Options Trading Strategies, Basic Concepts

When venturing into the options market, the best way to get the lay of the land is to be acquainted with at least some of the more elementary concepts. These will aid the new investor in successfully executing basic trading strategies.

Two basic terms, the call and the put, are the epicenter of the trading strategies. To buy a call confers the right, not the obligation, to buy at a price that is pre set. Conversely, puts give the buyer the right to sell at a pre set price.

Options are both sold and bought, meaning that the seller grants the buyer the right and takes on an obligation to fulfill the other side of the trade. The variations to this maneuver include: Long Calls The long call is the easiest to understand and is the most basic concept. MSFT (Microsoft) traded at $28 with June 31 options that were to expire on the third Friday of June. The strike price was $31, meaning that it was pre set so if exercised it had to be bought at that price.

Short (Naked) Calls When the writer, the person selling the option, does not own the underlying stock and the option is exercised, then he or she is obligated to sell. Under those circumstances, that action is considered a naked call. Because the person is on the selling side of the contract, his position is considered to be short. The short call status incurs the most profit by the amount of the premium if the market price of the underlying asset decreases. When the price exceeds the strike price by more than the premium, then the short position takes a loss. Long Put When a trader anticipates that the future market price of an asset, such as a stock, will fall before the expiration date is able to sell the stock at a fixed price.

The buyer, put buyer, is not obligated to sell the stock, but he or she does have the right. If the market price does drop below the strike price before the option expires and the decrease is more than the premium paid, then the seller profits. If the price increases or fails to drop enough to cover the premium then the trader will allow the contract to expire worthless. Short Put

When a trader speculates that the future market price will rise, they can sell the right to sell an asset at the predetermined price. If the asset's market price increases, the short put position incurs a profit that is equal to the amount of the premium. This amount excludes any transaction costs and commissions. However, if the price drops below the strike price by more than the premium amount then the writer loses the money.

There are several trading strategies that are basic to the market. These strategies employ the characteristics of four basic trading positions. These strategies have one of several outcomes: pure profit plays, speculating on gaining a profit or creating a combination of speculation and hedging. When positions move in opposite directions, it is called hedging. Hedging bears a profit less that sheer speculation, but they do compensate by offloading a certain degree of the risk.

Bull spreads and bear spreads are common strategies that can help the trader manipulate the market, depending on the market emotion. Bull spreads utilize a long call with a low strike price and combine it with a short call at a higher strike price and a short put with a higher strike price. On the other hand, bear spreads use a short call with a low strike price and a long call with a high strike price.

Alternatively, the short put can be used with a low strike price and a long put can be used with a higher strike price. There is a great deal of software on the market that can aid in these types of trades. Options trading software can offer users concrete demonstrations of the how these strategies work. They show how they behave under different assumptions regarding future prices, volume and other factors, combined with various expiration dates and strike prices to show how these different scenarios can result in a profit or a loss.

About the AuthorVisit 123OnlineTrading.com - Options, Stocks, Forex to find books, tips and advice about online options trading. Besides a large selection of free educational articles you can also find powerful books about online trading in general. Other Resources: 123OnlineStockTrading.com - Stock Trading Links

Debt Advice For People With Poor Credit

People that have poor credit have a lot of work to do in order to get their credit score back up to a level where they can get the credit that they need. By having a good debt management plan, a person will be able to improve their credit over the course of time.

There are some things that people can do in order to improve their credit, and not all of them are simple and easy to do. What are those things, and how do they help people get the goal that they want, which is to improve their credit? For people that have poor credit, it is important to know that your credit did not become poor overnight, and it won't get better overnight. It will take a lot of time and effort to improve your credit rating to a level where you would like to have it.

Once people understand that simple yet important reality, and then they can take the steps that they need to get their credit back on track, like seeking debt management advice. While it may seem like a simple thing, stopping the damage is the first step that people can take in order to improve their credit. Once people work to stop the damage, then they need to figure out what all they need to fix. What debts should they pay off first? While every case is different, in general paying off credit card debt is one of the best ways in order to start to improve one's credit score. Making those payments to the credit card companies on time is also very important. It is estimated that about 30 percent of a person's credit score is determined by whether they make their payments on time or not. Also, don't take on any new debt when working to improve your credit score. Refuse or don't accept any offers for new credit cards. Once people start to pay off credit card debt, then they can start to work on paying off any other debt that they have, such as car loans, student loans, or other forms of loans that people will take out in order to serve their needs.

