What is the smallest and largest number of shares that you can buy?
The Australian Share Registries, which manage the registers of companies, will allow an initial minimum parcel of $500 worth of shares to be purchased. Once that original number is purchased, the investor can buy smaller parcels to add to their holding. But as every trade incurs a brokerage fee, it may make more sense to…
What does it mean when a share goes ex-dividend?
To explain what it means when a share goes ex-dividend, we should first understand what a dividend is. A dividend is a taxable payment which is given to shareholders by the company they are invested in. Dividends are usually paid as cash (in the form of a cheque or by EFT if requested), however, they…
How do I determine the best stock to trade?
This is a common issue confronting new share traders who have decide to go the online route and do it themselves. As you have mentioned “trading”, I will assume that it is not long term investing that will be the philosophy of your account. First, you need some education about how you will trade once…
Why do some stocks have a bigger gap between Bid and Ask prices?
Recent sharp declines on the Australian share market have highlighted one of the most common misconceptions when it comes to trading shares: that heavy selling alone contributes to the price of a stock going down. It sounds as plausible an explanation as the reverse – that intense buying activity in a stock will push its…
When stock prices fall, where does my money go – can money just disappear?
When you hear that the sharemarket has lost $40 billion dollars in one day, it can be quite terrifying. How can so much money be wiped off the market in one day? Unless your stock has been going up, it’s difficult to make money in a falling market. In fact one of the few ways…
Why do companies care when their share price falls?
From a transparent point of view it can be confusing to wonder why companies care when their share price falls. After all, listed companies have already received money from investors, when they first sell shares through an Initial Public Offering (IPO). What happens in the secondary market, when investors buy and sell to each other…
How does the ban on short selling affect options traders?
The idea of short selling is to profit in a declining market. As a result of the ban on short selling, whereby and investor/trader will sell stock that is either borrowed, or not yet owned, only to buy the stock back at the lower price, many have shifted to the use of options in order…
Should I buy options that are in the money or out of the money?
There is no wrong and right answer to this question. Whether you decide to buy in the money or out of the money, options will be totally dependant on your trading strategy and tolerance towards risk. However we will discuss some differences between trading options at various strike prices. In the money options are obviously…
What are naked options and why are they risky?
A holder of a call option has the right, but not the obligation to buy an underlying share at a specified price, whilst the holder of a put option has the right, but not the obligation to sell the underlying share at a specified price. The process of selling new options is called ‘writing’. When…
Why is it bad to buy an option close to its expiry date?
I think that it is worth taking a quick step back and first discussing how we value options. If you were to dissect an option’s value into its components then the result would be two parts: Intrinsic Value and Time Value. Intrinsic Value is the option’s value if exercised on any given day, defined as…
