Butterfly Options » financial

Trading the Gold Market to Go Up and Down

admin — Thu, 07 Jan 2010 23:38:51 +0000

Gold has had a tremendous year. The flight to the perceived safety of gold, as well as the US Dollar weakness, has pushed the metal straight through the $1,000 per ounce mark and up to $1,200.However, it has not been a smooth upward journey. Investors should be aware that ‘pull backs’ in gold can be very violent indeed. We have had two major retracements in the last four years from fast rallies. Both of these finally ran out of steam but not before wiping out at least 25% of the price. If the same were to happen this time, Gold would slip towards the $900 mark.The acceleration of the gold market towards the end of 2009 was remarkably similar to the March/May move of 2006 and Oct/March 2007/2008. Both of these rallies saw sharp pull backs before regaining the upward momentum. The current target for the more aggressive gold bulls remains $1400. This level is a good deal closer now than when it was first mentioned by certain analysts. Having said this, it must be mentioned that Gold is having problems getting to $1,400.As it turns out, the problems concerning Dubai presented a massive buying opportunity. Of course, Dubai did give us the lesson that ‘the markets are prone to sharp declines’. Any such decline could shake out many bulls and compound moves to the downside.That is the risk of getting in at these levels. Whilst the upside could be fantastic, investors must have the stomach for possible shocks to the downside. On a bad day that could be as much as 5% in a couple of hours. So what to do? One option is to spread bet on gold. With spread betting you can trade in both directions. If the market looks like it will continue up, then you could bet on it to go up. Likewise, if a correction is due you can look at betting on the price of gold to go down.All forms of financial investment have the potential for incurring losses. For example, trading in stock, property, investment funds and pensions can lead to you losing money. With spread bets your losses can exceed your initial investment.Nevertheless, spread bets are a simple way of a) gaining access to the gold market and b) being able to trade the market in both directions.Yes, the gold market may move the wrong way. However, there are measures you can take to reduce your risks. You can add a Stop Loss to your trades which will mean that, if Gold moves against your position, the stop loss will close your bet and stop you from losing any more funds.On the plus side, the 24-hour trading that some firms like Capital Spreads offer on key markets can provide several opportunities. Whilst the underlying financial instrument may be closed you can still place trades on markets like Gold, Oil, the FTSE 100 and GBP/USD from Sunday night all the way through to Friday evening.

Trading the Markets and the Financial Recovery

admin — Thu, 07 Jan 2010 14:28:02 +0000

With the world in recovery mode, many people are still questioning how the financial markets got so out of control. They are also questioning something a little closer to home; how to better look after their own money and finances.If we are being honest with ourselves, we would probably admit that we can improve on at least one of the following; long term investments, tax efficiency, actively reviewing our existing investments and looking at new opportunities that the markets in 2009-2010 have provided / will provide.Also, I don’t think that there are many of us who wouldn’t benefit from putting more thought and effort into these key areas. Having said that, there are a growing number of individuals who are making use of a newer, and highly regulated, form of trading.One type of trading, namely financial spread betting, has a range of attractive features and is an option worth considering as part of your portfolio.When speculating though you must always remind yourself that the markets can go down as well as up. With spread betting you can lose more than your original stake or investment.But why trade if there is a risk?Whether you have an existing investment plan or not, it always worth considering any avenue that offers quick, simple access to the markets and a range of tax-free* advantages. Spread betting is one such avenue.Of the many other advantages, spread betting profits do not incur capital gains tax*. You are not actually buying and selling any assets or stock or shares. You are simply speculating on the future price or value of a financial market.A boon for many spread bettors is the sheer convenience of trading over the phone and online, even after the main stock markets and futures exchanges have closed.Another plus point is that there may be occasions when an investor wishes to close a spread bet early. This can work in two ways. It can help you limit a losing position or it can also help you lock in profits on a winning trade.The Financial Services Authority regulates the spread betting companies. This helps to ensure a certain level of quality or, more importantly, financial protection. With regulated companies like paddypowertrader you can trade some markets 24 hours a day, including key Forex and Stock Market Index markets. Naturally, you can also trade Crude Oil, Gold, UK and US shares and so on.So whilst there are a good number of positives, it is important to understand the negatives.Spread bets do carry a high level of risk so you should only speculate with money you can afford to lose. Before you trade, please ensure that spread betting matches your investment objectives, make sure you familiarise yourself with the risks involved and seek independent advice where necessary.* Based on current UK Tax law. If you pay tax in a jurisdiction other than the UK then this may be different.

