Tag Archives: day trading

Options

Australian Stocks: Options Trading in the ASX 100

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Options markets have quickly risen in prominence over the last several years, and there are many reasons to explain why these trends have been seen.  Global markets are quickly adding many different trading instrument types in order to meet the needs of everyday investors.  

For those most focused on Australian companies, this will often mean establishing positions in the ASX options contract. These option types allow investors to gain market exposure to the stocks listed on the Australian Stock Exchange, which is one of the most interesting and dynamic stock collections in the world.

Just like bonds and mutual funds, trading options is a kind of investment portfolio strategy for sophisticated investors. Options are a derivative security type, with a price derived from (or dependent upon) one or more underlying assets. Working as a contractual agreement, options grant the rights of buying and selling those assets on or before a certain date and at a set price – known as the strike price.

CALL Options and PUT Options

There are two basic types of options: CALLS and PUTS.  With CALL options, the investor gets the right to buy a particular stock at a fixed price on a fixed timeline, but it is not an obligation to make the purchase. CALL options work like a future deposit. Within the expiry time, the stock can be bought at a fixed price (the strike price), and it does not matter if the market value of that stock has doubled during the timeline. This can help investors make big gains. CALL options are exercised when the market value of stocks seems to be going up in a bullish fashion.

With PUT options, investors have the right to sell a particular stock at a fixed price within an expiration timeline. Again, making the sale is not an obligation. This can be profitable in cases where the market value of the stock goes down while the investor can still sell it at the higher strike price. But for both CALL and PUT options, there is a set expiration date. After that, the right expires and all purchases and sales must be made at the actual market rate.

Options Premiums

A premium is the price/value of an option in options trading. It is the amount paid by the investor at the time the options trade is selected. Technically, the only potential risk for the buyer is to lose the initial premium amount paid for the option (in cases where the trader does not utilize his/her buying or selling right before expiration timeline). These premiums can range from narrow to wide bid/ask spreads, and are often quoted by market makers who build market activity in that specific option.

Expiration Date

Every option contract comes with an expiration date, which is the total life span of that contract. The right to buy/sell a stock is valid until that period of time. Expiration deadlines vary for different stocks and products. The premium is lost if the purchase/sale is not made within the specific time period.

 

Market News

Stock Trading: Oracle Shares Surges to New Highs

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Stock Trading: Oracle Shares Surges to New Highs

Stock markets continue to post major bull rallies but one sector that has been largely missed by investors is the technology space.  This can be seen in professional indices trading trends, which have recently shown that assets tied to the NASDAQ have underperformed those tied to the value of the S&P 500.

But we are starting to see some of these trends change, as tech stocks have been able to post better rallies in recent weeks.  One of the best examples here can be seen in Oracle Corp. (NYSE: ORCL) which is now trading at long-term highs.

Stock Price Chart: Oracle Corp. (NYSE: ORCL)

Stock prices in ORCL have surged above prior resistance levels en route to new highs above $45 per share.  “Information driven,” Oracle is one of the most prominent names in tech development and marketing of business software products, database technology software and cloud engineered systems.  Based in the USA and established in 1977, the company is a public multinational entity having more than 136,000 employees currently with head office in California’s Silicon Valley.  

Key products among others related to Oracle are storage, servers, oracle applications and oracle enterprise manager. Enterprise resource planning, supply chain management, and customer relationship management soft wares are also specialized names which are associated with Oracle. It reported annual revenue of $37.04 US billion Dollars (2016) and net income worth 8.90 US billion Dollars (2016).

Tech Manufacturing Companies

In addition to manufacturing and marketing of business software products Oracle also offers other services which comprise consultancy, training and financing which is also a unique element in relation to Oracle. Since its inception Oracle has gone through a comprehensive process of acquisition of entities both corporate and individuals.  In 1995, IRI software was acquired by it under consideration of $100 million US Dollars.  

