Archive for October, 2009
I am a beginner with little money to pay fall tuition. I need to make money fast to pay my fees. So whats the best method to trade and make fast money. I have no knowledge abt options, but have great passion to learn in detail and trade. what will be the best way to learn
There are two excellent web sites for learning the basics of options.
http://www.cboe.com/LearnCenter/default.aspx
and
http://www.optionseducation.org/
Both are sponsered by the option industry and contain free, accurate, spamless educational material.
After getting what you can from those two sites, I recommend reading at least one good book about options. Any of the books at
http://www.cboe.com/Institutional/Bibliography.aspx
contain quality material, but will only be good for you if they are written in a style that you can follow and comprehend. My favoirtes are
McMillan, Lawrence G.: Options as a Strategic Investment, Fourth Edition. The grand-daddy of options books. The complete treatment from intermediate level to advanced.
Natenberg, Sheldon: Option Volatility and Pricing, Revised Edition, Burr Ridge, Illinois, Extensive treatment of volatility and advanced strategies as they pertain to commodity options.
I suggest you go to a large library, a large bookstore and/or amazon.com to scan multiple books and choose the ones you find most appropirate for yourself.
I will mention one other book that just came out this year, The Rookies Guide to Options by Mark Wolfinger, because the author contributes to the message board at
http://messages.yahoo.com/Business_%26_Finance/Investments/forumview?bn=4686677
under the name "dagnyt". Although I have not read any of his books, I will recommend his work based upon his contributions to that message board. (Be careful when reading that board. There is at least one individual who like to use names similar to those of regular contributers. Do not confuse "dagnyty" with "dagnyt" or "zman493" with "zman492".) In any case, it gives you a chance to ask the author questions directly if you believe that would be valuable. You can learn more about Mark Wolfinger and his books at his site
http://www.mdwoptions.com/
I would also recomend several months of paper trading before risking real money.
If you do not understand options now I recommend you find some other method for raising funds before the next school year starts.
I am a beginner with little money to pay fall tuition. I need to make money fast to pay my fees. So whats the best method to trade and make fast money. I have no knowledge abt options, but have great passion to learn in detail and trade. what will be the best way to learn
There are two excellent web sites for learning the basics of options.
http://www.cboe.com/LearnCenter/default.aspx
and
http://www.optionseducation.org/
Both are sponsered by the option industry and contain free, accurate, spamless educational material.
After getting what you can from those two sites, I recommend reading at least one good book about options. Any of the books at
http://www.cboe.com/Institutional/Bibliography.aspx
contain quality material, but will only be good for you if they are written in a style that you can follow and comprehend. My favoirtes are
McMillan, Lawrence G.: Options as a Strategic Investment, Fourth Edition. The grand-daddy of options books. The complete treatment from intermediate level to advanced.
Natenberg, Sheldon: Option Volatility and Pricing, Revised Edition, Burr Ridge, Illinois, Extensive treatment of volatility and advanced strategies as they pertain to commodity options.
I suggest you go to a large library, a large bookstore and/or amazon.com to scan multiple books and choose the ones you find most appropirate for yourself.
I will mention one other book that just came out this year, The Rookies Guide to Options by Mark Wolfinger, because the author contributes to the message board at
http://messages.yahoo.com/Business_%26_Finance/Investments/forumview?bn=4686677
under the name "dagnyt". Although I have not read any of his books, I will recommend his work based upon his contributions to that message board. (Be careful when reading that board. There is at least one individual who like to use names similar to those of regular contributers. Do not confuse "dagnyty" with "dagnyt" or "zman493" with "zman492".) In any case, it gives you a chance to ask the author questions directly if you believe that would be valuable. You can learn more about Mark Wolfinger and his books at his site
http://www.mdwoptions.com/
I would also recomend several months of paper trading before risking real money.
If you do not understand options now I recommend you find some other method for raising funds before the next school year starts.
I am only used to buying stock options that are either FAR out in expiration or have LOW TRADING VOLUME. I know that expiration date is vital for any option. Lately i have been watching the Yahoo! Options Most Actives under High Volume and Unusually High Volume.stock options. I have never owned one with open interest in the 10,000-150,000 (or higher) range. Many stock options like Microsoft, Intel, Bank of America, Citibank, and others trade daily and weekly in high volumes as OPTIONS. Many of these options also have affordable prices-in single and double digits. They also have DAILY RANGES of 10%-15% in many cases. My experience is with the options that have the LOWEST Volumes and trade infrequently (sometimes weeks). Do the mentioned options really trade on a daily basis? In this price range? Can these be profitable in the SHORT TERM? Thanks
Options with high volumes are more likely to be profitable in the short term because the price you pay/receive is much more likely to be close to the true value. If that many market makers are watching the stock then the difference between the bid and ask is likely to be small. On the other hand, options with very small volume or a long time to expiration are likely to be watched by very few market makers.
I am only used to buying stock options that are either FAR out in expiration or have LOW TRADING VOLUME. I know that expiration date is vital for any option. Lately i have been watching the Yahoo! Options Most Actives under High Volume and Unusually High Volume.stock options. I have never owned one with open interest in the 10,000-150,000 (or higher) range. Many stock options like Microsoft, Intel, Bank of America, Citibank, and others trade daily and weekly in high volumes as OPTIONS. Many of these options also have affordable prices-in single and double digits. They also have DAILY RANGES of 10%-15% in many cases. My experience is with the options that have the LOWEST Volumes and trade infrequently (sometimes weeks). Do the mentioned options really trade on a daily basis? In this price range? Can these be profitable in the SHORT TERM? Thanks
Options with high volumes are more likely to be profitable in the short term because the price you pay/receive is much more likely to be close to the true value. If that many market makers are watching the stock then the difference between the bid and ask is likely to be small. On the other hand, options with very small volume or a long time to expiration are likely to be watched by very few market makers.
