Option Trading and the Global Macro Trader

By Jim Kovner

One of the best things about being a global macro trader is that of being able to profit when things go crazy. Put another way global macro traders live for events that are covered in risk. If there is no risk then there is likely no reward. Of course blindly taking risks is a road to guaranteed ruin.

One of the first and most important risk management tools available to the macro trader is the practice of positions sizing. Position sizing is when you determine an optimal amount to risk on a trade. Obviously several factors can go into your position sizing algorithm. You can look at the probability of the trade working out. You can look at the over all risk versus reward ratio. And you can look at how much of your portfolio you want to risk. Obviously there are hundreds of potential variables that you can input into your position sizing model.

Once you have determined the right position size, or amount to risk on a given trade it is now time to look at how you can structure the trade to maximize your risk to reward and to cut off tail risk. What is tail risk? Tail risk is a term used to describe risks that fall outside of a normal distributed curve. Essentially a tail risk is something like a bomb going off in a major city or the CEO of a company getting arrested for fraud. Anything that can absolutely destroy a position is considered a tail risk.

Probably the simplest and most effective ways to cut off tail risk is to use options. If you are long volatility then you can profit from it whether you are using puts or calls. If on the other hand you are net shot of volatility then you are at the mercy of the markets and their wild and crazy fluctuations.

Options are very useful to cut off tail risk because they totally limit your risk while allowing for plenty of upside. In fact sometimes they provide a lot more bang for the buck then an outright stock position as they can have a lot of inherent leverage.

Of course as with anything there is a potential downside to using option to cut off tail risk. The risk is two fold. One is that you may be overpaying for the options. Depending upon the situation that may or may not matter but it is important to be aware of.

The other major risk is that your time horizon does not fit the trade. If you want to hold the position for years then move on and probably pass on using options. However if you want to hold it for weeks to months then go in and check them out as you can do a lot of risk reduction using options.

Ensure that in your trading you are doing everything possible to maximize your risk to reward ratio by paying the majority of the attention the risk management segment of trading. Are you trading for fun or praise, or are you trying to make money? - 23204

About the Author:

If you need actionable trading ideas then check out The Macro Trader It is a weekly global macro investor advisory publication with frequent intra-week updates for time-critical analysis and actionable trading ideas.

Will 2009 be the Worst Year in Stock Market History?

By Charles

The following article lists some simple, informative tips that will help you have a better experience with stock market.

In 1929, one of the darkest times in stock market history, as well American history took place. During the famous "Black Tuesday" the ticker tape fell behind by two and a half hours. But if we the church in America will stand in the gap and humble ourselves and pray we will see the biggest explosion in stock market history. Every nation is either under a blessing or a curse depending upon the condition of the church of Jesus Christ within it. Yes, we've even included a relatively recent addition in this article on stock market history. And that's because we recognize the importance of this particular exchange.

That's because while most bear markets more or less track the business cycle, this one began with a broken financial system. That makes the current bear more like the one that snarled from 1929-32 than others of the past 100 years. This was, as far as we know, the first software designed to analyze any price series in relationship to planetary cycles. The program introduced composite cycles and a facility to analyze the effect of aspects on any market. There are many characteristics of stock market that are revealed by the chart history like stock market matrix, significant swings, secular cycles, Generation returns, distorted averages etc. Various mutual funds and institutional investors study the chart history comprehensively, before making any investment.

Then, when the cycle turns against them and the risks turn sour, they try to cover it up and begin lying to their customers, to regulators and to each other. Trust erodes, and the whole thing collapses. We appear to be entering one of these historic cycles at this seminal point in the maturation of the human race.

See how much you can learn about stock market when you take a little time to read a well-researched article? Don't miss out on the rest of this great information.

The main reason is that people are naturally cautious, especially with their own money, and the return on stocks is highly volatile from day to day. This inclination toward caution is perfectly reasonable, reflecting an intuitive understanding of an important financial truth: the average return is not the only thing that matters when evaluating an investment. Shiller, a respected expert on market volatility, offers an unconventional interpretation of recent U.S. He warns that poorer performance may be in the offing and tells us how we--as a country and individually--can respond.

The inclusion of the names of certain stocks is only for educational purposes and not as a recommendation to buy, sell, hold, or short the stock. Trademarks mentioned are owned by their respective trademark holders. If such a time comes, and your stock is close to your buy in- sell it. Then when everyone is preaching hellfire and damnation, saying the next depression is here, buy the hell out of it. Even before the market opened, major securities houses were being flooded with sell orders. By the time the market closed for lunch at midday the Nikkei average of 225 stocks was down a record 1,873.80 yen to 23,872.80, a drop of about 7.3 percent.

Why not just ignore the volatility and collect the increased risk premium from stocks? That is the message of those who believe in "Stocks for the Long Run" and also from those who want you to invest in their long-only mutual fund or managed account program. Google Stock has a beta of .81, indicating that the stock price fluctuations are less volatile that the movement in the stock market. This crash and burn showed just how risky and volatile the stock market was. The crash also went to show that so-called "booms" in the stock market only last temporarily.

Don't limit yourself by refusing to learn the details about stock market. The more you know, the easier it will be to focus on what's important. - 23204

About the Author:

About the author: ForexMomentum.info provides information about the stock market history and find out how does the stock market work. You have full permission to reprint this article provided the links are kept unchanged.

How can you the home - owner avoid forclosure and save your house?

By Juniper Jenkins

Can foreclosure be avoided? For many mortals, the worst object that can happen to them is foreclosure on the house that they hold dreamt about all their lives. But, there are things that you can do to save yourself this painful experience even if you are in the midst of it. Foreclosure is the bank foreclosing or bewitching back your home and property due to scarcity of payment. For many people, foreclosure is an event that just hurts.

