Happy Holidays !!! to Everyone and a Prosperous New Year 2014 !!!
We thank you for your support and we do not forget !!!
Thursday, January 2, 2014
Wednesday, May 2, 2012
Buying Options on Stock Splits
In order to buy options on stock splits and to make the investments on these stocks worthwhile, it is imperative that a proper understanding of what stock splits are should be in order. Simply put, what is referred to as a stock split or a stock divide is the way in order to increase the number of shares in one company, but the market capitalization of the company remains and no dilutions happen in the process of the split. This can be best understood by way of an example. Say a company with 20 shares is priced at $10 each. If the company decides to do a 2-1 split, then there will be now 40 shares that are available to the company's stockholders. After the split, the price of each stock will be adjusted.
With the split, the cost of one stock stands at $5. Any ratio can be used by the company but the ratio that is usually used is the 2 for 1 split, the 3 for 1 split and the 3 for two splits. Some people will argue that with buying options on stock splits come higher stock prices. Research and experiences suggest that this isn't true. One good thing that can be done by splitting the stocks of one company is that this can increase the liquidity of the stock. In layman's terms, the stock will move better and stocks can exchange hands faster. Investors will snap up stocks that cost $ 5 dollars fast than stocks that cost $10 each.
If the effects of buying options on stock splits can't be substantiated by research and experience, then why do a number of investors buy options on stock splits? This could be explained by psychological factors.
For example if investors will expect and believe that stock splits can increase the price of shares, then stock prices may increase as well. Often stock splits can be a vote of confidence of the company, as a split can signify that the management of the company has confidence in the company's future. The stock split has a number of so-called stages. These stages include the pre-announcement, the announcement, the dormancy, the pre-split run, the split execution and the post split depression. The pre-announcement of the split will tend to have an impact on the stocks as stocks will climb faster than usual. The announcement of the split will usually be the time when the price of the stocks of the company jumps sharply. And the valuation of the stocks may increase for a period of time. After announcement of the stock split comes dormancy. This is the time when the price of the stock of the company will level off.
There are some instances when the stock of one company doesn't enter this phase as the price of stocks tend to increase some more. The split execution can be a great time to buy stocks on split as well. The post split depression is where the excitement tapers off. This is also the stage where the short sellers and who has low-risk opportunity to profit from the brief pull back. Most stocks will retreat after this time, but some will continue to post gains. This is the challenge to those who may want to engage in buying options on stock splits.
Ian Pennington is an accomplished niche website developer and author.
To learn more about buying options on stock splits [http://yourinvestingadvice.info/buying-options-on-stock-splits], please visit Your Investing Advice [http://yourinvestingadvice.info] for current articles and discussions.
What Happens When A Stock Splits?
Have you ever wondered what happens when a stock splits? Is it a good thing for the owners of the stock or is it a bad thing? What should you expect if the stock you own splits?
First, let us look into why a stock splits and what happens when a stock splits. Stocks split normally because they reach a higher than desirable price for the market or because the company does not believe that buyers will be willing to pay the price of the stock. This is a decision that is made solely by the board of directors for the company. Some companies prefer to have their stock split and others don't like to allow their stock to split.
When a stock splits the price gets cut in half and the owners of the stock double their shares. This means that if you own "X" stock and it is at the price of $50 and you own 100 shares or the equivalent value of $5,000 of the stock. Then, when this stock splits you would own 200 shares worth $25 each for a total value of $5,000. This can be a very exciting thing when it happens.
The stock splitting will not affect the total value of the stock, but it will affect the value of each share. This can be a very good thing for the owners of the stock. Typically when a stock splits it will encourage more buyers to purchase shares and can cause the price to increase again after the split. It also shows that the company has a strong value in the market.
One great example of a stock that has split over and over again and climbed up to a new high price and split again is Lowe's Home Improvement Stores. This stock has had a history of splitting and has split 5 times in the past 12 years, and yes that is a lot of splitting. The owners of this stock have benefited from a stock that has split and climbed back up in price and split again.