Other notable acquisitions include:

  • PeopleSoft in 2005 $10.3 billion US Dollars
  • Seibel Systems in 2006 for $5.85 billion US Dollars
  • Hyperion Corporation in 2007 for $3.3 billion US Dollars
  • Sun Microsystems in 2010 for $7.4 billion US dollars
  • Micros Systems in 2014 for $5.3 billion US Dollars
  • NetSuite in 2016 for $9.3 billion US Dollars
  • Apiary in 2017  for which the valuation of purchase consideration is yet to be agreed

According to reports in 2015 Oracle after Microsoft was second-largest software maker revenue wise which is indeed an impressive and substantial outlook internationally. Since the beginning company has introduced multiple technological dimensions like UNIX-based Oracle applications in 1987, PL/SQL in 1988, 64 bit RDBMS in 1995.  

This was followed by its free database to qualify industry standard security evaluations in 2002, smart scans that enhance software query response in HP Oracle Database machine in 2008 and in particular initiative in the shape of Oracle 12c which can facilitate cloud services along with Oracle Database in 2015.  Conclusively, despite facing multiple challenges since the beginning, Oracle has proved itself among preferred and highly recommended global tech entities.

Long Ideas

Gilead Sciences: Sluggish After Healthcare Reform Debate

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Gilead Sciences: Sluggish After Healthcare Reform Debate

Gilead Sciences is an American biopharmaceutical company that discovers, develops and commercially sells a range of therapeutics including antiviral drugs for the treatment of Hepatitis, HIV, and influenza.

The company was founded in 1987 by Michael Riordan, a medical doctor. He served as CEO till 1996. A venture capital firm Menlo Ventures made the first investment of $2 million dollars in Gilead. In 1996, it entered a collaborative research agreement with Glaxo for the development of genetic code blockers or antisense. This was terminated in 1998 and its antisense intellectual property portfolio was sold to Isis Pharmaceuticals.

Gilead IPO

Its Initial Public Offering raised $86.25 million. It launched Vistide for the treatment of CMV in patients with AIDS. It collaborated with Pharmacia & Upjohn to reach more markets outside the United States. In 2010, it acquired CGI Pharmaceuticals for $120 million which expanded its research into kinase biology and chemistry. It also acquired Arresto Biosciences for $225 million and their research for treating fibrotic diseases and cancer. It acquired Pharmasset Inc. for $10.4 billion dollars.

Drug Pipelines

This gave it control over the HCV treatment market by holding Sofosbuvir (medicine for Hepatitis C). It was the first firm to manufacture a pill which is known to reduce the risk of HIV infection. It had a market capitalization of US $113 billion and its stock doubled its value after the acquisition. It was ranked the 4th best drug company by Forbes. It attributed its success to FDA approval and potentially revolutionary drug Sovaldi.

The drug has faced its fair share of criticism for its high price. The committee of finance of the United States Senate investigated wherein it sent letters to the CEO of the company as to how it derived its price. It has recently also acquired Phenex Pharmaceuticals, EpiTherapeutics and Nimbus Apollo. This has given access to treat liver diseases such as non-alcoholic steatohepatitis, inhibitors of histone demethylases which regulates gene transcription in cancer and potentially treating hepatocellular carcinoma and an anti-inflammatory drug filgotinib which may be used to treat arthritis and Crohn’s disease. It’s current president and chief executive officer is John F. Milligan.

Long Ideas, S&P 500

GE: Trump’s Infrastructure Policies Favor Blue-Chips

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General Electric is an American multinational conglomerate incorporated in New York. It offers a range of services from power and oil, gas and aviation to financial services and even software development. It is one of the original 12 companies listed on the Dow jones index and while it may have not been listed on the index continuously it currently features in the index. It was one of the earliest companies incidentally funded Thomas Edison’s electricity projects.

General Electric was one of the earliest companies incidentally funded Thomas Edison’s electricity projects. The Radio Corporation of America was founded through GE in 1919. It was also used as the retail arm for radio sales until their separation in 1930. GE has been involved in power generation and its history working with turbines, it introduced the first superchargers. These were incorporated into flights during World War I. It reacquired RCA in 1986 and by that NBC.

