Many traders and investors dream about making consistent profits in the stock market. Typically, investors would turn to fundamental analysis for the medium to long term capital gains while traders would try to time the market using technical analysis to spot reversals or advantageous entry and exit with the first signs of trouble. Unfortunately for everyone, the stock market is a zero-sum game. What this means is that you should lose to someone else. Profits The market exchanges serves as a distribution center of wealth. Essentially, without knowing it, many novice investors and traders are actually trading against the professional and institutional traders. Who do you think will win most of the time? The answer is obvious. Credit Spread is one of the lesser known trading strategies available to the options trader. This strategy is call "credit spread" because you actually collect a profit upfront or a credit when you are in a credit spread position. Credit spreads are directional plays - bull or bear. The bull spread is called Bull Put Spread while the bear spread is known as the Bear Call Spread.
The Credit Spread Option Trading Strategy can be constructed to have a low risk investment vehicle. Using this strategy, we are able to use options prices to our full benefit. At the time Time decay works to our advantage the closer it gets to expiration. With this in mind, the time may very well be in our quest for profit. Our ally We just need to know how to use them to help us. Your time
Fact - about 80% of all options expire worthless, it is logical that serious and long-term investor only needs to write credit spreads for a living.
How will we benefit from Credit Spread?
Assuming that we are writing a Bull Put Spread:
If the stock moves up, we make money.
If the stock moves sideways, we make money.
If the stock moves lower, but is above the strike price we sold our bucket, we still make money.
I do not know about you, but any trade that you make when your stock moves higher, as it moves sideways, or even when it moves lower improve your chances of winning. Complete profit Writing credit spread is a powerful trading strategy because, if written correctly, it offers room for error and you would still profit even if you're wrong.
The closer it is to expire (most of the time 3 rd Saturday of the month), the better it is for us. We make money with the passage of time. Many seasoned credit spread traders like to see if their pay day. 3rd Saturday of the month
The biggest problem in Stock Options Trading is the race against the clock. Over 80% of options expire out-of-money or, in simpler terms, expire without value. If you bought options, this means that you would have lost in trading your money. So with this fact in mind, use an Options Trading Strategy that you would put on the other side of the table. And that is a time benefit trading strategy called using Credit Spread.
Copyright 2005 William Tan
Friday, 28 February 2014
Saturday, 15 February 2014
Samsung the Elephant
Samsung dominates life in his own country like no other company in the world. But the slogan "what is good for Samsung is good for South Korea" is open for debate.
The South Korean economy is a paradox. It has become the third largest economy in Asia after Japan and China. Its 48 million citizens in a generation enjoyed a leap in their standard of living and no country has more than South Korea benefited from the rise of China, which has become an important export. Its sovereign credit rating was recently upgraded due to reduced tensions with North Korea and it enjoys the foreign exchange reserves of more than $ 200 billion dollars. The Korean people have full satisfaction for a job well done, but instead are rather a disgruntled lot.
The per capita income is about a third that of the OECD average. Economic growth is expected in the 3-4% range closer to a mature economy than an Asian tiger. Unemployment is still a problem and a stronger currency and relatively high wages are shrinking exports which account for 40% of its economy. Output with only 7% this year after a 31% jump last year. After a credit binge, average net consumer loans is equal to 100% of disposable income and the Bank of Korea has recently bumped its benchmark rate for the first time in three years.
What is going on here? Somewhat surprisingly, South Korea is experiencing many of the same issues that Americans complain outsourcing. It was the largest investor in China last year with more than $ 6 billion fixed investment. His biggest steelmaker Posco announced 12 billion dollar investment in a steel plant in India, where the 24 steel companies is already running. Hyundai produces 600,000 cars in China and its subsidiary Kia makes 150,000 more.
Meanwhile, Samsung Electronics has Asia's largest technology company by market capitalization become (bigger than Sony), and its largest maker of memory chips and flat-panel displays and mobile phones. Samsung has a credit rating higher than sovereign rating of South Korea. With 62 branches, the Samsung group dominates life in Korea like no other company in history. It represents 15% of the country's total economic activity, 25% of the capitalization of the KOSPI stock market and the taxes it pays represent almost 10% of total government revenue!
Samsung, an increase of 25% so far this year, is still attractive at about 11 times consensus 2006 earnings forecasts and operating profit increased by 29% in the third quarter. Despite third quarter net profit falls 30%, it is expected a strong fourth quarter. There is a shortage of LCD television panels and flash memory chip global market share of over 60%. If prices have fallen flash chip sales have risen 40%.
But the company is not a great game on the South Korean economy. Rather, it is a global game in three major markets and the expected payoff of his extraordinary commitment to R & D. The South Koreans are dissatisfied because the five largest companies are growing outside the country more than in it and at a stage of development where it should be more competitive production. Onshore The challenge is the low cost production platform with massive scale just next door - the problem is China. Samsung already has 29 factories and 50,000 employees in China.