So if you own a stock and it splits, then you can expect to have twice as many shares that are all worth half as much, per share, than before. The total value of the stock will not change and the number of shares will double. So, now you know what will happen if your stock splits. When it happens you should celebrate and be excited about it.
Read more about the stock market and investing here:
Buying Options on Stock Splits
Any investor or option trader should be knowledgeable on what will happen in the event of stock splits when buying options on stock splits. If you are a beginner option trader, the first question that will come into your mind is "what happens to options during stock split?" This question is important for those who are in the option trading business because stock options do really split. It is best to know what is going on in every amateur option trader to avoid confusion and disarray that may lead to wrong courses of actions.
Basically, a stock split only happens when shares of a particular company are splitted into smaller options but can be able to maintain the overall share capital. One example is when a company has 10,000 shares of option trading at $50 whereas these shares can be splitted down to 20,000 shares amounting to $25. This example is the most common form of stock splits. It would be best if you know how to hold your shares before buying options on stock splits. When stock options split, the company automatically adjusts the options. The adjustments are done through the assistance of an option trading broker. The proportion of the split will be reflected in a way that you will end up with a net position value amount that is matched before the event of splitting.
In buying options on stock splits, the investor or the option trader should have some knowledge on the drawback. Drawback is the process being done before the adjustments to stock options are applied. It is like a fair deal that help increases the quantity of option shares that you are holding. These option shares may or may not conform on your option trading plan. The more option shares you hold, there is a tendency for a higher real dollar loss for a certain term most particularly the short term.
Basic strategies are great help when buying options on stock splits since these will identify the optimal period of investment during the opportunity of stock split, which is commonly called by some investors and option traders as the "sweet spot". These strategies are already tested in the stock market since the beginning of 1975 where stock splits events have been very severe. However, there are still many investors and options traders who believe that stock splits can bring value to the stock market data.
A proprietary software was already developed that will give good picks for those buying options on stock splits. Apparently, not all events of stock splits are advised as good picks by the software since not all of it is meeting the criteria. If planning to buy options on the event of stock splits, the process usually starts through diligent observation on some stock split announcements. In this process, all pertinent information would be easier to understand.
Candis Reade is an accomplished niche website developer and author. To learn more about Buying Options on Stock Splits [http://fastinvestingstrategies.info/buying-options-on-stock-splits], please visit Fast Investing Strategies [http://fastinvestingstrategies.info] for current articles and discussions.
How to Make a Profit on a Stock Split
Investing in the stock market can be an incredibly hard thing to do. There's so much to learn about, and things seem to change overnight. Just when you get something figured out, the rules go and change themselves and you have to learn about a thing all over again!
One thing that seems to confuse people the most is the Stock Split. Most people don't know what to do when a stock that they own splits. Should you be happy? Should you be worried? Should you sell your stock? Should you buy more? Is it a good sign? Is it a bad sign? No one really seems to know. It SEEMS like it should be a good thing, but how can you be absolutely sure?
That's exactly what I want to talk about in this article today. When you're done reading, you should have a fairly good idea of everything you ever needed to know about stock splits and whether or not they are actually a good thing for your stock market investment portfolio or the end of the world as some people might have you think!
So before we get into this in any greater detail, I should first explain exactly WHAT a stock split is. Basically, a stock split is exactly what it sounds like. Your stock splits in every way.
If you owned one share of stock that was currently priced at $100, you will now own two shares of stock that each have a value of $50. Your current price level is the same....which is $100 (1 share at $100 or 2 shares at $50 each, it all comes out to the same $100).
Because of that fact, many people who really know what they are talking about suggest that a stock split is a non-event! What's the difference? (they say). Well, for the most part, they are right. But there are some things to take into consideration.
People buy stock based on price points. Some investors may not be able to afford an expensive stock that's trading around $100, but they would like to buy the stock if it was trading around $50. So splitting stock may cause more people to buy it in the future. When more people want to buy a stock, its value generally increases due to the effects of supply and demand. While technically not true (any first year economics student can explain that you haven't actually increased demand, you have just moved to a lower or higher point ON the demand curve) the logic seems to appeal to most everyday investors.