About the AuthorIf you have a poor credit rating and would like some debt advice, visit the experts at www.debt-free.org.uk

Seven Types of Loss Mitigation During Foreclosure

By Expert Author: Nick Adama

Homeowners dealing with the threat of foreclosure should know about as many options as possible, if they are attempting to save their houses before they run out of time. Some of these options fall under the category of "loss mitigation," which usually refers to a third party (usually either third party company or a division of the bank) that helps negotiate with borrowers to find solutions to foreclosure.

But under this category of loss mitigation fall a number of solutions to foreclosure that may apply in various circumstances. Some lenders may not offer each of these solutions right from the start of negotiations, but homeowners can always request more information about them if they believe one may be appropriate for their foreclosure situation. The seven solutions detailed below are typically classified as loss mitigation.

Cash for keys. In a cash for keys agreement, homeowners are offered a set amount of money from their bank to move out. The offer is usually presented by mail or in person through a local third party, such as a real estate agent or law firm. Banks offer such solutions in order to negotiate a peaceful transfer of a foreclosed home and give the former owners some cash in their pockets for moving expenses.

Deed in lieu. A deed in lieu of foreclosure can be given to the lender by homeowners who are just trying to unload the house, avoid foreclosure, and move out. Borrowers offer to give the deed to the property back to the bank in return for the mortgage company not going through with the foreclosure process. At that point, the bank would be able to list the house for sale and attempt to recoup some of its losses.

Loan modification. Much press has given to the idea of modifying mortgages that are in foreclosure. There are a vast number of ways to do this, from lowering the interest rate to extending the repayment period of the mortgage. The only real drawback to this solution is that banks are rarely that enthusiastic about modifications, because a properly structured one will benefit homeowners more than lenders.

Partial claim. For homeowners with a mortgage guaranteed by the FHA, a partial claim may be used to give the bank a one-time payment from the government in order to stop foreclosure. In exchange, a lien is placed on the property, although the lien has a zero percent interest rate and does not have to be paid back until the first mortgage is paid off or the home is sold or ownership is otherwise transferred.

Short sale. A short sale allows borrowers to sell their property for less than the total amount that they owe to the lender. All of the mortgage companies have to accept a reduced payoff for the sale to close, or the homeowners will have to bring cash to closing to pay off any remaining liens. While this can help borrowers avoid losing their homes, banks are not very quick to approve short sales.

Short refinance. With this method, the bank agrees to lower the total due on the mortgage in order to facilitate a refinance through another lender. Oftentimes, homeowners may be approved for a certain amount of money to refinance, but the amount they owe on the first mortgage along with fees and unpaid interest makes it impossible. A short refinance allows the refinance to go forward and the foreclosure to be ended.
Special forbearance plan. Under a special forbearance, homeowners can make a lower payment or have no payment at all for a certain period of time. This can be more easily negotiated well before homeowners default, as banks will not be fond of borrowers who ask for lower payments after they have begun missing them. In addition, the homeowners will eventually need to pay back any payments they missed.

Homeowners facing foreclosure have the problem of not knowing what options may be appropriate for their individual situations. And unfortunately, the lenders are often no help, pushing borrowers into expensive repayment plans or filing fraudulent lawsuits alleging foreclosure. However, the more that they know about various solutions that will help them save their homes, the less stressful the situation will be.

About the Author/Author Bio
Nick publishes articles on the ForeclosureFish website, which aims to teach borrowers how they can avoid on their homes while they still have time. The site describes various methods to save a house, including foreclosure refinancing, cash for keys, mortgage modification, filing bankruptcy, and more. Visit the site today to read more and find out what alternatives you can use to prevent the loss of your home: http://www.foreclosurefish.com/

Bi-Weekly Mortgage Calculator

Bi-Weekly Mortgage Calculator
This calculator will show you how much you will save if you make 1/2 of your mortgage payment every two weeks instead of making a full mortgage payment once a month. In effect, you will be making one extra mortgage payment per year--without hardly noticing the additional cash outflow. But, as your about to discover, you will certainly notice the increased cash flow that will occur when you pay your mortgage off way ahead of schedule!
Enter the principal balance of your mortgage (call your mortgage lender and ask for the current payoff amount):
Enter the amount of your monthly mortgage payment: (principal and interest portion only):
Enter the your mortgage's current interest rate:
This is how much interest you will pay under your current monthly payment plan:
This is how much interest you will pay if you switch to a bi-weekly mortgage payment plan:
Bi-weekly Mortgage Interest Savings:
Copyright © 1997-2009 Web Winder Site Traffic Magnets. All rights reserved.

