How can you hedge a US portfolio of shares when the US Dollar is going down?
Hedging is a strategy used as a means of removing or at the very least reducing the uncertainty of exchange rate fluctuations on your portfolio returns. The method you employ to hedge your portfolio will depend on a variety of factors. The first step in choosing a hedging strategy is to quantify your exposure. For…
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…
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…
Why everyone loves penny dreadful stocks
Penny dreadfuls – stocks that sell for a handful of cents yet give big percentage gains – have a long history in Australia. Since the beginnings of the stock exchange, resources explorers have traditionally filled this role, often hitting paydirt with a drilling hole, resulting in a share price surge. More recently, technology stocks and…
Professional trader makes big bucks from home
After spending eight years in Asia as NAB’s head of trading Doug Goldsmith returned to Australia in 2005 to assist in re-building the bank’s local and global treasury operations following the institution’s $360 million illegal trading and foreign exchange debacle. Six months later Goldsmith put his extensive experience across all products to the test and…
Broker Recommendations – 6 to BUY, 6 to SELL and 6 to HOLD
Michael Heffernan AUSTOCK BUY RECOMMENDATIONS Origin Energy (ORG) An energy retailer, but also a power generator, gas producer and explorer. It’s been an excellent sharemarket performer since splitting from Boral in 1991. It offers a bright future after selling half its coal seam gas assets for US$5 billion to US based ConocoPhillips in a joint…
What futures contracts are the most popular and who buys them?
Futures traders normally fall into two groups with each having a typical ‘holding period’, based on the purpose of that futures position. The first group of traders, hedgers, have an interest in the underlying commodity and are seeking to minimise price risk in the physical market. Farmers are typically hedgers, and normally hold positions from…