The two for one (or 2:1) split that I described is only one type of stock split that we see in the stock market today. Another common split is the four to one split (or 4:1). In this case if the stock was trading at $100 per share and splits four to one, you would now own four shares of stock that are each valued at $25 per share. Again we see that you are still left with $100 worth of stock (1 share at $100 is the same as 4 shares at $25 each).
Many times companies that split their stock are up to something. They may want to use shares of stock to go after other companies, purchasing them with their own stock. A stock split gives a company more shares to use to buy another company.
Likewise, a company may issue s stock split as a way to create a takeover defense against another company taking over them! Sometimes stocks will be split, creating different stocks with different voting powers that make it difficult for outsiders to gain control of a company.
Whatever the reason, you should be wary of a stock split because technically, as I've mentioned above, they serve no actual purpose. So if a company takes the time and expense to split it's stock, it is almost certainly up to something and you should keep your eyes open!
Jason Markum has been writing articles online for over thirteen years. When not writing about investing, Jason runs a very nice double curtain rods web site where he reviews ceiling mount curtain rods for your home.
Buying Options on Stock Splits
In order to buy options on stock splits and to make the investments on these stocks worthwhile, it is imperative that a proper understanding of what stock splits are should be in order. Simply put, what is referred to as a stock split or a stock divide is the way in order to increase the number of shares in one company, but the market capitalization of the company remains and no dilutions happen in the process of the split. This can be best understood by way of an example. Say a company with 20 shares is priced at $10 each. If the company decides to do a 2-1 split, then there will be now 40 shares that are available to the company's stockholders. After the split, the price of each stock will be adjusted.
With the split, the cost of one stock stands at $5. Any ratio can be used by the company but the ratio that is usually used is the 2 for 1 split, the 3 for 1 split and the 3 for two splits. Some people will argue that with buying options on stock splits come higher stock prices. Research and experiences suggest that this isn't true. One good thing that can be done by splitting the stocks of one company is that this can increase the liquidity of the stock. In layman's terms, the stock will move better and stocks can exchange hands faster. Investors will snap up stocks that cost $ 5 dollars fast than stocks that cost $10 each.
If the effects of buying options on stock splits can't be substantiated by research and experience, then why do a number of investors buy options on stock splits? This could be explained by psychological factors.
For example if investors will expect and believe that stock splits can increase the price of shares, then stock prices may increase as well. Often stock splits can be a vote of confidence of the company, as a split can signify that the management of the company has confidence in the company's future. The stock split has a number of so-called stages. These stages include the pre-announcement, the announcement, the dormancy, the pre-split run, the split execution and the post split depression. The pre-announcement of the split will tend to have an impact on the stocks as stocks will climb faster than usual. The announcement of the split will usually be the time when the price of the stocks of the company jumps sharply. And the valuation of the stocks may increase for a period of time. After announcement of the stock split comes dormancy. This is the time when the price of the stock of the company will level off.
There are some instances when the stock of one company doesn't enter this phase as the price of stocks tend to increase some more. The split execution can be a great time to buy stocks on split as well. The post split depression is where the excitement tapers off. This is also the stage where the short sellers and who has low-risk opportunity to profit from the brief pull back. Most stocks will retreat after this time, but some will continue to post gains. This is the challenge to those who may want to engage in buying options on stock splits.
Ian Pennington is an accomplished niche website developer and author.
To learn more about buying options on stock splits [http://yourinvestingadvice.info/buying-options-on-stock-splits], please visit Your Investing Advice [http://yourinvestingadvice.info] for current articles and discussions.
What Happens When A Stock Splits?
Have you ever wondered what happens when a stock splits? Is it a good thing for the owners of the stock or is it a bad thing? What should you expect if the stock you own splits?
First, let us look into why a stock splits and what happens when a stock splits. Stocks split normally because they reach a higher than desirable price for the market or because the company does not believe that buyers will be willing to pay the price of the stock. This is a decision that is made solely by the board of directors for the company. Some companies prefer to have their stock split and others don't like to allow their stock to split.
When a stock splits the price gets cut in half and the owners of the stock double their shares. This means that if you own "X" stock and it is at the price of $50 and you own 100 shares or the equivalent value of $5,000 of the stock. Then, when this stock splits you would own 200 shares worth $25 each for a total value of $5,000. This can be a very exciting thing when it happens.