I learned over and over again the fundamentals on options, but I still don’t understand fully how they work.
Is there a software or a website that shows how to trade options and all the possible outcomes using real numbers?
If you have so a weak knowledge do NOT engage in them.
I learned over and over again the fundamentals on options, but I still don’t understand fully how they work.
Is there a software or a website that shows how to trade options and all the possible outcomes using real numbers?
If you have so a weak knowledge do NOT engage in them.
I bought a stock and call and put on it. I made a profit on the stock and took a loss on a call and put option. If I buy the stock and different put and call option strike prices within 30 days, is it considered a wash for my options losses for tax purposes?
Good question. Pub 550 deals specifically with straddles.
Coordination of Loss Deferral Rules and Wash Sale Rules
Rules similar to the wash sale rules apply to any disposition of a position or positions of a straddle. First apply Rule 1, explained next, then apply Rule 2. However, Rule 1 applies only if stocks or securities make up a position that is part of the straddle. If a position in the straddle does not include stock or securities, use Rule 2.
Rule 1. You cannot deduct a loss on the disposition of shares of stock or securities that make up the positions of a straddle if, within a period beginning 30 days before the date of that disposition and ending 30 days after that date, you acquired substantially identical stock or securities. Instead, the loss will be carried over to the following tax year, subject to any further application of Rule 1 in that year. This rule will also apply if you entered into a contract or option to acquire the stock or securities within the time period described above. See Loss carryover, later, for more information about how to treat the loss in the following tax year.
Example.
You are not a dealer in stock or securities. On December 2, 2006, you bought stock in XX Corporation (XX stock) and an offsetting put option. On December 13, 2006, there was $20 of unrealized gain in the put option and you sold the XX stock at a $20 loss. By December 16, the value of the put option had declined, eliminating all unrealized gain in the position. On December 16, you bought a second XX stock position that is substantially identical to the XX stock you sold on December 13. At the end of the year there is no unrecognized gain in the put option or in the XX stock. Under these circumstances, the $20 loss will be disallowed for 2006 under Rule 1 because, within a period beginning 30 days before December 13, and ending 30 days after that date, you bought stock substantially identical to the XX stock you sold.
I bought a stock and call and put on it. I made a profit on the stock and took a loss on a call and put option. If I buy the stock and different put and call option strike prices within 30 days, is it considered a wash for my options losses for tax purposes?
Good question. Pub 550 deals specifically with straddles.
Coordination of Loss Deferral Rules and Wash Sale Rules
Rules similar to the wash sale rules apply to any disposition of a position or positions of a straddle. First apply Rule 1, explained next, then apply Rule 2. However, Rule 1 applies only if stocks or securities make up a position that is part of the straddle. If a position in the straddle does not include stock or securities, use Rule 2.
Rule 1. You cannot deduct a loss on the disposition of shares of stock or securities that make up the positions of a straddle if, within a period beginning 30 days before the date of that disposition and ending 30 days after that date, you acquired substantially identical stock or securities. Instead, the loss will be carried over to the following tax year, subject to any further application of Rule 1 in that year. This rule will also apply if you entered into a contract or option to acquire the stock or securities within the time period described above. See Loss carryover, later, for more information about how to treat the loss in the following tax year.
Example.
You are not a dealer in stock or securities. On December 2, 2006, you bought stock in XX Corporation (XX stock) and an offsetting put option. On December 13, 2006, there was $20 of unrealized gain in the put option and you sold the XX stock at a $20 loss. By December 16, the value of the put option had declined, eliminating all unrealized gain in the position. On December 16, you bought a second XX stock position that is substantially identical to the XX stock you sold on December 13. At the end of the year there is no unrecognized gain in the put option or in the XX stock. Under these circumstances, the $20 loss will be disallowed for 2006 under Rule 1 because, within a period beginning 30 days before December 13, and ending 30 days after that date, you bought stock substantially identical to the XX stock you sold.
I have heard that a corporation managing an LLC is best and provides the most protection. I don’t know which corporate structure as I need insurance and want to fund retirement programs for myself and my wife as well. I will be trading my own account with my own money and do have someone that can be an officer in the organization with me. No shares are needed unless they benefit me in some way. Thank you for your wisdom in advance.
Unless you will be trading on behalf of others you do not require the double protection of two entities. An S-Corporation to pass the gains and losses directly to yourself would be fine and you would be shielded from liability. If you want a separate tax vehicle, a standard C-Corporation or LLC will suffice.
I have heard that a corporation managing an LLC is best and provides the most protection. I don’t know which corporate structure as I need insurance and want to fund retirement programs for myself and my wife as well. I will be trading my own account with my own money and do have someone that can be an officer in the organization with me. No shares are needed unless they benefit me in some way. Thank you for your wisdom in advance.
Unless you will be trading on behalf of others you do not require the double protection of two entities. An S-Corporation to pass the gains and losses directly to yourself would be fine and you would be shielded from liability. If you want a separate tax vehicle, a standard C-Corporation or LLC will suffice.