Changing Company Focus

In the 1960s, GE was considered one of the major computer companies. It had a line of both general and special purpose computers such as GE200, GE400 etc. IN 1970, GE sold most of its computer division to Honeywell, though it did retain its timesharing options for a while after. GE’s current business divisions include GE Power, GE Oil & Gas, GE Renewable Energy, GE Energy Connections, GE Aviation, GE Healthcare, GE Transportation, GE Capital and GE digital.

Through these GE participates in various markets ranging from generation and distribution of electricity, medical imaging equipment, automation, motors and aviation. It also offers financial services through GE Commercial Finance, GE Consumer Finance etc. GE has a history of large scale water and air pollution. IT heavily contaminated the Hudson river with PCBs between 1947 and 1977. It also polluted the Housatonic River with PCB discharges from 1932 till 1977. Recently GE has shifted its efforts towards using clean renewabl

Recently GE has shifted its efforts towards using clean renewable energy. It unveiled its EV solar Carport which has solar panels on its roof with electric vehicle charging stations under its cover. It has a renewable energy programme ‘Ecomagination’ which has resulted in over 70 green products such as halogen lamps, biogas engines being introduced into the market. It invested nearly $25 billion dollars into the project due to popular market response.

Long Ideas, S&P 500

Goldman Sachs: Financials Ride Trump Train Higher

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Goldman Sachs: Financials Ride Trump Train Higher

The Goldman Sachs Group is an American multinational financial company that provides financial services such as investment management, securities and is involved in investment banking. Investment banking accounts for about 21% of the group’s revenue. It gained a reputation as a white knight against hostile takeovers. It is one of the leading M&A forms and frequently tops the Thomson Financial league tables in size of transactions.

Goldman’s Business

It performs various activities such as financial advisory, underwriting etcetera. Investing and lending activities included 16% of its revenue while Institutional client services such as currency and commodities, equities trading accounts for 45% of its total revenue. It is a primary dealer in U.S Treasury securities market. It was founded in 1869 and is headquartered at New York City.

In August 2012, Goldman Sachs created the first social impact bond to support therapy for 16-18 year olds incarcerated on Rikers Island. It has implemented internal policies to address global warming and climate change. It has given around $119 million in grants since 1999 to promote youth education. It was ranked as one of the best places to work for by Fortune magazine and it supports employee philanthropic efforts. As a result the employees are highly loyal to the organisation.

Mortgage Market Criticism

As a result, the employees are highly loyal to the organization. Goldman Sachs has also been criticised as being responsible for the collapse of the mortgage market. It faced investigations from the Congress, the Justice Department and the SEC which it had to settle. It was alleged to have misled investors. Goldman Sachs has denied the allegations and stated that its customers were aware of the bets. It has been accused of various other ethical violations including insider trader based on information obtained from the U.S government and working to

Goldman Sachs has denied the allegations and stated that its customers were aware of the bets. It has been accused of various other ethical violations including insider trader based on information obtained from the U.S government and working together with dictatorial regimes and increasing prices of commodities through futures speculation. It was accused of helping Greece hide its debt by creating a special credit default swap to cover the high risk of Greece’s national debt. 

Goldman Sachs has donated money to both major American political parties during election cycles as well as the candidates and the super PACs of both parties. In 2016, Goldman employees donated $371,245 to the Republican National Committee and $301,119 to the Hilary Clinton presidential campaign but top employees were forbidden from donating to Donald Trump.

Market News, S&P 500

Will S&P 500 Hit New Record Highs?

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Will S&P 500 Hit New Record Highs?

The S&P 500 is arguably the most important benchmark in the financial markets.  Over the last few months, we have seen some amazing trends that have confirmed a bullish end to 2016.  But now that a lot of the initial optimism in stock markets has fully run its course, investors will be looking for new ways of profiting on a dynamic market that has been defined by bullish sentiment and low interest rates.