The stock splitting will not affect the total value of the stock, but it will affect the value of each share. This can be a very good thing for the owners of the stock. Typically when a stock splits it will encourage more buyers to purchase shares and can cause the price to increase again after the split. It also shows that the company has a strong value in the market.
One great example of a stock that has split over and over again and climbed up to a new high price and split again is Lowe's Home Improvement Stores. This stock has had a history of splitting and has split 5 times in the past 12 years, and yes that is a lot of splitting. The owners of this stock have benefited from a stock that has split and climbed back up in price and split again.
So if you own a stock and it splits, then you can expect to have twice as many shares that are all worth half as much, per share, than before. The total value of the stock will not change and the number of shares will double. So, now you know what will happen if your stock splits. When it happens you should celebrate and be excited about it.
Read more about the stock market and investing here:
Wednesday, August 10, 2011
Fwd: | 08.09.11 | Moody's vs. Standard & Poor's
Today's Top Stories 1. Piling on, AIG sues Bank of America over MBS 2. Moody's vs. Standard & Poor's 3. The ultimate irony: Treasuries soar! 4. S&P to face withering backlash, investigations likely? 5. Legal burdens over MBS continue to mount Also Noted: IBM Whitepaper Spotlight On... What to make of Goldman Sachs' stock? Bank of America to raise capital?, Wells Fargo modifies more mortgages and much more... News From the Fierce Network: 1. What to make of limit up/limit down plans? 2. BlackBerry supports NFC 3. Weak equity volume leads to more HFT elsewhere
Today's Top News
Bank of America can't seem to catch a break, as more critics emerge over its controversial $8.5 billion settlement with aggrieved MBS holders. The latest company to join the chorus of criticism is AIG. It will certainly not join the group that has settled with AIG and will instead oppose it for reasons that have become familiar. In fact, it will formally oppose it. It says that the bank relied on an overly conflicted trustee (BNY Mellon) to negotiate the settlement and that the value of the settlement was way too low. To pile on a bit, AIG will also file its own lawsuit against Bank of America, asking for more than $10 billion on the $28 billion worth of MBS it is holding. It basically believes that the bank, specifically its Countrywide unit and its Merrill Lynch unit, were not forthcoming about the mortgage risks when they sold the securities. According to the New York Times, AIG will file similar suits against other banks, including Goldman Sachs and JP Morgan Chase. What has prompted this belated action? It may be that the insurance giant was waiting for government enforcement action, planning to piggyback and charges. But the likelihood of federal charges--criminal or civil--has dissipated. That realization might have prompted AIG to act. The bottom line for Bank of America and others is that yet another big settlement, which we expect at some point, will have to be reserved against. For Bank of America especially, this is additional cause for uncertainty. That can be easily seen from the stock price movement. It has declined 50 percent so far this year, down to penny stock levels. For more: - here's the article Related articles: Bank of America to take charge to cover settlements Bank of America's deal with bondholders could clear up uncertainty Feds to sue big banks over MBS sales to credit unions
So who should we believe: Standard & Poor's, which has taken the unprecedented step of lowering the credit rating of long-term Treasuries to AA+, or Moody's, which is sticking with its AAA rating for now, as is Fitch? S&P has gotten nearly all the publicity, much of it critical of its downgrade decision. For a look at the other side of the argument, the New York Times does us all a favor by quoting from Moody's explanation of why it is comfortable with its AAA rating. The reasons are as follows. (1) The strength of the U.S. economy. Yes, the strength. Relatively speaking, it is well positioned to survive the current malaise. Other countries are worse off. (2) The dollar continues as the world's de facto currency. Despite the calls we've heard for a globally managed currency, the dollar still reigns, and that allows for all sorts of financing advantages. (3) Relative to other AAA-rated nations, the U.S. deficit, while large, is not so large that it warrants a downgrade. "While the projected trend of U.S. government debt is less favorable without further deficit reduction measures, we believe that eventually such measures will be adopted." And (4) the passage of the Budget Control Act was a step in the right direction. "Although