Trading the World Gold Market

admin — Thu, 07 Jan 2010 01:12:52 +0000

Gold has experienced a spectacular rise recently. I say recently, the metal has been trending upwards for months.With limited supply, the pressure should always be easier to apply to the upside. However, if this were the only argument then precious metals prices should never really fall.Perhaps the market is not particularly overbought at the moment so there is still good room for manoeuvre to the upside; unfortunately, the same can of course be said for the downside.We are in uncharted territory. With inflation remaining weak, interest rates likely to stay low, the US Dollar showing no real signs of recovery, banks still looking a bit weak and fears over the strength of the rebound in world growth, all the factors pushing Gold to the upside continue to linger on.Looking at gold on a given day though, the price can easily rally on any weakness in the US Dollar. Of course when a market jumps like that then some investors will inevitably close their positions and take their profits. That can then cause the markets to fall, albeit temporarily.This having been said, selling Gold has proved to be an expensive mistake for quite some months. Aside from minor corrections, the price has slowly ground higher through the whole period.Not only this but since breaking above the critical $985 level back in September 2009 and then repeatedly failing to get back below it, the omens have started to favour yet another spike higher.In an era of concern over the value of assets, gold holds its age old allure. There is still much uncertainty in the markets. The big recipient of all this uncertainty remains the precious metal and it is tempting to speculate that no matter which currency gains the upper hand, the continued undervaluation of the emerging BRIC country currencies will perhaps drive the price of gold to undreamt of levels.So what are the options for the investor? I prefer to spread bet on gold. However, before I continue, it should be noted that, as with all forms of speculation, there is a negative side. You can lose more than your initial stake with this from of trading.One of the main reasons for trading gold through spread betting is that you can go long or short with a spread bet. This means you can speculate on gold to either rise or fall, particularly useful in volatile markets.You also get instant access to thousands of financial markets. Yes you can trade gold spreads but you can also trade the future value of foreign exchange markets like Dollar / Yen and Euro / Sterling as well as stocks and shares or the future price of other commodities like crude oil.With spread bets, no assets or ownership rights are exchanged, you are simply speculating on the future price of a market, the benefit here is that spread betting is tax free*.Before you trade though, note that spread betting carries a high level of risk so you should only speculate with money you can afford to lose. Like the adverts say, before trading, please ensure that spread betting matches your investment needs, make sure you familiarise yourself with the risks involved and, where necessary, seek independent advice.* Based on current UK tax law, if you pay tax in another jurisdiction then tax law may vary.

Trading the Markets after a Recession

admin — Sun, 27 Dec 2009 12:12:18 +0000

So it looks like we have avoided a 1930’s style depression however the current forecasts still suggest slow growth and a difficult time ahead. So what should you do in a difficult environment with your own finances?If we were to be honest with ourselves, then we should probably accept that we can improve on at least a couple of the following; tax efficient investments, long term investments, actively reviewing our existing investments and looking at new opportunities that the financial markets are currently providingI am sure we all appreciate that we could benefit from planning more. That is not to say everyone is simply sitting on their hands. Many people actively trade stocks and shares.The increase in the popularity of spread betting is understandable. A few of the attractive benefits include the fast nature of placing a trade and the large variety of global trading options on offer.Naturally, as with all types of investment, be it on Stocks and Shares, ETFs, pensions etc, there is a negative side and with spread bets you need to be careful because you can lose more than you initially invested.If there is a risk to your capital then why should you contemplate spread betting as part of your investment strategy? Spread betting can be beneficial on a number of fronts, from tax efficient investments* to ease and speed of making a trade.There are many benefits. For example, spread betting profits do not incur capital gains tax*. You are not actually buying and selling any assets or stock or shares. You are simply speculating on the future price or value of a particular financial market.As discussed, investing does have its risks. Nevertheless, there are things you can do in order to reduce your downside. Adding a Guaranteed Stop Loss Order to your spread bet helps reduce your risks. If you start to lose on a trade and the market continues to move in the wrong direction but hits your Stop Loss then your trade will be closed and you won’t lose any more money.In order to spread bet you do not take possession of any assets or stocks. You are just speculating on the future value of a market. This allows you to place trades quickly and with little fuss, an important feature in fast moving markets.Where to trade? A number of spread trading firms offer the usual benefits of letting you trade thousands of international markets as well as letting you trade outside normal market hours. Companies, like Capital Spreads and FinancialSpreads.com, will also let you trade markets like Crude Oil, Gold, the German Dax and the UK FTSE from Sunday evening all the way through to Friday evening.So whilst there are a good number of positives, it is important to understand the negatives.Spread betting carries a high level of risk. You should only speculate with money you can afford to lose. Like the adverts say, before you trade, ensure that spread betting matches your investment objectives, make sure you familiarise yourself with the risks involved and, where necessary, seek independent advice.What else should you consider when trading?In the numerous chat rooms and internet forums there are many trading tips and theories. Some are fairly sensible, some less so. The following includes some of the more common principles.It is worth having a look at a spread trading practice account. These are free accounts with virtual funds. If you are less familiar with this form of trading then a little practice should help you understand the positive and negatives as well as the various types of bet you can place.Greed can be your worst enemy when trading. It can be tempting to trade lots of positions in lots of different markets. Personally, I tend to trade 0-5 markets at any one time. I have no idea how anyone can fully research and make informed decisions on 20 open trades, especially if they start moving against you.* Since you are placing a bet rather than buying an asset or share, it is treated like a bet by the UK and Irish tax authorities which means your profits are tax free. Tax laws can change.

