

Overnight news make the stock drop to $90 at the next day open and we want to get out:
Stock holder loss: $3,000
Option holder Loss: $420 (there will still be some time value in the option).

But actually, the broker does not want us to do so many trades, we shall rather sit tight and wait until the share is going up again, but the next day prices drop: $79/share: $4,100 loss for the stock holder.

What will be the answer when we call your broker and ask what is going on:

“Hold on to it, it is gone get BETTER.”
Yes right, now the share has to climb 51% to get us back to break even.

We want people to take their financial freedom into their own hands and teach them techniques of how to invest in the markets, making money in all directions and rather having a buy and sell, than a buy and hold strategy.
With a buy and sell strategy we always have a target and at the target we either take the entire position off, or pull the stop tight, to not allow realized profits to slip away.

Let us assume we wanted the share price to go to $125 in the next 5 days and cash out. What would be the results:

Stock holder: Selling 100 shares at $ 125, gaining $500 - which equals a 4.2% return on capital.
Option Holder: Selling 4 option contracts - but what will be the value of the option?

To calculate the result of the future option value, we need to understand the impact of the option influencing parameters, that are made out of: The relation an option moves with the stock, time decay and volatility change. It all sounds more complicated than it is. We provide you with a model where you can do the calculation in seconds on the trading platform or on our member section of the website.

In our case the simulator lets the option price increase by $1.96. Calculating $0.02 slippage, we come to a value increase of the option of: $1.94 x 400 Shares controlled = $776, or 61% return on capital.

Based on those results, the option investor gained 55% more profit and in total risked about $400. While the risk of the shareholder can be substantial on defined amount of gains.

So finally, who is taking more risk: the option investor or the share holder?
Now that you know the answer, it is up to you to learn the mechanics to be able to apply such investment strategies. To be a successful financial market investor, skills and market details need to be learned and this is what NeverLossTrading is successfully teaching. We believe in hedging and leveraging any market investment: from Mutual Funds, Stocks to Options and Futures. You will leave our workshop fully setup to follow the NeverLossTrading concept.
Take your financial freedom into your own hands:
“If you do not care about your own money, nobody else will.”
Check us out at: http://NeverLossTrading.com

Is Technical or Fundamental Trading The Way to Make Money In the Stock Market?

Years ago when I learned trading, fundamental analysis was a big thing. It was impressive what all those people knew and how it was clear to them and the general public that certain shares had to rise and others had to drop.

Did it work out?

NO, of course not: In Reality the general public never would have known about those stocks unless the fundamental trade had already been made by Institutional Investors and people went in, buying when those who initiated the price move were selling.

Basically we proclaim: The fundamental analysis accessible to a private investor is worthless.

Institutional Investors have lined up cohorts of highly qualified stock market analysts in addition, they have their connections and relations, where a private investor can never reach.

So what do we do?

The answer is easy: We rely on the fundamental analysis of the “smart money.”

When institutional investors start buying into a share, our scanners and technical analysis tools indicate that program buying or selling is going on and we enter in the direction of the move, copying the action of the big money.

“The NeverLossTrading System can quickly identify when serious buying and selling is taking place, to participate in buying or selling.”

We know that it takes institutions time to enter their positions, and that stocks can double, triple, or more before the institutional fundamental investment is done and we start buying (or selling) alongside of the “Key Market Investors.”

With NeverLossTrading, people trade what they see on the screen and not what they assume that is coming.
Over the years of trading we developed our own set of indicators, integrating the knowledge and skills of the world best and successful traders, with focus to identify institutional moves. Our indicators are in house developments that measure the market pressure, like a voltage measurement in electrical engineering applied to the decision making signal wave of the financial markets:

• Pressure from the top, pushes prices down.
• Pressure from the bottom, pushes prices up.
• Pressure from both sides and the market will first consolidate but at one point, like an electrical field, break through and move strongly in one direction.
Each of our trade setups has an identified stop and target:
• One of our studies draws a stop line on the graph and allows for no interpretation.
• The target can be set by our trend calculation or trailed with the stop line that moves with the market.

For the private investor, regardless of the trading system they choose, these are the steps and techniques to make money in the financial markets:
• Have a system that allows you to spot key market action.
• Forget news and fundamentals, invest when institutions move in and out of share.
• Always hold yourself protected with stops and accept small losses, aiming for big wins or constant smaller gains.
• Learn techniques to be able to make money in up, down and sideways markets.
• Trade a set of shares that you understand with minim requirements on: Liquidity, Volatility, Daily-Price-Range.
• Apply a trading strategy that allows to leverage and protect your funds.
• Understand market correlations on time of the day, annual season, news related.
• Combine price and volume moves for entry and exit decision.
These are the skills we train and we encourage every new trader to get a solid education prior to risking money in the financial markets.
With the methods we teach, each and any market can be traded: Stocks, Commodities, Treasuries, Currencies and their derivatives like Options and Futures.