the political process has been considerably more contentious than usual in the past few months, it finally did produce an agreement. We expect further fiscal measures over time, albeit with vigorous debate over the particulars." One striking conclusion from reading the article is that the basis for sovereign downgrades tends to be subjective. Moody's is certainly more upbeat in its assessment of the political process in the U.S. In the end, both can only offer opinions. But Messrs. Market will vote. And in the end, they will likely side with Moody's. For more: - here's the article Related articles: Standard & Poor's U.S. downgrade dilemma U.S. debt downgrade would hit FICC trading profits What to make of the credit rating agencies
Standard & Poor's decision--whether foolish or smart--led to a lot of angst in the markets, as big institutions sold out of stocks and sought safe haven of ... Treasury securities. Now hold on a second. Didn't S&P just declare to the world that the creditworthiness of the U.S. government had been compromised such that long term Treasury bonds warranted a lower rating? Yes, they did, but in the irrationally rational calculus of the markets, it didn't matter because they are still deemed safer than anything else out there, and in some quarters that includes cash (you just might get charged a custodial fee these days). While a strict analysis of creditworthiness is the issue for the rating companies, investors are more concerned about relative safety. Yields took a massive plunge all across the curve, even as more people fretted that interest rates were bond to rise as a result of the downgrade by one of three credit rating agencies. Yields on the 10-year dropped precipitously, to the lowest levels since 2009. Long bond yields also tanked. But the Treasury market's gain came at the expense of other bonds. Agency bonds suffered mightily as S&PO moved to downgrade the big GSEs, to the chagrin of many. The big issue is whether this is the knee-jerk reaction that many predicted, or something more profound. For more: - here's a Bloomberg Business Week article on the Treasury market - here's a Financial Times article on agency bonds Related articles: Bankers and regulators make odd bedfellows on debt ceiling issue Treasuries and government bonds: An era-defining trade? Bond dealers stick with bearish Treasury forecast Read more about: interest rates, Treasury Bonds, credit rating agencies, Creditworthiness back to top
"Pardon me for asking, but who gave Standard & Poor's the authority to tell America how much debt it has to shed, and how?" Robert Reich poses a good question, noting that the downgrade of U.S. Treasuries came at a very bad time. My sense is that all the headlines and controversy may come back to haunt the company, which is increasingly finding itself on the defensive as it enters the unforgiving world of Washington politics. One issue here is the extent to which the conclusions and timing of the release were driven by marketing needs. S&P after all is in this business to make money, as it has to generate funds for shareholders of McGraw-Hill. It's corporate image is relevant in that light. Releasing major studies or products or really anything newsworthy at the most advantageous time is of course a time-honored marketing practice. We saw this recently with McAfee's big study on cybersecurity, which was released just ahead of a major conference. S&P had reasons to inject itself into the most politically heated battle the year. Its reputation has been decimated by the financial crisis, and from an image point of view, it understandably yearns to return to happier times when it was seen as a fairly objective (rightly or wrongly) arbiter of creditworthiness. That reputation dissipated in the wake of the financial crisis, when many shocking practices on the part of credit rating companies were revealed. So whatever moral authority the company now tries to stand on is very weak. The very competence of the company--and there are some issues with its methodology--has once again become a central issue, exactly what the company doesn't want. I'll again quote from Reich: "Had S&P done its job and warned investors how much risk Wall Street was taking on, the housing and debt bubbles wouldn't have become so large--and their bursts wouldn't have brought down much of the economy. You and I and other taxpayers wouldn't have had to bail out Wall Street; millions of Americans would now be working now instead of collecting unemployment insurance; the government wouldn't have had to inject the economy with a massive stimulus to save millions of other jobs; and far more tax revenue would now be pouring into the Treasury from individuals and businesses doing better than they are now." "In other words, had Standard & Poor's done its job over the last decade, today's budget deficit