Posts Tagged ‘option’

Using Exchange Traded Funds For Covered Calls On Emerging Markets And Gold

Friday, February 10th, 2012

An ETF (exchange traded fund) is a collection of stocks that trades like a single stock. Many ETFs come with options available so investors can use them for covered calls. They make sense for covered calls because of the built in diversification they provide (important for smaller accounts). Because of the way ETFs are constructed, there is no single stock risk. If one of the stocks that is part of the ETF drops suddenly then the effect will be felt less by the ETF that contains that stock than by the stock itself.

Some exchange traded funds track specific indexes, allowing you an easy way to trade the index. For example, the symbol IWM represents an ETF that is comprised of 2000 stocks that make up the Russell 2000. When you buy IWM you are buying a collection of 2000 stocks. Other popular ETFs include QQQQ (for the NASDAQ 100) and SPY (for the S&P 500). And there are ETFs to track countries, sectors, or commodities. For example, EWJ tracks Japan, XLF tracks financial stocks, EWZ tracks Brazil, and GLD tracks gold.

The ETF with symbol GLD is an important one given the interest in owning gold. However, GLD doesn’t pay dividends. But, by using covered calls you can create dividend-like cash from gold, too. Just buy a gold ETF and write calls (in-the-money if you’re neutral to bearish on gold or out-of-the-money if you’re bullish on gold). GLD is by far the most liquid (meaning, most capital invested, and most highly traded) gold ETF and probably your best bet for covered call trading. Other ETF choices include DGL which has small open interest (not good), and UGL which is 2x leveraged and therefore quite volatile (not good).

Everyone needs some exposure to emerging markets for diversification. But financial information in other countries is hard to come by, inconsistent, and usually in a format that is difficult to digest. So it’s another good case for ETFs. The most popular emerging market ETF is EEM (iShares MSCI Emerging Markets Index Fund), which has nearly $41 billion in assets and is highly liquid. Another choice, if you want to limit your exposure to just China, for example, would be to use iShares FTSE/Xinhua China 25 (FXI).

There is one kind of ETF that you do NOT want to get involved with for covered calls, and those are the leveraged ETFs. Leveraged ETFs are designed to be two or three times more volatile than an unleveraged ETF. You can normally recognize leveraged ETFs because they have words in their names like “double”, “2x”, “ultra”, “triple”, “3x”, or “leveraged”. Leveraged ETFs are mostly the play thing of day traders and are not appropriate for conservative covered call investors. It can be tempting to do a covered call on one of these because the premiums are usually very high. But there’s a reason for those high premiums! Leveraged ETFs are, by definition, two or three times more volatile than their unleveraged counterparts.

Born To Sell’s site offers more information about covered calls. Covered calls can help you survive the next market meltdown. Here’s how: https://www.borntosell.com/covered-call-blog/market-meltdown.

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Grasping High Yield Covered Calls

Wednesday, December 28th, 2011

Many traders who are conservative use a strategy called “covered calls”. One type that increases the return on investments is high yield covered calls (HYCC). However, this strategy can be confusing and requires some research.

For those who are new to the stock market, it is important to remember that stockholders have rights. For instance, they can buy and sell stocks at any time for the price currently set by the stock market. When using a HYCC strategy, this right to make transactions is sold to another person for a predetermined cash price.

This set price, or strike price, is paid when a transaction is made. There is also a set expiration date after which the stock reverts to the seller. The HYCC is actually a contract that allows the seller to release underlying stock at the set price to the buyer. When the transaction is ‘covered’ the stockholder owns the shares outright.

Utilizing the HYCC strategy is one of the best ways to get the greatest return on an investment, which can be as much as 5%. In order not to come out with less than satisfactory results, understanding how this program works is essential. This is especially important when the market becomes volatile as it is now.

The basic fact is that stock prices vary greatly. Whether they go up, down, or remain stable has a great deal to do with potential returns. An HYCC option is a way to ensure a positive return regardless of what the market is doing because presets a price. As long as a transaction is set with an expiration date sometime in the future and is completed prior to that date, the seller is ensured that the amount received will result in a profit.

There is a premium paid for HYCCs and, when selling stock, this means the premium plus the price agreed to is paid. This generally works out well unless the stock price spikes, at which time there may not be as great a gain as otherwise. If the stock goes down or remains stable, however, there is a possibility that the stockholders will retain the shares upon expiration, but gets to keep the premium anyway.

