Technical Analysis Basics

By Mike Swanson

Understanding what is going to happen in the future is something that everyone would like to have. But we have all seen that there is really no such thing as a crystal ball in stock trading. There is however something that we can try to work towards and that is the use of technical analysis which could help get a view on the future by using the lessons that have been learned in the past.

Technical analysis is when analysts take market trends from yesterday, last year or a few years back and look at the way in which the prices of certain items (be they goods or shares) were managed and the volume in which they were bought or sold. Using this information, they are then able to forecast what the market trend of that particular item or product will be in the future.

To obtain the information that they require, an analyst will often make use of various charts, models or even an index. This is a good means of tracking data and then also trying to determine what trends are likely to be present in the future market. It is clear that the charts such as a candle stick or open low chart are very good as a means of actually depicting the way in which trends are likely to be shaped.

Welles Wilder was the first person to develop the discipline of technical analysis and this work has now become a key part of the work for many professionals. This is especially true of those that are involved in trading and of course particularly pertinent to those in the stock exchange. They utilize the information to try and make as much money as they can, so it is clear the amount of importance that they attach to this information.

Whilst using technical analysis is often frowned upon by fundamental analysts who use actual company stock position, market position, etc. To make their predictions, larger corporations now employ both technical and fundamental analysts.

While technical analysis is not going to offer you a crystal ball into the future, it is certainly a good tool to make sure that you are as prepared as possible for the type of opportunities that could come your way. Make sure that you understand the historical movements of trends so that you can use these to your advantage in future markets. - 23212

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Understanding Call Options The Easy Way

By Maclin Vestor

In late 2008, after the market tanked, losing at one point over 500 points in a day, this was for many, a wake up call to them. They realized that perhaps owning stocks for the long run was not entirely safe, and required some more financial education.

While it's true that in the long run stocks may have returned 10%, at any given moment they could come down. Do you really want to risk that we go through a depression or hyperinflation causing you to lose value just before your retirement? Puts and calls are a way to either do less with more, or protect against the things you want less of to happen more. Of course, unfortunately many people use them to speculate trying to do more with the same amount of money at risk, which can potentially lead to much greater losses. An option contact is the right to execute a certain trade at a given price. A call option is the right to buy, where as a put option is the right to sell. Now if you could buy a stock at $100, you could either pay for 100 shares for $10000. Or you might be able to buy an option contract for the right to buy 100 shares, at a set price. You don't pay for the shares themselves unless you decide to.

An analogy I like to use is a reservation to buy an item that isn't even out yet. Say people wanted to buy the PlayStation 4 immediately after the release date was out. Now let's say people expect it will cost $1000. You on the other hand have looked at everything that they say the PlayStation 4 will contain, and you believe it will actually be worth $2000 when it debuts. You believe the supply will be short, demand large in the future. A store learns that it in fact would retail at $1000 if sold today. So you might put down $100 now to reserve that PlayStation 4 at $1000. You only have 30 days after its release date to execute this "option" otherwise it expires worthless and you lose your 100 shares. Now lets say it's a huge debut, and everyone wants it, you could pick up your copy and own the PlayStation and decide when you want to sell it. Or, you could let someone else do that work, and say online it's going for $2,000. So you could sell the rights to your contract for maybe $900, and now your $100 contract is worth $900. The thing about options is if you are right, the rewards are much greater in percentage points. You could buy the PlayStation at $1000 when everyone else is paying $2000 this contract is worth $1000. Although you would have gained $1000 if you bought the PS4 at $1000 rather than get a contract to reserve it at that price, by only paying $100 you risk a lot less. If you were to buy 10 contracts the maximum potential risk is still 100%, but the reward would be 10 times as great. Unfortunately while the potential risk is the same, in reality, the risk is greater because the liklihood of a large loss occurs more often.

Options work the same way as the example, only rather than the right to buy a single item; it is the right to purchase shares, usually 100 shares per 1 contract. So instead of paying $100 for the right to buy a $1000 item, you instead might pay $100 to purchase $1000 worth of stock or 100 shares at $10.

There are of course some major downfalls. If the stock goes below $1000, who in their right mind would want to buy the contract? Well actually, anyone who believed the price would go up significantly. So if the contract never expired, someone would pay a lot more. If the contract expired the next day, the contract would be worth a lot less as it would be a much greater gamble.

