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…
Where did CFDs come from, and why the weird name?
Contracts for Difference or CFDs were originally developed in the United Kingdom in the early 1990’s by Smith New Court, a London based trading firm. CFDs were mainly used by the firm’s hedge fund clients to short sell using the benefits of leverage and also to take advantage of the stamp duty exemptions, which were…
Capitalising on price movements in reporting season
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Trading the top 200 Aussie stocks with an eye on the SPI or the XJO, but never both
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10 top dividend paying stocks
When the sharemarket falls by 20 per cent or more – as it has done since November – one of the major comforts to an investor is the dividend income from shares. It comes from a company’s earnings, so it’s not affected by the share price. So the dividends being paid this year – usually…