High yield covered calls can be very confusing at first. However, by utilizing a site that has a tutorial, the demonstration and visual aids can provide clarification. When the stock market is volatile, such as it is today, it becomes even more important to have all the help you can get.

The Born To Sell web site is all about optimum covered call options. Most people think income investing with options is hard. But it’s easy. Here’s how: https://www.borntosell.com/covered-calls/top-covered-calls.

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The Investment Strategy Known As Covered Call

Tuesday, December 6th, 2011

Those who are active in stock market investments are well aware of the technique of covered calls strategy. Traders who are experienced and new investor need to understand the covered call concept. These investments require one to know the concepts of risk and profit principles.

The particular option is known as a limited-risk strategy. Basically, it involves a seller presenting stock for sale which gives a buyer the right to buy at a predetermined price for a specific length of time. This can work out well for the buyer if the value of the option increases.

The buyer has a certain length of time to complete the sale or release the option. There is speculation involved in this kind of transaction for both the buyer and the seller. If the seller owns the stock he does not have the danger of problems encountered with ‘naked call writing’ which sells unowned stock on speculation.

Time has proven that there is a larger number of buyers who do not exercise their option to buy than there are those who do. This percentage in favor of the seller can mean a profit depending on how much stock he is selling. In addition, the premium received for each 100 shares sold is his to keep.

This type of stock dealing is often used when the seller has a portfolio with stock held for long-term gain. This stock, as a rule, fluctuates very little in value or may be expected to drop. Before working out of one’s portfolio, however it is important to be able to have the skill of good stock market analysis.

Many traders prefer this kind of option speculation because it offers a chance to make a profit by purchasing 100 shares by paying a fee. However, it takes a study of the stock market, an in-depth analysis and covered calls strategy to determine which stocks are apt to increase in value over the allotted time. The stock’s growth record and the latest financial news is necessary prior to making a decision.

For additional tips on call options please visit this website.

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how to Investment in stock

Thursday, December 1st, 2011

There is quite a bit to learn about each different investment type. The stock market can be a big scary place for those who know little or nothing about investing. Fortunately, the amount of information that you need to learn has a direct relation to the type of investor that you are. There are also three types of investors: conservative, moderate, and aggressive. The different types of investments also cater to the two levels of risk tolerance: high risk and low risk.

Chicago, IL – October 28, 2011 – Zacks Investment Research presents their newest list of stocks and ETFs featured in their weekly Equity Market Anomalies article, which describes how to profit from stock market opportunities. The investments in this article focus on the profitable Seasonal Anomaly:

the stock market and Halloween have a long-documented association. The Halloween Effect is one of many “Seasonal Anomalies.” Dr. William Ziemba, among others, is well known for his work on seasonal stock market anomalies, including the Halloween Effect. In a nutshell, the Halloween Effect consists of buying the market six trading days before Halloween and selling come May 1st. The market could be bought using either S&P 500 or Russell 2000 futures or ETFs.

Conservative Investment

Conservative investors often invest in cash. This means that they put their money in interest bearing savings accounts, money market accounts, mutual funds, US Treasury bills, and Certificates of Deposit. These are very safe investments that grow over a long period of time. These are also low risk investments.

Fifth Third LifeModel Moderate B Class Information Fifth Third LifeModel Moderate A LMDAX Fifth Third LifeModel Moderate B LMDBX Fifth Third LifeModel Moderate C LMDCX Fifth Third LifeModel Moderate Inst LMDIX

The fund was incepted in March 2004 and is managed by American Express Financial Corporation. The fund seeks the highest level of total return that is consistent with a moderate aggressive level of risk. The fund invests primarily in equity securities and also invests a moderate amount in fixed income securities. The fund may be most appropriate for investors with an intermediate-to-long term investment horizon. Dividends and capital gains are distributed annually

Sustainable Growth Rates Earnings growth is what fuels aggressive growth stocks. Therefore, it is of utmost…

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The Differentt Types of Investments During difficult economic conditions, the demand for essential services such as utilities remains more or less constant. Since this category of funds protects investments during a downturn, they are viewed as a defensive choice, and have gained strength in current market conditions. They are also an excellent choice for investors seeking a steady income flow from consistent dividends yields. Investments in this sector are usually considered to be a conservative investment option. However, many utilities funds are now venturing into emerging markets and provide appreciably higher returns at relatively lower levels of risk.

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