Another fallback is it is not quite the same as putting $100 as people do at retailers traditionally, because in that case, the $100 is generally refundable or discounted towards your purchase, where in the case of options they are not. So it's possible that the value of the underlying stock goes up, but your contract still isn't worth anything. If in the example, you were only able to sell it for $1099 or less, you would still lose out. Say that instead of paying $100, reserving a $1000 item at $1000 price, you decided you would rather pay $65 to reserve that stock at $1200 price. Although the stock is not currently worth that much, if it does go to 2000, it's worth $800 over a 1200% increase. However if it only goes to $1200, you're out the $56, rather than gaining $200. In addition, even if you did reserve it at $1000, if the price of the item is not worth at least $1100 you have lost, and in addition, you could have used that $100 elsewhere during that time.

The options market is derived from the stock market, and may require a different trading system. While every option you have is based on the underlying price of the stock, index, or commodity, that doesn't mean the risk is the same. There is a greater risk of the stock doing nothing as the option still maintains some of it's value. The more time it has, the more potential it has to achieve a gain, and thus the more it's worth. In general buying options is a way of having leveraged control over the stock's price movements without needing to own them directly. Buying a put option is betting the stock will go down, where as buying a call option is betting the stock will go up.

On the other hand, selling a put or call option is collecting cash with the promise to pay the call owner 100 shares of the stock, and the put owner you will be forced to buy 10 shares at the designated price. For example, if you sold a call for $100 with the designated price of 100 shares at $10 or $1000, and the stock went up to $15 or $1500 worth, it would cosst you $500. If you owned the shares of stock you could instead just sell the shares and miss out on the gain that you would have otherwise had. If you sell puts for $1000 for 100 shares at the designated price of $10 per share and the stock was at $10 and went to $5, you would have to buy 100 shares at $10 even though it's only worth $5 each, or just take a $500 loss. Buying stocks and options both can be risky, and it is important to consult with experts and to understand the rules and regulations as well before investing, or before trading stocks or options. - 23212

About the Author:

Maclin Vestor teaches about stock market investment advice. You can even learn about finance, money management, and figuring out finance at his blog.

How to Finally Pay Off Your Debt, Even if You've Failed Miserably

By Sean Payne

A large number of people who are currently in debt have tried at least once to pay off their debts. Many of them have tried several times. Unfortunately, most of them have failed, ending up even deeper in debt than before.

So, why do all these people end up getting deeper and deeper in debt? The answer lies in the approach that they use to get out of debt. Those who take on more debt in an attempt to get out of debt are only putting a patch on the problem. Debt consolidation loans may work for a short while, but the underlying habits that created the debt problem in the first place will work against them.

The true answer to the problem can be found in fixing the underlying habitual behaviors that originally created the debt problem. The best way to accomplish this is by using a proven plan for paying off debt, one that won't let you continue in your old ways.

What are the steps of the best plan for getting out of debt and avoiding bad habits?

The first step in a good debt repayment plan is to create a buffer between yourself and debt. When you're running low on money, even a little financial emergency can pressure you into going back to using debt. What's a buffer? It is a small amount of savings, around $500 to $100, depending on your own unique situation. This buffer should be enough to pay for an emergency car repair, a plumbing emergency, or get you through a week or two if your paycheck is late.

The next step is to take on no additional debt. This means no debt reduction loans, no additional mortgages, or any other debt. If you take out a second mortgage in an attempt to pay off credit card debt, you're replacing an unsecured debt with a secured loan. This means that if you are unable to pay off your debt, you're at risk of losing your home.

The third step is to make a plan to pay off all your debts. Realize that the order in which you pay off your debts can make a huge difference. If you do it wrong, you're at risk of losing your motivation to get out of debt. Do it right, and you'll pay off your debts quickly while becoming more and more enthusiastic about getting out of debt.

The fourth step is to carry out your plan. The easiest way to do this is to automate your debt repayment plan. One way to accomplish this is to use an automatic bill payment service, such as the kind offered by most banks. Once set up, a bill payment service will keep you from incurring late fees. Most bill payment services are free, so this is awesome if you want to get out of debt.

The final step is to stick to your plan. After a while, you will have developed a little bit of momentum, and this will become easier. Once again, choosing the correct debt repayment plan can make a huge difference.

That's it: Now you know how to pay off your debts even if you have failed a dozen times. All you need is the correct approach. - 23212

About the Author:

Sean Payne has taught people about personal finance and how to get out of debt for over a decade. To get more information about how to pay off debt, get Sean's informative free course on debt reduction management.

Stock Options Exchange Fundamentals

By Monica Felts

Stock option trading is a high levered market play. An option is a contract between a buyer and a seller that gives the buyer the right?but not the obligation?to buy or to sell a particular asset (the underlying asset) at a later date at an agreed upon price. In return for granting the option, the seller collects a premium from the buyer. The Wall Street Journal, Stock Option Trader, amongst others, analyze market conditions and trends.