would be far smaller and the nation's future debt wouldn't look so menacing. We'd all be better off had S&P done the job it was supposed to do, then. We've paid a hefty price for its nonfeasance. A pity S&P is not even doing its job now. We'll be paying another hefty price for its malfeasance today." Note the last sentence and the use of the world malfeasance. Is he onto something? No one would be surprised if S&P once again found itself under investigation. I fully expect several to be opened. In the heat of the moment, some think it acted in criminal fashion, hardly civil at the least. In the face of a budding backlash, the McGraw-Hill board needs to think about what to do next. It needs to act wisely. One "out" would be to gracefully find a way to rescind its decision. It can claim-and it certainly seems true-that S&P's methodology and analysis wasn't up to snuff. The sooner this happens, the better off it will be. For more: - here's the Reich commentary Related articles: What will S&P do on U.S. debt? Credit rating woes still linger
When Bank of America announced it had agreed to pay $8.5 billion to settle a suit by aggrieved MBS holders, the knee-jerk reaction was to conclude that it--and the industry--was making great strides in putting the credit crunch behind it. But in just a few short weeks, we're seeing just the opposite. While the chance of criminal--and even civil--charges have receded, we're seeing more private litigation. It's almost as if aggrieved parties were waiting to piggy back government charges but have now decided to go forward on their own. AIG, for example, has sued Bank of America for $10 billion over about $28 billion worth of MBSs. Now comes news from Morgan Stanley that it faces $1.7 billion in potential legal costs from various MBS and CDS-related issues. Reuters notes that the bulk of the $1.7 billion in possible costs about $990 million, relates to its Cheyne Finance SIV. Other loses may stem from transactions with other companies, including MBIA and Citigroup. To add to the malaise, AIG just might join Morgan Stanley as well as a host of other companies, including Bank of America and Goldman Sachs. So we may see a spike in legal reserves spike higher in the near term. We'll have to wait and see if more private litigants come out of the woodwork. It's a distinct possibility. For more: - here's the article Related articles: Bank of America hits snags on road to settlement Short sellers suggest doomsday scenario for banks Fed issues mortgage rules for comment Also Noted
Hard to believe that Goldman Sachs is trading at less than book value right now, which to some people makes the stock an "absolute steal." But there are some strong headwinds that will create lots of risk in the near-term. And there are those who continue to urge caution. Goldman Sachs' profitability has declined markedly and its future sources of revenue growth seem uncertain. At some point, if you have a value-oriented mindset, you might be tempted to say the stock will likely recover. But value investors have been burned badly by financial stocks. Some may want to see the stock drift even lower--Bank of America for example is trading at less than half its book value--before jumping in. Article Company News: > Bank of America to raise capital? Article > CDS spreads on banks widen. Article > Barclays may not pay Lehman bonuses. Article > Tepper sells out of Bank of America. Article > Morgan Stanley weighs in on downgrade. Article > Wells Fargo modifies more mortgages. Article > JP Morgan still sees equities up on the year. Article > Goldman Sachs hires analyst to cover Web stocks. Article Industry News: > Many deals now at risk. Article > Banks predict odds of another recession. Article > Gold prices soar again. Article > Costs of hedging against volatility rises. Article > Mutual fund managers caught by downgrade. Article > Corporate CDS spreads widen. Article > Treasuries surge after downgrade. Article And Finally... Hot financial news: Late season sales on grills. Article
Refer FierceFinance to a Colleague Contact Us Advertise Advertising: Ryan Willumson or call 202.824.5040 Media Kit: www.fiercemarkets.com/advertise Press Releases: email jimkim@fiercefinance.com Email Management Manage your subscriptionChange your email address Unsubscribe from FierceFinance Explore our network of publications: |
Tuesday, July 26, 2011
Fwd: Long-Term Charts For Short-Term Currency Trades
-------- Original Message --------
| Subject: | Long-Term Charts For Short-Term Currency Trades |
|---|---|
| Date: | Mon, 25 Jul 2011 16:30:00 -0600 |
| From: | Investopedia Forex <webmaster@investopedia.com> |
| To: | Nelson Brauchitsch <nbrauchitsch@yahoo.com> |
| |||||||||||||||||||||||||||||||||||||||||||||
Educational Articles
Term of the Week
Frequently Asked Questions
Find Forex Weekly Useful?
Subscribe to:
Posts (Atom)