The Clear Benefits of Loan Consolidation by Scott Fromherz

Debt consolidation offers clear benefits to anyone who is juggling multiple credit card payments and loans. The first most obvious benefit is the total savings over the term of the new consolidation loan due to lower interest rates. The second clear benefit is increased cash flow due to lower monthly repayments. These two primary benefits lead to secondary benefits that impact every area of a person's life.

Debt consolidation is usually considered when people feel squeezed financially. It can often save them from financial disaster. However, debt consolidation should not only be considered as an emergency measure to resuscitate finances that have flat-lined (or for rescuing those that are about to), it is a strategy that should be considered by anyone with multiple sources of debt to reduce expenses and save money. The difference between consolidating or not consolidating debt could be your child having a college loan versus a paid education, driving a quality car versus a bomb, owning your home in twenty years instead of thirty or countless other possibilities. Even if you can easily cover all your debt repayments, your overall financial position can improve with debt consolidation.

For those who are enduring financial pain, however, debt consolidation can provide a much needed miracle. It can take pressure off the finances by freeing monthly income and making it easier to cover current expenses. For many people, debt consolidation has prevented foreclosure on their family home and has stopped the debt collectors in their tracks.

Serious financial stress can place a great deal of strain on relationships and plant the seeds of family breakdown. It can also lead to serious stress related illnesses. The benefits of debt consolidation, therefore, are far reaching. The decision to consolidate your debts could save your marriage and keep your family together. It could also prevent you or family members from becoming so stressed you get seriously ill.

Even if your financial circumstances are not so severe, debt consolidation can increase your expendable income which can then be used to reduce debt faster, increase savings and investments or simply to improve the quality of your life. After all, doesn't it make sense that more of your money should stay in your pocket and less go to financial institutions? The long term savings in terms of interest payments can also be very significant and therefore your long term financial position will benefit from effective debt consolidation.

There are number of different debt consolidation loans to choose from. If you are a homeowner with enough equity in your home, probably the best loan for this purpose is a home equity loan. This is because it usually offers a lower interest rate than other loans available to you. A home equity loan used to be known as a second mortgage and the risk is more easily seen with the old term. The loan is attached to your mortgage which means that if you miss a payment, you are vulnerable to losing your house. However, this is unlikely since by consolidating your loans, your monthly expenses will decrease making payments easier.

The most popular way to consolidate loans is to use a personal loan. Personal loans are usually unsecured which means that you do not need to provide collateral in order to obtain the loan. They usually have lower interest rates than other consumer loans and fixed terms so that the debt will be finalized by a particular date.

Low rate credit cards and home equity lines of credit can also be used as debt consolidation loans. However, the risk with these loans is that you can actually increase your debt levels if the card has a higher limit than your current debt or at the very least spend up to the current limit. If you do this, you'll never get out of debt. Yet, even knowing this, if we are under financial pressure most of us will use whatever we can to alleviate it. Therefore, these loans are best used if the debt consolidation is for a specific and ongoing purpose such as medical or education expenses that could not have been met without the loan.

Of course, as with any financial decision, it is important to check into your options carefully. Some loans will be better than others for your personal circumstances. A good adviser can help you find the right loan to meet your needs and may even be able to advocate for you with your lenders to smooth the process and alleviate stress. Whether you choose to handle your debt consolidation yourself or to seek the help of a professional, the right debt consolidation loan will provide clear benefits that can vastly improve your life.

For more information on loan consolidation go to http://www.ConsolidationFind.com

Loan Amortization For Year-rest Installment Loan

This blog will teach you how to work out a rough schedule for a yearly-rest installment loan. A yearly-rest loan is a loan where the principal amount is reduced on a yearly basis. To work out a schedule for this type of loan, you must first work out how much is the yearly installments and divide that by two. To do this, open a spreadsheet and do the following below. Remember to follow each step as it says or the formula will not work.