Because China has already begun to things such as machine tools, that the South Koreans were busy exporters in 2003 and 2004 produce, South Korean planners believe must quickly transform into a finance, communications and transportation hub - akin to the role of Singapore and Switzerland. The question then they have the right companies, the right skills and what is its competitive advantage?
Together, Samsung, POSCO, KEPCO (Korea Electric Power) and SK Telecom accounted for nearly 50% of the South Korean stock exchange's market capitalization. For a basketball analogy, the South Korean starting five used are strong, but the bench is a little thin and his team has lost.'s Home advantage The problem is not Samsung, but rather that they need about ten more Samsungs.
The top four companies also make up 40% of South Korea iShare (Ewy) ETF is up 29% so far this year. Samsung alone accounted for 23% of this ETF and buying the iShares gives you more exposure to the top ten South Korean companies. I trim our position in the iShares South Korea to take some profits off the table and with the expectation that the stronger won and higher interest rates will lead to a slowdown in exports. Together with the likely return of the North Korean problem, this may very well undermine investor confidence.
Bottom line: buy Samsung based on valuation and top notch global reach and R & D, but expect tougher going for the South Korean economy as China changes its robust export market for direct competitor.
The South Korean economy is a paradox. It has become the third largest economy in Asia after Japan and China. Its 48 million citizens in a generation enjoyed a leap in their standard of living and no country has more than South Korea benefited from the rise of China, which has become an important export. Its sovereign credit rating was recently upgraded due to reduced tensions with North Korea and it enjoys the foreign exchange reserves of more than $ 200 billion dollars. The Korean people have full satisfaction for a job well done, but instead are rather a disgruntled lot.
The per capita income is about a third that of the OECD average. Economic growth is expected in the 3-4% range closer to a mature economy than an Asian tiger. Unemployment is still a problem and a stronger currency and relatively high wages are shrinking exports which account for 40% of its economy. Output with only 7% this year after a 31% jump last year. After a credit binge, average net consumer loans is equal to 100% of disposable income and the Bank of Korea has recently bumped its benchmark rate for the first time in three years.
What is going on here? Somewhat surprisingly, South Korea is experiencing many of the same issues that Americans complain outsourcing. It was the largest investor in China last year with more than $ 6 billion fixed investment. His biggest steelmaker Posco announced 12 billion dollar investment in a steel plant in India, where the 24 steel companies is already running. Hyundai produces 600,000 cars in China and its subsidiary Kia makes 150,000 more.
Meanwhile, Samsung Electronics has Asia's largest technology company by market capitalization become (bigger than Sony), and its largest maker of memory chips and flat-panel displays and mobile phones. Samsung has a credit rating higher than sovereign rating of South Korea. With 62 branches, the Samsung group dominates life in Korea like no other company in history. It represents 15% of the country's total economic activity, 25% of the capitalization of the KOSPI stock market and the taxes it pays represent almost 10% of total government revenue!
Samsung, an increase of 25% so far this year, is still attractive at about 11 times consensus 2006 earnings forecasts and operating profit increased by 29% in the third quarter. Despite third quarter net profit falls 30%, it is expected a strong fourth quarter. There is a shortage of LCD television panels and flash memory chip global market share of over 60%. If prices have fallen flash chip sales have risen 40%.
But the company is not a great game on the South Korean economy. Rather, it is a global game in three major markets and the expected payoff of his extraordinary commitment to R & D. The South Koreans are dissatisfied because the five largest companies are growing outside the country more than in it and at a stage of development where it should be more competitive production. Onshore The challenge is the low cost production platform with massive scale just next door - the problem is China. Samsung already has 29 factories and 50,000 employees in China.
Because China has already begun to things such as machine tools, that the South Koreans were busy exporters in 2003 and 2004 produce, South Korean planners believe must quickly transform into a finance, communications and transportation hub - akin to the role of Singapore and Switzerland. The question then they have the right companies, the right skills and what is its competitive advantage?
Together, Samsung, POSCO, KEPCO (Korea Electric Power) and SK Telecom accounted for nearly 50% of the South Korean stock exchange's market capitalization. For a basketball analogy, the South Korean starting five used are strong, but the bench is a little thin and his team has lost.'s Home advantage The problem is not Samsung, but rather that they need about ten more Samsungs.
The top four companies also make up 40% of South Korea iShare (Ewy) ETF is up 29% so far this year. Samsung alone accounted for 23% of this ETF and buying the iShares gives you more exposure to the top ten South Korean companies. I trim our position in the iShares South Korea to take some profits off the table and with the expectation that the stronger won and higher interest rates will lead to a slowdown in exports. Together with the likely return of the North Korean problem, this may very well undermine investor confidence.
Bottom line: buy Samsung based on valuation and top notch global reach and R & D, but expect tougher going for the South Korean economy as China changes its robust export market for direct competitor.
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