There are put option and call options. The put option gives the buyer the option to sell the underlying asset. The call option gives the buyer the right to buy the underlying stock. An option trading tutorial or a good Wall Street stock trading book or free guide is necessary and extremely helpful for those interested in pursuing options trading.

A call option provides the right to buy a specified quantity of a security at a set agreed amount, known as the 'strike price' at some time on or before expiration, while buying a put option provides the right to sell. Upon the option holder's choice to exercise the option, the party who sold, or wrote the option, must fulfill the terms of the contract.

The theoretical value of a stock option can be evaluated according to several statistical models. These models, which are developed by quantitative analysts and attempt to predict how the value of the option will change in response to changing conditions. Because of these proven models, the risks associated with granting, owning, or trading options may be quantified and managed with a great precision.

Exchange-traded options form an important class of options which have standardized contract features and are traded on public exchanges. The low-cost leverage feature that options provide make them an extremely attractive financial instrument.

There are many indicators and tools used to predict price movement. Don?t try and use all of the indicators and signals at the same time since you will never see all of them in agreement, and you will get far more information than you can process. Information gleaned from stock option trader sources, the Wall Street Journal and other sources aid in option and stock trends.

The stock market, in fact all markets, behave in wave-like oscillations over time. It is important to gauge the direction of the wave before you take a position. If a stock is experiencing a strong upward long-term trend, but the current short-term trend is downward, leading an lagging technical indicators help signal entry and exit points for your trade.

Oscillators are useful indicators for market direction. Momentum indicators, although lagging in their construction, are helpful when combined with oscillators. You want to catch a trend early and not enter it when the large gains have already passed by. - 23212

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Youll want to read the latest financial news, what likely will happen tomorrow, so get a Wall Street Subscription. A useful source for option traders is Stock Option Trader. The Online Journal's new features, analysis tools breaking news keep you informed while trading online. Subscribe today for FREE weeks and 80% off!

Guidance on New COBRA Rules From The IRS And Doeren Mayhew

By Doeren Mayhew

The bureau recently free guidance, in a question and respond format, addressing how employers are to lot and essay recovery of the new COBRA payment subsidy enacted under the American ecovery and Reinvestment Tax Act of 2009 (P.L. 111-5). The Act provides that an individual who has been involuntarily terminated on or after September 1, 2008, through the end of 2009 is required to clear only 35% of the group health shelter payment to bonded COBRA continuation coverage (up to nine months).

The new guidance focuses on two broad areas: Form preparation - the mechanics of how an employer recovers the COBRA premium subsidy through a payroll credit claimed on IRS Form 941, and administration and eligibility. The guidance also addresses common inquiries surrounding the timing of when the subsidy begins and ends.

How the IRS Subsidy Works: A past employee and his or her kinsfolk are "assistance suitable employees" if they are suitable for COBRA health shelter continuation coverage as a termination of any reflex termination occurring from September 1, 2008, through December 31, 2009. These individuals are required to clear only 35% of the group health shelter payment that would otherwise apply.

Under the IRS Act, the "person to whom the premiums are payable" - generally, the employer - pays the other 65% of the COBRA continuation premium. The employer module then be reimbursed by means of a federal payroll tax credit claimed on Form 941.

The Payroll Credit Generally, an employer can claim the payroll credit for the COBRA payment subsidy on Form 941, Employer's Quarterly Federal Tax Return. To do so, the employer should enter the amount of any COBRA payment assistance payments paid on behalf of employees for that lodge on Line 12a. The amount entered should equal 65% of suitable workers' total COBRA payment payments - not amounts received from past employees.

In the IRS Guidance, the IRS indicated that there has been some confusion surrounding the proper number of individuals to be reported on Line 12b as having received COBRA premium assistance reported on Line 12a. The guidance clarifies that only one individual should be counted for Line 12b purposes in a situation where a former employee has also secured coverage for other qualifying individuals such as a spouse and/or children.

Timing Issues: The IRS has also clarified that the COBRA premium reduction applies as of the first period of coverage beginning on or after February 17, 2009, for which a qualifying involuntary terminated employee is eligible to pay 35% of the premium. The exact date of coverage is contingent upon the period to which premiums are charged to the plan. The 35% premium subsidy generally applies until the earliest of three events: (1) when the former employee secures other health insurance coverage; (2) the date that is nine months after the first day of the first month for which the special COBRA premium subsidy provision applies; or (3) the date the individual is no longer eligible for COBRA continuation coverage. - 23212

About the Author:

Visit Doeren Mayhew online for more information. Doeren Mayhew is located in Troy, Michigan.