Trading Volatility and Adjustments with Options

By Donald Scott

In this article we'd like to explain adjustment beliefs which can be practical in running an options account. This individual strategy can be practical to each and every type of option spread such as the Credit Spread, Iron Butterflies, Iron Condors, Double Diagonals, as well as others.

As this is being written in October of 2008 the VIX is as high as it's been. Look at a 5 year chart and see where we are. This level of volatility has made options quite expensive. Before we make any adjustments to our portfolios, we always think about the volatility. Where is it now and where is it going? Should we be buying or selling options at this moment?

A very common mistake that option traders make is buying or selling options at the wrong time. If we buy options when the volatility is at a high, we are entering a trade with odds against us. Option traders that do this don't realize why their options lose value so fast. Every option trading adjustment should be made by thinking of the option Greeks and volatility. We really need to understand these fundamentals to succeed in the options market.

A STUDY IN TODAY'S OPTION MARKET

Let's say that we have on an Iron Condor, and the market has been in an uptrend for two weeks. If this is the case, then we might be looking at an adjustment right? We are getting close to our short strike, and we need to do something to manage our risk. In this situation the IV of the asset has probably been dropping, since the IV normally moves the opposite direction of the underlying being traded. So, what do we do? Well, if the IV is at support and the technicals indicate that it might rise again, then we'd be looking at doing a positive Vega adjustment.

There are many option strategies and morphing concepts, so how can we make a good decision on what to do in this case? A critical step in the decision making is graphing the current volatility inside the options market. We usually use the VIX and RVX. Is the volatility bottomed and increasing? Is it at a peak and coming back down? Is it barely moving? What is happening in the options market and where is the volatility in relationship to its history? We additionally need to study the technical analysis of our traded asset. Where is the price headed? We have to comprehend Vega and the other option Greeks to accomplish high probability changes to our positions. In today's example, if the volatility prediction is up, it would make sense to add some positive Vega to our portfolio.

Some positive Vega strategies include Broken Wing Butterflies, Debit Spreads and Calendars. There are many more techniques which we discuss in our mentoring program.

To conclude, if the stock market moves against you when you are in an option spread, then always study the IV of your underlying asset. Knowing what is going on with volatility can really help you make better decisions on managing your portfolio. This will definitely reduce your exposure to risk while increase your chances of being a profitable trader. - 23200

About the Author:

Want to find out more about Option Trading? Then visit San Jose Options Mentoring on how to choose the best Options Course for your needs.

Currency Profile Of US Dollar (Part II)

By Ahmad Hassam

You should understand the role of monetary and fiscal policy in strengthening or weakening the US Dollar or that matter any other currency is important. Who makes the monetary policy in any country? It is the Central Bank of that country. The Federal Reserve Board (FED) is responsible for making the monetary policy of United States. Through its Federal Open Market Committee (FOMC), FED sets and implements the monetary policy. The voting members of FOMC are the seven governors of FED plus five presidents of the district reserve banks. The meetings of FOMC are widely watched by the analyst for interest rate announcements and changes in growth expectations. Eight meeting of FOMC are held every year.

FED uses the monetary policy to control inflation, unemployment and balanced growth. FED has a high degree of independence in setting the monetary policy. FED has the mandate for long run price stability and sustainable economic growth. In other words, fighting inflation and unemployment are the two most important jobs of FED Chairman. The most important tool used by FED is its Open Market Operations.

Open market operations involve FEDs sale or purchase of government securities that includes treasury bills, notes and bonds. In increase in FEDs purchases lowers the interest rates while selling of these securities raises the interest rate.

The primary interest rate that is affected by these operations is the Federal Fund Rate. Federal Fund Rate is the key policy target of the FED. It is the interest rate at which the banks lend overnight to one another.

The other main pillar of economic policy is the fiscal policy. Who controls the fiscal policy? The governments in almost all the countries! Fiscal policy means the amount of taxes and government spending for a given year. The US fiscal policy is in the control of US Treasury. In fact it is the US Treasury that actually determines the US Dollar policy.