For those who are in foreclosure now, you could be facing the truth that you may just never earn out of it. But, during every stage of foreclosure, you obtain the opportunity to salary up. If you can not do this, possibly you own taken on too much of an investment. In any circumstances, recipience out of it bequeath be hard, but it can be done.

It is important to communication that banks are not in the business of owning homes. They cleverly want to make the money off the gain you salary in the mortgage loan you take out. While this may not seem of stress, it really is. The banks consign often do everything they can to keep you out of foreclosure as well. So, if you are in the occasion where you can not afford a cost that month, dub the bank and see what they can do for you.

Foreclosure is a serious article. Do not move it lightly. If you foreclose on a home, you bequeath quite ruin your accept. There is plainly nil that you can do worse for it. If you are in the position that you no longer can afford your home, take the opportunity to vend it first. At least you entrust retain cleared your debt in a good way and left your credit in thoughtfulness. If you are currently in foreclosure, you lack to take steps to secure the right counsel to offices you through it. - 23204

About the Author:

This article has been written for the community of eugene oregon curious about finding deals on real estate eugene oregon from Iverson and Company eugene oregon

Stock Investment Tips Revealed

By Mr Christopher Latter

Stock investment is the most lucrative option available today to make money quickly in a short period of time. As our future financial requirements and necessities are unknown, it is not wise to totally depend on the less profitable and traditional ways of depositing your money in the savings account of a bank or investing in various insurance policies. Many individuals are looking forward towards stock investment.

You can try to be on the safer side at the least. Why do you block the unlimited potential of your money by depositing it in to the dumb and less profitable savings account? Its time to make your money fly high with wings by investing it in to stock market. I want to invest in the stock market but I do not know where to begin with This problem is faced by many of the beginners. The right approach involves a step by step process. Start with the required learning. Choose the way of learning that exactly suits your life style. Determine your priorities. Try out all the ways and get the adequate wealth to invest. The final step which never ends is continuous learning even after you become a genius.

What is specifically the best way to learn for me? When you really get involved as a beginner you would have these sought of questions in your brains. In fact there is a lot of junk available on the web to choose from. Various sites give the required training. Some information is free and some other for a little money. Online training is quite beneficial for people who have less time in hand to spend. Busy life styles may prevent these people to spend more time. This type of training is tailor made for such people. The training sessions take very less time but give all the required info. If you are not so busy and like to explore other ways of learning also then the best options would be the daily papers, weekly magazines, various programs on TV etc. If you think you can not follow up with all these stuff and need a simpler option then you should consider consulting a broker who is efficient enough. Many brokers and consultants provide training platforms through practice papers. This could definitely be handy for stock investment.

After getting good investing education you have to set your priorities right. You have to think of short term stock investment or long term investment depending on your financial needs and goals. You have to select stocks which suit your financial needs and goals. You should be able to judge which stocks are good for short term stock investment and which are good for the long term. You should be able to build effective market strategies to cope up with different market trends.

You should never spare any way through which you can get money. Try to get as much money as possible to make stock investment. Remember the more money you invest the more it grows. You are never too old or too young to start stock investment. You might be from any professional background; it is not really a criterion for investment.

Knowledge is unlimited. No matter how much you learn it is just a small drop in the ocean. Same concept applies to stock investments too. So if you stop learning then you are limiting your possibilities. Your competitors would have an edge over you if you do so. Continuous learning will lead you to design great strategies that would make you prosper.

So, one should keep in mind all the above things to be a good stock investor being able to make good stock investment and to achieve ultimate financial independence. - 23204

About the Author:

Read an archive of subjective articles to Reliable Stock Investments and many that are closely related to great stock investment advice.

Learn To Invest With A Financial Strategy

By Jane Calhoun

Everyone now knows that buy and hold is probably not the best investing strategy, if that's the only plan you have as an investor. Achieving gains over time means more involvement in choosing investments, but even more important is to learn to invest money using a defined iunvesmttnet strategy. This gives you a map for investing money regardless of market situations. It's almost like playing a game; you only see results when the game is finished, and the winner appears. The use of an investing strategy, and a plan, is what eventually will separate the winners, over time, from the losers.

It's not difficult to put together an investment strategy, but it does take time and thought. It encompasses your personal financial goals, as well as gives you a road map to achieve those goals. With this plan in front of you, you will then know what investments will be the best fit for your strategy as you go forward. When you decide on a specific investment vehicle, for example bonds, stock, or mutual funds, you can then determine what choices within those categories will be the best fit as well. You will have a template for choosing individula stocks, or bonds or funds, instead of going with your gut - never a good strategy!

When you are trying to determine how to invest your money, if you haven't spent the time on doing research, your choices can quickly become very confusing, if for no other reason than because there are so many different investment vehicles and individual investments to choose from. This is why having a strategy is key, because it helps you decide which instruments will help you reach your objectives, and which are not a fit.

For investors who are not very experienced in choosing stocks, a financial planner might be a good choice to work with. Working with a professional can help you put a finer point on what you need to accomplish your financial goals and complete your plan. For exmaple, they can help you identify your risk tolerance, your resources for investing, and the time horizon over which your investments can grow.

Before investing, be sure to complete your strategy and trade from your plan, not from the gut. Over time, investors wihtout an investment strategy clearly do far worse than those who have goals and steer a course using their plan. When you learn to invest money and apply your strategy, your financial goals will begin to materialize. - 23204

About the Author:

Looking for the best way to invest money in a down market? Jane Calhoun writes about how to learn to invest money and more in today's investment climate.