Trading the Dow Jones Index

admin — Fri, 25 Dec 2009 01:14:26 +0000

With the world in recovery mode, many are still questioning how the financial markets got so out of control. There are certainly new investment opportunities in the current environment and it’s always a good time to review your portfolioAccording to Simon Denham of Financial Spreads, “In all this [market uncertainty] it must be admitted that, while equities remain attractive versus everything else, we have not had a serious pull back for quite some time. The fall through June and early July comes to mind but even this did not seem particularly violent at the time.“[As we come to the end of 2009] the Dow Jones appears to have some misgivings about remaining a five figure number. The DJIA has now rejected the 10,000 mark three times. Having said that, we are now uneasily pondering the continuation of the rally”.So to me it looks like the Dow could go either way. But how and where to trade the Dow Jones Index?One option is spread trading – an increasingly common form of trading. There are a wide range of benefits. The variety of trading options, speed and ease of making a trade are making it more and more popular.There are downsides to all forms of investing and with spread trading you need to be careful because you can lose more than your initial investment. Having said that, there is a wide range of markets on offer. You can speculate on thousands of markets from the popular Dow Jones Index and Pound / Dollar exchange rate, to the not so popular Coffee, Dollar / Peso and Interest Rate markets.Also, because you are trading directly with a spread betting company there are no broker’s fees. And, should you choose to do so, you can close a spread bet early. This can help secure profits or prevent further losses.Back to the Dow though, how does the market work? Should you decide to spread bet on the index then, looking at a spread trading website like GFT, you may see a spread of 9800 – 9803.As a result, you could spread bet on the Dow Jones to move above 9803 or below 9800.For this example, you could choose to spread bet £2 for every point the Dow Jones rises or falls.If you bought the Dow Jones at 9803 and the Dow Jones index went up then the spread could change to 9847 – 9850. Therefore, you could close your trade for a profit by selling at 9847.Your Profit (or loss) = (settlement price of the market – opening price of the market) x stakeYour Profit (or loss) = (9847 – 9803) x £2 stakeYour Profit (or loss) = £88 profitThe markets can of course fall, if the market were to drop to, for example, 9761 – 9764 you might decide to close your Dow Jones spread bet to prevent further losses. In that case, you would sell back at 9761.0. So, with the same £2 per point stake:Your Profit (or loss) = (settlement price of the market – opening price of the market) x stakeYour Profit (or loss) = (9761 – 9803) x £2 stakeYour Profit (or loss) = -£84 lossSo whilst the above illustrates the positives, it is important to understand the negatives.Spread bets carry a high level of risk to your capital so you should only speculate with money you can afford to lose. Like the adverts say, before trading, please ensure that spread betting matches your investment objectives. Make sure you familiarise yourself with the risks involved. If necessary seek independent advice.* Tax law can be changed or may differ depending on your personal circumstances.

