Key To Successful Forex Trading
By KhmengWat.com
Here are the characteristics of successful FOREX trading1. Successful FOREX traders tend to have absolute control over their emotions – they never get too excited over a win or too depressed Read more...
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The "up" Scenario
By KhmengWat.com
In the "up" scenario, the maximum gain that can be attained is the stock finishing at $10.00 or higher.
At $10.00, you would profit from the full value of the extrinsic value of the option which is $.50 and you would also have $.50 of capital appreciation from the stock for a total of $1.00. This represents a 10.52% one-month return or an annualized return of 126.32%.
It is not realistic to expect this type of return every month but remember, recent studies show that premium selling works approximately 80% of the time, which is still very good.
We stated earlier that the maximum return of this buy-write will be actualized when the stock reaches $10.00 or above and the maximum return will be $1.00, and no more than $1.00. As the stock goes higher, the option will earn less in direct proportion with the increase in capital appreciation.
For
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Mastek net rises 16%
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FCStone Group, Inc. F1Q09 (Qtr End 11/30/08) Earnings Call Transcript
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example, if the stock closes at $10.30 you would receive only $.20 from the option. The option would now be worth $.30 because with the stock at $10.30, the 10 strike call would have $.30 of intrinsic value.
Since you sold the option at $.50, you would see a $.20 profit ($.50 - $.30 = $.20). Since you bought the stock at $9.50 and it is now $10.30 you have $.80 of capital appreciation. Combine the two and you have a $1.00 profit.
Let’s look at what happens when the stock trades up to $12.00 and see if you again have a $1.00 return on the position. At $12.00, the option will have $2.00 of intrinsic value (stock price - strike price) because it is in the money.
You sold the option at $.50 so you have a $1.50 loss. However, you bought the stock for $9.50 therefore you have a $2.50 capital gain. Combined, you have a $1.00 profit.
In a third example, if the stock trades up as little at $.10 you still have a $.60 gain. You will receive $.50 from the sale of the call which would expire out of the money thus worthless plus $.10 of capital appreciation. $.60 represents a 6.3% one month return.
Please refer to the chart below for examples of total dollar profits per number of contracts, remembering that each contract controls 100 shares of stock.
Observe that if the stock closes over $10.00, then your stock will be called away because your short calls will be exercised. This is correct but we will talk about position management later. For now, let’s get back to our three scenarios.
In the "up" scenario, you would profit with the buy-write when the stock is up as little as a penny, but you are also limited on our maximum profit.
You are limited on your maximum profit as defined by the formula below:
Maximum Profit = Strike Price + Option Price - Stock Price.
This method of calculation will work every time. As you see, the buy-write has a positive but limited upside potential.
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Additional
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Mini Forex Trading
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Open an online FOREX trading account first before considering of betting big if you’re a beginner. FOREX trading is risky if you don’t have enough experience. If your intention is to get some Read more...
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British Pound Crosses: Short Term Weakness Expected
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13:30 GMT, and will be today's leading publication that will affect the Yen's For more forex information, go to NEXT RTICLE : addLoadEvent(func) else Click the button to vote for this article Loading status ... TEXT SIZE : Comments #bottom_more
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S&P Picks and Pans: Wal-Mart, Satyam, Intuitive Surgical, Wyeth, Citigroup
08 to $3.36 and fiscal year 2010's by $0.13 to $3.55, to reflect unfavorable forex and weakening warehouse club demand. We are cutting our target price by $3 to $58 on DCF and p-e analyses. -J. Agnese S&P REITERATES HOLD OPINION ON SHARES OF
Research and Markets: Illustrative Report on Mattel, Inc. and the U.S. Doll and Stuffed Toy Manufacturing Industry
- AP Sponsored Links With AAA rated, GE Capital Corp. Not an offer of securities for sale. Free Forex Trading GFT Makes FX Trading Sweet with Free al Resources. Try Now. Get Your AA, BA, Masters or PhD at a Top Online School. Start Now. Magazine
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low of 91.55 alongside with a resistance level at 91.96 and a support at For more forex information, go to NEXT RTICLE : addLoadEvent(func) else Click the button to vote for this article Loading status ... TEXT SIZE : Comments #bottom_more .bottom_space
Italy PM-Alitalia would still consider Lufthansa offer
Extract not available.
FCStone Group, Inc. F1Q09 (Qtr End 11/30/08) Earnings Call Transcript
of this increase coming from exchange trade and the other $400,000 of this increase comes from our Forex commissions. As I mentioned before a decline in exchange traded volume of 2 million contracts was offset by a $0.50 increase in our commission rate
SYNNEX Corporation Sets Record and Meeting Dates for 2009 Annual Meeting of Stockholders
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- AP Sponsored Links With AAA rated, GE Capital Corp. Not an offer of securities for sale. Free Forex Trading GFT Makes FX Trading Sweet with Free al Resources. Try Now. Get Your AA, BA, Masters or PhD at a Top Online School. Start Now. Consult with a
Forex Trading Strategies Aggressively buy Japanese Yen Against US Dollar, British Pound, Swiss Franc, and Australian Dollar
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Forex Trading Strategies Aggressively buy Japanese Yen Against US Dollar, British Pound, Swiss Franc, and Australian Dollar
Our forex trading strategies forecast that the Japanese Yen will strengthen against the US Dollar, British Pound, and Swiss franc. A wide range of systems have bought the Japanese currency in the
Old Republic International Announces Fourth Quarter and Full Year 2008 Conference Call
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USD/JPY Technical Analysis 8 January 2009
at 6:32 GMT. Total today +184, yesterday +149, as shown at www.zifx.com/performance.php For more forex information, go to www.iForex.bg NEXT ARTICLE : GBP/USD Technical Analysis 8 January 2009 Click the button to vote for this article Loading status ...
EUR/USD - Euro Dollar, American Session - 08/01/09
take a short position. Resistances 1,3750 - 1,3840 Supports 1,3540 - 1,3320 For more forex information, go to www.mataf.net NEXT ARTICLE : Daily Forex Analysis Click the button to vote for this article Loading status ... EMAIL PRINT TEXT SIZE : A A A
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