Suppose if you would like to apply for a two-year loan of $8,000 at 10% per annum. To work out the monthly installment amount:
1) In Cell A1, type " Annual-rest Installment Loan"
2) In A3, type "Amount of Loan".
3) In B1, type "8,000"
4) In A4, type "Interest Rate per year"
5) In B4, type "10%"
6) In A5, type "No. of Installments per year."
7) In B5, type "2"
8) In A6, type "No of years of loan"
9) In B6, type "2"
10) In A7, type "Interest rate per month"
11) In B7, type "=B4/12"
12) In A8, type "Total number of installments"
13) In B8, type "12"
14) In A10, type "Amount per installment ="
15) In B10 , type "=PMT(B4,B6,-B3,0,0)"

The amount that you would have to pay for the installment is $384.13 per month.

To work out the loan amortization schedule, in the same spreadsheet, do the following:
1) In D1, type "Loan Amortization Schedule"
2) In E2 , type "Principal at beginning of month"
3) In F2, type "Interest due at end of month"
4) In G2, type "Installment Payment"
5) In H2, type "Principal Repaid"
6) In D3, type "=1"
7) In E3, type "B3"
8) In F3, type "$B$7*E3". Copy this formula from F4 to F26
9) In G3, type "=B10"
10) In H3, type "0". Copy this value from H4 to H13 and H15 to H25
11) In H12, type " =SUM(G3:G14)-SUM(F3:F14)". Copy this formula to H26
12) In D4 to D26, type 2 all the way to 24
13) In E4, type "E3-H3". Copy this formula from E5 to E26
14) In G4, type "=G3" and copy this formula from G4 to G24

The final result will look something like this:

You may change the figures in B3, B4 and B6 to see how this schedule changes together with the monthly payments payable. Do remember to change the number of payments in column D to correspond with the number of years.

Disclaimer: Please note that aside from the schedule above, there might be other charges by the bank such as admin fee, processing fee etc. Do check with your bank officer or financial planner before making any decision to go ahead with any bank loans.

Loan Amortization For Monthly-Rest Installment Loan

This blog will teach you how to work out a rough schedule on working out a monthly-rest installment loan. A monthly-rest loan is a loan where the principal amount is reduced on a monthly basis. To work out a schedule for this type of loan, you must first work out how much is the monthly installments. To do this, open a spreadsheet and do the following below. Remember to follow each step as it says or the formula will not work.

Suppose if you would like to apply for a two-year loan of $8,000 at 10% per annum. To work out the monthly installment amount:
1) In Cell A1, type " Monthly-rest Installment Loan"
2) In A3, type "Amount of Loan".
3) In B1, type "8,000"
4) In A4, type "Interest Rate per year"
5) In B4, type "10%"
6) In A5, type "No. of Installments per year."
7) In B5, type "12"
8) In A6, type "No of years of loan"
9) In B6, type "2"
10) In A7, type "Interest rate per month"
11) In B7, type "=B4/B5"
12) In A8, type "Total number of installments"
13) In B8, type "B6*B5"
14) In A10, type "Amount per installment ="
15) In B10 , type "=PMT(B7,B8,-B3,0,0)"

The amount that you would have to pay for the installment is $369.16 per month.

To work out the loan amortization schedule, in the same spreadsheet, do the following:
1) In D1, type "Loan Amortization Schedule"
2) In E2 , type "Principal at beginning of month"
3) In F2, type "Interest due at end of month"
4) In G2, type "Installment Payment"
5) In H2, type "Principal Repaid"
6) In D3, type "=1"
7) In E3, type "B3"
8) In F3, type "$B$7*E3". Copy this formula from F4 to F26
9) In G3, type "=B10"
10) In H3, type "G3-F3". Copy this formula from H4 to H26
11) In D4 to D26, type 2 all the way to 24
12) In E4, type "E3-H3". Copy this formula from E5 to E26
13) In G4, type "=G3" and copy this formula from G4 to G24

The final result will look something like this:

You may change the figures in B3, B4 and B6 to see how this schedule changes together with the monthly payments payable. If you have to change the number of years, don’t forget to change the column on the number of payments to (12 * number of years).

Disclaimer: Please note that aside from the schedule above, there might be other charges by the bank such as admin fee, processing fee etc. Do check with your bank officer or financial planner before making any decision to go ahead with any bank loans.

In the next blog, we will discuss annual -rest loan schedules. See you around when I post my next blog.