We often meet people who tell us:

“But we cannot go short in a retirement account.”

“I have no margin allowance in the custodian account of my children.”

For sure those are the official regulations, but if you possess the trading skills/mechanics of knowing how to initiate a 1:10 leverage to the up- or downside in any account, you will see the financial markets from a different angle.

Take a look at our program: http:\\NeverLossTrading.com and for sure get a solid training and set of skills prior to investing your money in the financial markets.

Is Automatic Trading Software The Way to Make Money in the Stock Market?

Lately I am getting a lot of proposals for Auto-Trader-Software’s. Some of them even state that they work 89% off the time. In respect to the promise, the prices are pretty decent, ranging between $2,500 and $25,000 -  while 80% of the offering is between $2,500 and $5,000. All of those promotions surely have a little disclaimer that states: “Past history is not to be taken as attainable future performance,” and this is understood.

To get a good feeling for the offers received, I called the most expensive provider:  $25,000  on a 40% off promotion and got connected to a knowledgeable person. On my question if he trades the markets every day, his reply was: “I am the employed software developer” and I thanked him for his honest answer.

Let us make a financial appraisal to evaluate the payback for a possible investment into an auto-trading-program.

If we could gain $200/day with such software, in 250 trading days this would amount to: $50,000 of profit. Not a bad price/value relations: The investment would pay itself back in 2 weeks to 6 month and be an ATM after.
Consider compounding interest through reinvesting our profits: with $200 the first day, we make $400 the next, $800 after. This would make us a millionaire in 14 days. After 24 days a billionaire and in a  year after we start, we own the money of the word and the computer program even does the work for us while we are sleeping or being away from the computer, enjoying the good life of being rich.

This is more than anybody could ever ask for, I just wonder why those software programs are so inexpensive and like in real life, if I get something offered well below the real value, I am very suspicious of why that is.

“Why does one work as an employed programmer if he could be a billionaire?”

For everybody who wants to put their automatic trading program to work for them, good luck to you and please send  a card from the billionaires club that you surely join in 6 weeks from now.

We believe that you cannot successfully automate trading. If such would work we would find those programs run by:

Goldman Sachs, JP Morgan, Morgan Stanley, Fidelity, ING, Deutsch Bank, UBS, Barclays, BNP and others who would be able to afford purchasing it, but as a private investor: “Forget about it.”

Everybody who wants to learn to trade various financial markets needs  sound knowledge
of how to trade and why. NeverLossTrading is a primer institute to learn trading in all dimensions, ranging from the psychological aspects to position sizing, trade execution and documentation. We share with you a follower strategy that focuses on the market moves of institutional money and we trade along right with it, copying the actions of the market leaders.  You will learn how to make money applying the right instruments for all market directions: Up, down, sideways.

NeverLossTrading offers you a free trading platform and provides a set of indicators that focus on what just happened, instigate by institutional money and then it is time for us to trade: A wealth of knowledge and experience  that  supports you throughout your life as the a successful Financial Market Investor.

Check us out at: NeverLossTrading.com

NeverLossTrading: Stock Market Outlook 2011

 

Our method of trading is applicable to various markets: Stock Market, Commodities, Currencies, Treasuries and their derivatives, like options and futures.In this publication we want to focus on the market with the most common interest: The stock market. But prior to telling which market sectors and stocks we favor, it is important to know that we only act if the overall market dynamic proves our analysis right. Let us share some of our imperatives:

• We and nobody else knows where a share price will move to next.
• We do not believe in great tips from people who portrait that they know.
• The NeverLossTrading concept spots price action of institutional money on all time frames and reaps the benefits by following
  where the big money is going.

Even so we have a predefined and foundation based market interpretation, we will wait until we get it confirmed and enter into a trade when the movement starts. Over time we developed a variety of market indicators to spot the beginning and end of such movement.