Stock Trading for Bold Brave Investors

admin — Mon, 14 Dec 2009 23:49:26 +0000

Stock trading is one of the last true meritocracies. All that matters for your investment success are your own decisions. Stock trading is a precision-based activity and one tiny mistake in judgment could send you plummeting right to the bottom and result in a huge loss.
Likewise, the opposite could happen. You may make a great buying decision that will put you on the path to riches. Traditional stock trading is done at stock exchanges, which are places where buyers and sellers meet and decide on a price, although electronic trading is gaining in popularity. Stock trading is affected by how well the economy is doing and by basic supply and demand considerations.
Stock Trading is a get rich slow process. Money can be made, but it takes time. Stock trading is something that interests many people because it offers them a chance to make money without breaking into a sweat. In addition, it has a lot of excitement attached to it especially when using short term strategies that help pit traders against the stock market.
Stock Trading is trading stocks and shares of different types of companies and organization at the stock exchange. In every country, there is a stock exchange where various companies get their shares listed, when they arrange to raise required funds by means of issuing shares.
Stock trading is a very competitive field and in order to succeed you need to FOCUS on a set of simple strategies that you can implement without hesitation. The real “secret” of the stock market game is enclosed within the trading set ups and market signals you rely on to decide when to buy or when to sell shares. Stock trading is a business (because it is done for making money).
So as in a business, in stock trading, one needs to complete solid planning before making any buy/sell/trade. Stock trading is viewed by some people as a very complicated matter. This is regarded by many as an arena better reserved for those who have extensive exposure and experience in stock trading.
Stock trading is a game in which you cannot afford to be average. Thousands of new and inexperienced traders are being charged hundreds, even thousands of dollars by scam artists and self proclaimed experts for dubious stock picking services and mechanical buy and sell signal generators.
Stock trading is a relatively simple activity compared with other professions, particularly with the tools available in today’s Internet world. It is certainly within your abilities, and as you educate yourself on and build your skills, you’ll find that your fears subside as your confidence grows.
Researching a stock and then buying online it is one part of the story. The other part being how to plan a trade with an exit strategy? You must research the risks attached to online trading to make sure you are prepared for the worst. Be determined and goal orientated.
Exchange traded funds are good to use for trading and investing. By keeping trading simple, there is less stress and more opportunity to profit. Exchange Traded Funds, also known as ETFs, are index funds traded on the major stock exchanges just like stocks. An index fund involves a collection of securities, much like mutual funds, except that ETFs differ from mutual funds in some distinctive ways.
Options are bets about the future price movement of exchange traded securities. The prospect of unusually high returns always signals unusually high risk so be careful about trading options. Timing is everything.
Options are a great way to both earn and lose a lot of money. If you’re interested in involving yourself in the more unpredictable, risky, and spontaneous part of the stock market then trading options is something you should investigate. Option strategy is about selection of the best stock opportunities and following your signals. Here, you can achieve success if you are acquainted with the correct option trading strategy .
There are online resources available that will provide you with free simulated stock and option trading. You will easily find enough information to start your trading venture. You can practice trading stocks, options, spreads, futures, short sells, and so forth. Just run a search for “demo stock trading accounts” and you will find a good list to research.
Stock and option trading is a big game in many ways. But as it is a game involving the exchange of money if you play you need to take the game seriously.

Forex Trading Opportunities

admin — Sat, 05 Dec 2009 23:33:27 +0000

If you are trading the forex markets then a big concern will be growth forecasts and indications of when the various central bank stimulus packages will end. Growth has returned to the US, mainland Europe and is expected to return soon to the UK.Looking the forex markets, the US Dollar has been out of favour for a good deal of 2009. More recently, ratings agency Fitch announced that the UK’s sovereign credit rating is at risk when compared to other top-rates countries. That ‘opinion’ helped push down Sterling. Having said that, Sterling has remained fairly resilient, the general consensus seems to be that, out of the MPC, ECB and Federal Reserve, the UK will be the first to move interest rates higher next year. An increase in interest rates will naturally support Sterling.But where and how to take advantage of these market movements? A spread bet is one option that offer a solution which covers tax free* trading and quick access to global markets.There are a number of useful advantages such as the wide variety of markets available. Investors are not limited to stocks and shares. You can still spread trade stocks but you can also take a position on stock market index values, commodity prices and, of course, the forex markets.Also unlike traditional share trading, you can sell a market. Spread betting lets you trade in both directions. You do not have to bet on markets to go up. If you feel that a stock market index like the FTSE 100 or Dow Jones will go down you can speculate on it to go down. If you think that the price of a particular share will go up, you can spread bet on it to go up.I also like that there are no commissions or broker’s fees.Naturally, you can trade online or over the phone. However, the 24-hour trading that some companies offer provides interesting opportunities. So the underlying markets may be closed but you can still trade markets like the FTSE 100 and EUR/USD from Sunday night all the way through to Friday.All forms of financial investment have the potential for incurring losses. For example, trading in stock, property, investment funds and pensions can lead to you losing money. With spread bets your losses can exceed your initial investment. So if you are looking at forex spreads then note that spread bets do carry a high level of risk to your capital. You should only speculate with funds you can afford to lose. Before trading, ensure that spread betting matches your investment objectives and familiarise yourself with the risks involved. If necessary, seek independent advice.* Based on current UK Tax law. If you pay tax in a jurisdiction other than the UK then this may be different.