Time Value of Money : Future Values

In this blog, we'll explore how to use a spreadsheet to calculate future values without dealing with any complicating formulas. Just follow the instructions step by step and you will never go wrong.

Future Value of a Single Payment

1) In A1, type "Interest Rate Per Year"
2) In A2, type "No of years"
3) In A3, type "Value In the present day"
4) In A5, type " Future Value = "
5) In B5, type "= FV(B1,B2,0,B3)"

Suppose if you would like to put $10,000 into a one year fixed deposit that pays an interest of 5%. To find the future value of this deposit i.e, the value of the deposit on the day the fixed deposit matures, do the following:

1) Type 5% in B1
2) Put 1 in B2
3) In B3, type -$10,000

The future value will be reflected as $10,500. The final result will look like this:

Try changing the values in B1, B2 and B3 to watch how the future value changes.

Future Value of a series of payments

To find the future value of a series of payments, do the following:
1) In A1, type "Interest Rate Per Year"
2) In C1, type "If you're workign with months, divide this figure by 12)
3) In A2, type "No of years"
4) In C2, type "If you're working with months, multiply this figure by 12)
5) In A3, type "Amt Per Payment"
6) In A4, type "Arrears/Due"
7) In C4, type "(Key in 0 if the payment is made in the beginning of the period and 1 for the end of the period)"
8) In A6, type "Future Value = "
9) In B6, type "=FV(B1,B2,B3,0,B4)"

Suppose if you have to deposit $1000 at the end of every year for 5 years at an interest of 4%. To find the future value of this investment, do the following:

1) In B1, type 4%
2) In B2, type 5
3) In B3, type -1000
4) In B4, type 1

The future value of this investment will be worth $5,632 and the result will look something like this.

Try changing the values in B1, B2, B3 and B4 to see how the future value changes.

I hope that you found this blog useful.

Time Value of Money - Present Values

If you hate figures and are not very good with the calculator, then you've come to the right page. In this blog we'll learn how to calculate the present value of an amount without all those complicating formulas that you see in most finance textbooks. All you need to do is to open up a spreadsheet and you're ready. Just follow the step by step instructions on setting up the spreadsheet and you're on your way to working out the figures in a jif. Please note that the following instructions will only work if you follow the steps exactly as it says.

Present Value of a single payment

To calculate the present value of a single payment. Do the following:
1) In an excel spreadsheet , type "Interest Rate Per Year" in Cell A1.
2) In A2, type "No. of Years"
3) In A3, type "Value in the Future"
4) In A5, type "Present Value = "
5) In B5, type "=PV(B1,B2,0,B3)"

Suppose if you will be receiving $20,000 in a year from now and you would like to find out what this value is worth today if you know that the interest rate is 2%. To do this, you have to do the following:

1) Key in 2% in cell B1.
2) Key in 1 in cell B2 for the number of years.
3) In B3, key in -20,000 as the value in the future. This figure has be keyed in as negative for the answer to work.

The present value will be $19,607.84. This is what the $20,000 of the future is worth right now. The final result will look something like this:

Try experimenting a bit by changing the interest rate, amount or number of years and watch the present value figure change. Now wasn't that easy?

Present Value of a series of payments

To work out the present value of a series of payments, do the following:
1) In A1, type "Interest Rate Per Year"
2) In C1, type "(If you're working with months, divide this figure by 12)"
3) In C2, type "(If you're working with months, multiply this figure by 12)"
4) In A2, type "No of Years"
5) In A3, type "Amt Per Payment".
6) In A4, tyep "Arrears/Due"
7) In C4, type "(Key in 0 if payment is made beginning of the period or 1 for end of the period)"
8) In A6, type "Present Value = "
9) In B6, type "=PV(B1,B2,B3,0,B4)"

To illustrate an example, if you have to make a payment of $1000 at the end of each year for the next 5 years with an interest rate of 4% and you would like to know what will the total value of the figure be as at today. Do the following:

1) In B1, type 4%
2) In B2, type 5
3) In B3, type -1000
4) In B4, type 1 because payment is made at the end of the year and not the beginning of the year.

The present value that you will get is $4,629.90. The final answer will look something like this:

Try changing the interest rate or number of years or even the amount per payment to see how the present value changes.

I hope that you find this blog useful. In my next blog, I will cover future values.