This key question is often raised to us: Do you not lose time and profitability by entering late?
Find our answer: http://NeverLossTrading.com tab OUTLOOK 2011

So much to our core principles, now we want to share how we analyzed the stock market for 2011. Besides an overall appraisal we focus on sector development, knowing that institutional investors do the same and with that we want to be prepared if a move happens to jump in and when it ends to jump out. This spells out another of our core principles: We are not proposing long term buy and hold strategy but rather a buy and sell strategy where we act on an our entry signals for the underlying financial investment instruments and in the same way act on exit signals. Now to our 2011 analysis:

Stock Market Evaluation by NeverLossTrading

Situation Analysis: High corporate earnings are reflected in continues stock market growth. All sectors recovered while the major grows was initiated by a few companies with breakthrough consumer oriented information technologies and services.  Other markets followed and build a solid platform of earnings on modest revenue growth for 2011.

To define our preferred market focus areas, we are using a scoring model that rates growth achievements paired with sectors earnings  and combines this score with the market power potential of the examined segment. Besides overall growth strategies, the NeverLossTrading concept provides a trading plan for down-trending and sideways-trending markets.

In a short summary, here is our stock market preference list for 2011:

Harvesting Strategy

1. Information Technologies:   We specifically focus on companies related to data, network services and innovations
2. Financials: Our first focus are institutions that benefit from growth in the financial markets: GS, JPM, BRK.B,BEN. On a sign of recovery we will
   jump on BAC and C but else stay out of banking.
3. Consumer Companies: We go with the world market leaders based on technology, service, unique product offering.
4. Industry: Again, we pick world market leaders with innovation potential.
5. Others: We are very selective in Energy with focus on new energies and resourceful nergy recovery or production and apply the same rinciple
   to the pharmaceutical sector and only invest in companies with innovations on he horizon.

Shorting Strategy

1. Telecommunication: On a sign of weakness this is where we will short the market, expecting  troublesome year and years to come for all major telecommunication companies.

Download the detailed report at http://NeverLossTrading.com Tab OUTLOOK 2011

Is The Stock Market Manipulated?

The following article about stock market manipulation just came to me:  http://www.msnbc.msn.com/id/40404668/ns/business-us_business/from/toolbar
and it put a smile on my face.

Do we have another Joe the plumber in:

"A large part of trading has to do with trust, and I don't have it," says Mark Swenson, a 43-year-old plumber from New Hampshire who refuses to buy individual stocks” (from the above article).

Are we serious? In every market, those who can try to take control of it.

Go and sell “Plumber Cola” against Pepsi and Coke and see where you gone end up getting. Make
adhesive tape and stick it to Scotch. Put a better diaper out and beat Proctorand Kimberly.

Do we really assume in financial markets, because of the security exchange commission (SEC) and TV, we have the same access to information like a Goldman Sachs and JP Morgan?

Yeah right. They employ 105 (and this might be a low number pulled from the sky) well educated MBA’s making market analysis for them and we feel we can get all of that through “Stock TV Entertainment” of an email newsletter we subscribe to?

Institutional Investors dominate 85% of the financial markets and they are out to succeed and care less from whom they take the money they make.

Institutional investors have a big advantage in knowledge and we will never be able to get anywhere close. So how can we compete and prevent that they  take our money?

The answer is:   Don’t fight them go with them.

Spot the action of institutional investors that can be made transparent on a stock chart and instead of fighting their action, we follow. By doing so we move in the right direction and even have an advantage that matters: speed. The private investor can get in and out of a position quick
while institutions have to scale in and out – and by their scaling we spot their action and react the same, but faster.

At the end of the day, who cares that institutions dominate the market, we can grab their tail and make fantastic market runs people mostly cannot even think off.

When you understand how to be a successful financial market investor, profits will come big time. Financial markets allow a 1:100 or 1:50 leverage without even asking a bank for a credit. With that 10,000 dollars invested can act as one million – and when the million goes up 5% you make $50,000
on a $10,000 investment. But you need to know how. NeverLossTrading is a primer institution to educate you in how to follow the footsteps of the giants in the financial market to copy and leverage their action.

NeverLossTrading - Financial Market Evaluation: Stocks, Bonds, Futures, Currencies, Commodities

The rising US-Dollar is not based on internal strength but on Irelands banking problem in the Euro zone. What will come next?

1. Currencies

Today, November 16, 2010, the key market influencer was the US-Dollar. So why did we see the Dollar rising. Not because of internal strength, but because of financial trouble in the Euro zone. After Greece getting bailed out it looks now that Irelands Banking system need the support of Brussels, which increases the overall amount of Euro floating and by that the Dollar in relation increases.

If we look at the dollar value it is composed of:

Euro 57.6%

JPY 13.5%

GBP 11.9%

CAD 9.1%

S-Krona 4.2%

CHF 3.2%

Others 0.5%



So when the Euro Drops, the US-Dollar Rises



2. US Economic Indicators

Basically positive, even so on a small scale, but the rising dollar made the market tumble today:

The National Association of Home Builders said its homebuilder confidence index rose to 16 in November from a downwardly revised 15 in October. Economists had been expecting the index to edge down to 15 from the reading of 16 originally reported for the previous month.