You should always try to watch the US Treasury views as changes to that view is very important for the currency markets. For example, US Treasury can give instructions to the New York Federal Reserve Board to intervene in the forex markets by actually buying or selling US Dollars if the US Treasury feels that the US Dollar is under or overvalued.

Over 90% of all currency deals involve the US Dollar. The heavily traded currency pairs in the global currency markets are EUR/USD, USD/JPY, GBP/USD and USD/CHF. These currency pairs represent the most frequently traded currency pairs in the global markets. As you can see, all these currency pairs involve US Dollar on either side of the pair. So the most important economic data for the global currency markets is the US Dollar fundamentals.

The US Dollar moves in opposite direction to the gold. There is an almost perfect negative correlation between the US Dollar and the gold prices. This inverse relationship stems from the fact that gold is measure in US Dollars.

Gold is commonly viewed as the ultimate safe haven commodity by the investors all over the globe. When US Dollar depreciates due to global economic uncertainty like the present, gold appreciates. You must know that the gold prices are going up right now. - 23200

About the Author:

Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in day trading stocks and currencies. Try Strignano's Forex Signals free. Discover a revolutionary Forex Robot Trading System!

Some Tips On Forex Trading

By Jason Myers

In general, the response is positive, and you can be encouraged to embark on trades in foreign exchange. The main advantage of trading in foreign currency is that, though it is risky, the rate of money exchange is traded 24 hours a day. This is different from the conventional Stock Exchanges with opening and closing periods across various time zones.

When you examine the present FOrex Trading market, there are some factors you need to take into account. Among these include your risk exposure and management, as well as your actual involvement in trading versus being a novice trader; and likewise your willingness to proceed with Foreign exchange Trading with a learn-first-practice-second mindset.

Your ability to deal with risk, particularly highly volatile foreign exchange, must be assessed when thinking about forex trading in your risk portfolio. The profits may be rewarding in a foreign currency sell, but good profits correspondingly imply high risk of loss. Significant losses, if you are careless. Play the forex trading with a smart game plan.

If you are a veteran market trader, from the shares platform, then you may do well with currency estimation. When you engage in foreign currency prediction, make a point to educate yourself first. Before making a plunge like a reckless gambler, obtain information. Make wise decision to minimize unneeded loss and step-up the prospects of good profits.

Have an exit plan. If you are well versed with the market behavior, you'll see some patterns of movement influenced by different economic pressures. The currency rate will peak and trough and your goals are geared towards making a deal when there is a trough, and exit at certain point close to the peak. Avoid waiting for the rate to reach its maximum level, since this is when you could take a snag if your timing is just off-key. Always bear this in mind! - 23200

About the Author:

Jason Myers is a professional writer and he writes mostly about daily forex trading news. He's also interested in forex daytrading.

Are You Wondering How Personal Budgeting Can Help You Avoid Financial Ruin?

By Emma Elvie

We decided to share some tips about personal budgeting in hopes of being able to provide some valuable tips and advice that can save you from financial ruin and filing bankruptcy. Listed below are several tips that will enable people to save more money.

Clip coupons: This is the single most important rule of personal budgeting. Why? Simply because a few minutes spent clipping coupons could end up saving you multiple dollars in the checkout line.

Buy in bulk: If your favorite products are on sale, buying in bulk may cost you more at present but could end up saving you a lot in the future. Some good examples are items that do not have an expiration date, such as soap, shampoo, toiletries and other household items. Canned foods, which carry a long expiration date, are also ideal for buying in bulk.

Begin putting your pocket change in a jar each month this is another great personal budgeting plan that can help you. As you continue to collect your loose pocket change you will notice that it will add up quickly; before you know it you will have an extra $50 or $100 per month.