Financial Trading Tips

admin — Fri, 04 Dec 2009 12:33:10 +0000

With the world in recovery mode, many people are still questioning how the markets got so out of control. They are also questioning something a little closer to home; their own finances.Some people will be looking for more tax efficient investments. Others will want to diversify their existing portfolios as well as look at new investment opportunities.I don’t think that there are many of us who wouldn’t benefit from putting more thought and effort into these key areas.The one thing you can see in the newspapers and financial websites is that more and more people are turning away from just having a pension and a few stocks and shares.Spread betting, or spread trading, offers some interesting features and is worth considering.There are downsides to all forms of investing and with spread bets you need to be especially careful because you can lose more than your original stake.If there is a risk then why should you consider spread betting?Whether you have an existing investment plan or not, it always worth considering any avenue that offers quick, simple access to the markets and a range of tax-free* advantages. Spread betting is one such avenue.There are several benefits. Spread Betting is Tax Free (no capital gains tax, stamp duty, income tax). Also there is no capital gains tax, no stamp duty or and income tax on spread bets*.The simple breadth of markets makes spread betting an investment option. Spread betting companies tend to offer thousands of markets from UK and US Equities to spread betting on Gold, Oil, Coffee and Dollar / Yen rates.So whilst there are positives, it is important to understand the negatives. Spread bets carry a high level of risk so you should only speculate with funds you can afford to lose. Before trading, please ensure that spread betting matches your investment objectives, familiarise yourself with the risks involved and, if necessary, seek independent advice.Are there other aspects that need to be considered? I have seen many trading tips over the years, some more useful than others. Here are three of the more common ideas.Tip 1) Plan each trade. Ensure you are trading the markets you know. Understand at what point you want to close your trade if it goes wrong. Make sure you know the profit level you are looking for and close your trade when it hits that level. This will help you close your bet and also help you control any greed factors.Tip 2) You should stick to the markets you know. If you know little about the US Stock Market but have a good understanding of the UK Stock Market then you are probably better off trading the FTSE 100 Index and leaving the Dow Jones. It is surprising how many investors ignore this rule and want to ‘have a go’ at another market.Tip 3) Greed can be your worst enemy when trading. It can be tempting to trade lots of positions in lots of different markets. Personally, I tend to trade 0–5 markets at any one time. I have no idea how anyone can fully research and make informed decisions on 20 open trades, especially if they start moving against you.So where to spread bet? Make sure the spread betting company you trade with is Authorised and Regulated by the Financial Services Authority, this generally ensures a certain level of quality. It also offers a degree of customer protection.* According to current UK tax law, if you pay tax in another jurisdiction this may vary.

Spread Betting on the Financial Markets

admin — Fri, 04 Dec 2009 01:41:15 +0000

Are you looking for a safer entry route in the capital markets? In the last few years there has been a lot of innovation in the financial markets; some good, some not so good. So what markets to trade and, more importantly, how to trade them?One option is spread betting, in the past this form of trading has had a reputation of letting you make quick profits and even quicker losses. It was always a bit of a rollercoaster. The leading spread betting companies have now introduced a number of ways to help to restrict your losses. Spread betting is a quick and tax free* method of trading and, therefore, it does have its appealing aspects. These days though, with financial spread trading, you can limit your downside. Of course, as with all investments you should exercise more than a little caution.Spread betting on the financial markets offers more than just tax based advantages. For example, you can enter into a trade to buy or sell shares without actually owning them. So if you think a share will perform poorly you can speculate on it to go down. This is also known as ‘shorting’.You can also bet against a wide range of other markets eg you can spread bet on Gold, Crude Oil, the FTSE 100, Dollar/Euro, Pound/Yen etc to go down. Naturally, you can also speculate on these markets and thousands of others to go up.Personally, I also like the fault that the whole process is regulated in the UK by the Financial Services Authority. This helps ensure your funds remain safe.If you financial spread bet, the range of possibilities is quite impressive and growing by the day. As you can see from the above, you can trade shares, forex, commodities and indices. More recently you have been able to trade bonds, interest rates and even house prices. Financial spread trading is based on speculation of the future movements of the markets. Hence there is an inherent risk associated with the decisions you may undertake. However, there are various methods available in order to reduce your risk. One such option is the Guaranteed Stop Loss order. This is an automated order that ensures that your losses are limited. It can also be wise to trade in small stakes as this is a simple way of reducing your risk.Note that spread betting carries a high level of risk and may not be suitable for all classes of investor. Only trade with money that you can afford to lose. Make sure you fully understand the risks involved. If necessary, seek independent financial advice.* Tax law is subject to change and may differ in jurisdiction outside Ireland or the UK.