The Labor Department said its producer price index rose by 0.4 percent in October, matching the increases seen in each of the two previous months. Economists had been expecting the index to increase by a more significant 0.8 percent.



Excluding a jump in energy prices as well as a modest drop in foods prices, the core producer price index fell by 0.6 percent in October after edging up by 0.1 percent in September. The drop came as a surprise to economists, who had expected core prices to increase by 0.1 percent.



Meanwhile, the Federal Reserve said that industrial production was unchanged in October after falling by 0.2 percent in September. Economists had been expecting production to increase by 0.3 percent.



3. Stock Market

Wal-Mart (WMT) reported third-quarter net income of $0.95 per share, topping estimates for earnings of $0.90 per share. Sales came in at $101.2 billion, short of consensus estimates for $102.43 billion for the quarter.Wal-Mart also forecast fourth quarter earnings of $1.29 to $.133 per share, above the $1.28 per share mark forecast on Wall Street.



Home improvement retailer and Dow component Home Depot Inc. (HD) posted third-quarter earnings of $0.51 per share, just above the $0.48 per share estimates for the period. Quarterly sales totaled $16.6 billion, above the $16.59 billion expected for the quarter.

4. Bonds and Notes

The big sell off on Bonds and Notes continues and might have found a potential bottom today. Interesting how the market exited bonds so rapidly even so a big demand will be generated by the Fed, buying back $600 billion in Bonds.

5. Commodities

On the front of commodities, the rising US Dollar did his dues and we are showing landslides to the downside: Gold, Crude Oil, Wheat, Sugar whatever you touch is on run down.



6. Conclusion

All securities cannot run into one direction, one side has to give: Bonds or Socks, Stocks or Commodities. The dollar strength is theoretical and might find a top at 80 Cents (/DX Dollar Index).

Under any circumstances it is a good time for day trading and even so the overall direction is down, there might be a good opportunity for a short term rise of Stocks and Commodities with a sell at the Thanksgiving Week.

Good Trading !

http://NeverLossTrading.com

Government Spending Drove the Recent Stock Market Growth

Government Spending Drove the Recent Stock Market Growth


Looking at the last 3 stock market uptrend’s we see the following:

A) 1996 – 2000: The time of the .COM Boom. All known and explained

B) 2003 – 2007 The time of world economic growth boosted mainly by Asia/Chinas development

C) 2008 – today Markets are driven by massive government/deficit spending allowing for:

• Solid corporate earnings

• High unemployment

What is going to come next?

Let us first describe some key market facts:

The $600 billion of government money will flow into the market over the next 6 month. The stock market already advanced this action and so there will maybe be another little move to the upside, but not a massive one.

The technology companies who were the driver of the stock market growth: AAPL, NFLX, GOOG, AMZN are partially getting under pressure where to find new market places for their offering:

- How many more iPhones can you sell. So where is the next wave for Apple Computer.

- How many move videos can you consume while you have the internet, Xbox and movie on demand by the cable and satellite company. So why should Netflix grow?

- Google is getting under pressure by Facebook targeting the massive advertisement incomes Google made and with that one of the most overweight internet champions is having an interesting time ahead of them.

By having free money and being able to sell bad mortgages back to the government, Banks are comfortable in not lending. They enjoy a high margins with the loans they get serviced. Mature markets like Banking usually have a tendency for consolidation and with that big banks will not grow through business expansion, but acquisitions of local and regional banks. By banks not lending, growth through consumer and corporate deficit spending is limited.

Now we draw our conclusion:

We will enter a time of a sideways trend with high volatility, ending potentially in a bigger market revision, by all current growth being achieved through government spending that is not backed by the economy.

When we look at the VIX (Volatility Index)

We see a typical triangular pattern, which indicated a potential breakout in the first quarter of 2011.

As we know the VIX is inverse to the stock market and the breakout could be twofold:

- To the upside, with a downside revision of the stock market.

- To the downside, entering a sideways or growth market.

Looking at the trend over the last 60 months we would rather lean to a downside revision of the stock market with a rising VIX after the first quarter of 2011.

Hence we recommend to learn how to implement bearish and sideways market strategies to not get eaten up in the times ahead of us. NeverLossTrading.com as a premier institution for investor education has a fantastic program to prepare you not to lose but benefit in all market directions: up, down, sideways.

Good Trading,

http://NeverLossTrading.com