For the S&P 500, this has meant new record highs at a fairly regular clip, as investors start to price in the possibility of renewed economic optimism under the administration of President Donald Trump.  When trading this type of event in the market, traders can use the SPDR S&P 500 ETF (NYSEARCA:SPY), which can be traded using the MT4 platform that is made available by easyMarkets.

Stock Market Trends

When looking to make the best investments in the S&P 500, it is essential to understand the cyclical nature of the ways that stock market trends unfold.  If, for example, we were to look at the Elliott Wave Theory, then many would suggest that the markets unfold in a series of wave structures that can be forecasted in advance.  

On the other hand, practitioners of fundamental analysis will need to look at factors like price-to-earnings ratios and industry competition in order to determine which stock investment strategy is best.  So there does not necessarily need to be a one-size-fits-all strategy when looking to gain stock investment exposure in assets that are tied to the S&P 500.  

The world-famous stock benchmark is currently trading at record highs and when we think about the fact that the Federal Reserve has left the economy at relatively low-interest rate levels there is still clear scope that we could see stock market rallies in the S&P 500 index.

S&P 500 Trading Systems

When we are looking at the potential trading systems that can be used to trade the S&P 500, it is important to consider possibilities like options and contrarian strategies that are able to take advantage of stalling momentum or even complete reversals in major benchmarks like the S&P 500.  This is not always something that is considered by traditional stock market investors, but this is an investment strategy that can be used to profit from investments in the other direction when stock markets are trading near their all-time highs.  

Stock Price Chart: GOOG

In other cases, it makes sense to look at other stock market benchmarks like the Dow Jones Industrials and the NASDAQ.  These instruments have their own characteristics when we are looking at the ways stock market investors can implement a stance on the economic outlook.  But now that we have seen some more evidence with respect to the ways the Federal Reserve will probably proceed with interest rate policy over the next two quarters, there are ways for investors to capitalize on these trends as they unfold.  

Forex, Options, S&P 500

Dow Jones Investors: Technical Analysis Strategies in Daytrading

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Dow Jones Investors:  Technical Analysis Strategies in Daytrading

The price-weighted average of the most 30 prominent stocks traded on the New York Stock Exchange (NYSE) and NASDAQ is known as Dow Jones. In general, the stocks with higher market caps are considered in Dow Jones trading and this is important information when we are looking for ways to capitalize on stocks in live markets.  

Dow Jones Daily Bar Chart

Capture

Figure: Dow Jones Technical analysis strategy

Trading the Dow Jones is pretty effective with RSI and 200-day moving average. Forex moving averages can be found using an effective forex trading platform like the software offered by easyMarkets.  Traders draw trend line and channel to find potential trade setup. Unlike another trading strategy Dow Jones is traded with breakout strategy. Traders draw proper channel and trend line in the daily bar chart and wait for confirmation signal in the RSI after the breakout.

Trading Channel Support

In the above figure sell signal was initiated with the breach of channel support. Traders take the confirmation from RSI value. Since a value of RSI was below 50, the sell signal was valid.

The second trade was initiated after successful completion of the triple bottom in the bar chart. Traders went long after the new higher High which was created just above the 200-day moving average. Before going long, make sure that the value of RSI is above 50.Remember that we will go long only if the price is above 200-day moving average and for short the price should be below the 200 days moving average.

Understanding Time Frames

When you are using technical analysis strategies like this, it is always important to consider the time frame you are using in your approach.  There are some differences in the ways that markets operate in the short-term and long-term perspectives, and these time frames tend to be most useful for certain types of trading styles.  If you tend to have a more conservative approach, then it is usually preferable to adopt a long-term trading strategy as this will allow you to avoid many of the short-term fluctuations in price that can be seen on a short-term day trading basis.  These are factors that should be considered before you make the decision to put live funds into the active markets.