When it comes to personal budgeting most people do not give any thought to their coins; they usually just get rid of it because it is not a dollar bill. However when it comes to personal budgeting it is vital that you start focusing on everything.

Start paying yourself by putting a small portion of your check into a savings account. If you can begin by putting at least 10-20% of each check into a savings account, if you can not do that then just start by putting something aside.

Impulse shopping: People who do this type of shopping usually end up regretting the fact that they did it. If you want to avoid buyers remorse then the next time you want to make a purchase; take some time out. If you stop and take a couple of days before making the purchase you will be able to think rationally to see if you can afford it or not.

Shop the sale racks: Everyone enjoys sprucing up their wardrobe now and then so, when it comes time to add a few new pieces of apparel, stop by the sale rack for big savings. There is nothing wrong with keeping a few extra dollars in your pocket, which can be later be used for life's little essentials.

Of course these a just a few of the tips that you can use to help you with your personal budgeting so that you can avoid filing bankruptcy and staying on top of your finances. If you want to learn more about handling your financial obligations and avoiding bankruptcy then be sure to visit the site below. - 23200

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Saving Money Tips Get The Facts! Tips To Save Money

Retirement Planning: A Primary Source of Money

By Doeren Mayhew

Americans greatly depend on just two major sources with regards to retirement income namely the Social Security and the Employer Pensions. However, most of these people won't be able to depend on these alone to render them income since Social Security benefits are becoming less and the number of employers who provide pensions are becoming few.

This is why personal savings are essential for this might be the only viable solution when it comes to retirement income.

A person is only eligible to receive social security benefits if he is consistent in his contributions amounting to that of at least 10 years. The amount of benefit is not the same for every individual. It is determined by the amount of your contribution and the age at which you choose to receive the benefits.

The good side about this is that the benefits are set to go up with inflation and the bad side is that your earnings in determining the benefits are capped. This just means that those who earn huge income will get less of their usual earnings compared to those whose income is below the level of cap.

In order to receive full benefits from your social security, you need to be on the right retirement age. The retirement age before is 65. However, actual required full retirement age is increasing for those born in 1938 or later. It reaches the ripe age of 67 for individuals born after 1959.

If you want to estimate the benefits, you can log on to the website of Social Security Administration at www.ssa.gov. Another way is to review the annual statement that will be sent by the SSA around three months prior to your birthday. If it has not arrived yet, then you can just request online.

Early vs. Late Acquisition of Benefits
You can choose to start getting your benefits even as early as 67. However, expect that you will receive fewer benefits compared to if you have waited for your actual and full retirement age to come first. For instance, 66 is your full retirement age and you decided getting your benefits by age 62. Then you will be receiving just around 75% of the amount you are supposed to have. For every month that you wait patiently for until you reach the actual age, your monthly benefits are set to increase. So in this example, by age 63, you will get about 80% of the actual amount.

On the other hand, if you decide to take the benefit years after your full retirement age, you will receive an increase in payment. Each year beyond your full retirement age equals an additional 8% per month. So, if your full retirement age is 66 and you choose to get your benefit at age 30, you will receive a monthly benefit of 132% of the amount you should have received had you starting getting the benefit at age 66.

Remember that if you will get the benefits earlier, you will be paying less and get more in the process. The reverse will happen if you will opt to delay in getting your benefits. So If you want the benefits to work to your advantage, you have to know when you are going to receive them.

Spousal benefits is also available
Even if your spouse does not have any earnings with Social Security, he or she will still get the benefits because of your record. Your children will also be eligible but this will depend on their age.

For your spouse, he or she will get 50% of your benefits once you have reached your retirement age. You will also lessen your spouse's benefit if you will get your benefits earlier.

Always remember that your spouse may be entitled to his or her own set of benefits as well. If this is the case, then he or she will surely be paid higher. - 23200

About the Author:

This data is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional advice or opinions and assumes no liability in connection with its use. Please contact Doeren Mayhew for more information.