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  • Trading Strategies | Online Stockmarket Trading Update
    summarised in the chart at end of this article In 2011 the Australian market closed down 15 delivering a second consecutive year of negative returns for only the second time since the 1980s in 1981 the index fell 16 4 followed by a 18 5 fall in 1982 In 2011 commodities prices were mixed with gold and crude oil rounding out the year with gains of 13 and 9 respectively while base metal prices plunged as the eurozone debt crisis dragged on with aluminium iron ore copper and lead all plunging around 20 while other metals such as nickel and tin closed the year even worse off down by around 25 Markets in 2012 Markets are said to climb the wall of worry as they recover from bear market territory and that is exactly what transpired in 2012 Although it was a roller coaster ride as markets were very shaky in April May due to the eurozone debt crisis and again in October November when major world powers went through their election processes Early in the 2012 calendar year traders were faced with myriad headwinds including the euorzone financial debt crisis instability in the global financial system which was getting worse slowing growth in China and the US Fiscal Cliff Additionally a number of countries were facing changes in their political leadership including Japan the US and the once in a decade change in China Fortunately Santa Claus came to the rescue pushing a number of markets as high as 10 to 15 from their November lows with Japan outperforming now up around 23 from those lows and China up 17 in the same timeframe 2012 Global Market Performances Markets globally have recorded a stellar performance in 2012 with few exceptions see China as illustrated in the chart below CHART Share Market Performances in 2012 The Australian market s performance again sits around the middle of the performances of the other major world markets in 2012 as highlighted in this chart The European powerhouse Germany surged higher in 2012 up almost 30 for the year and you can see from the European STOXX 600 performance up 18 for the year that the eurozone markets climbed the wall of worry even though their economies are still suffering from the eurozone debt crisis The World MSCI Index finished up 13 for the year In the US markets were up over 13 as President Obama was re elected and is spite of the Fiscal Cliff In Asia the major economies Japan and India rebounded sharply finishing up over 23 while the Chinese market was up only 3 for the year suffering from the slowing economy the uncertainty around the once in a decade change in leadership and the lowest levels of foreign investment since 2009 The positive trader sentiment has continued into 2013 as seen by the green bars on the above chart Investment Themes For 2013 Investors will need to be nimble again this year in managing their portfolio and trading positions Buy and hold has not worked in the past few years resulting in investors having to become more active Bonus We have compiled a Special Report on Investing in 2013 where we cover Evaluation of the Australian market and what to expect in 2013 Evaluation of commodities prices Top down sector analysis on the Australian market Sectors to focus on this year Investing for Yield and our view on interest rates Investment themes How to Survive 2013 For a free BONUS report email advisory d2mx com au or call 1300 610 024 You can also request the trading results from our Advisory service which performed well in excess of the overall market return For trade ideas and recommendations on how to trade in this market sign up for a free trial of the D2MX Daily Trading Report which provides a daily serving of insightful market analysis from the D2MX Advisory team including Trade ideas and strategies Dividend enhancement strategies Market scans to watch International market analysis and Highlights from the S P ASX 200 To request an obligation free trial call 1300 610 024 or email advisory d2mx com au Contact me at D2MX Trading on 1300 610 024 and I can help you trade using a number of strategies that will give you the tools to navigate this market and help you boost your returns on investment Michael Hevern Investment Adviser D2MX Trading This report was prepared by Michael Hevern It represents the views and opinions of the author It is not intended for use by any third party without the approval of Michael Hevern While this report is based on information from sources which are considered reliable its accuracy and completeness cannot be guaranteed Any opinions expressed reflect my judgment at this date and are subject to change Contracting Hevern Pty Ltd is a Corporate Authorised Representative No 408868 of D2MX Pty Limited ABN 98 113 959 596 AFSL No 297950 D2MX and Michael Hevern has been appointed as an Authorised Representative of Contracting Hevern Pty Ltd Opinions conclusions and other information expressed in this report are not given or endorsed by D2MX unless otherwise indicated The information contained in this Report is General Advice only as the information or advice given does not take into account your particular objectives financial situation or needs Disclaimer Using leverage to invest can be a two edged sword as it can magnify your returns when the stock price rises but will in turn magnify the losses if the trade does not perform as expected 2011 Market Performances CHART Market Performances in 2011 Go to Top Posted in Stock Market Analysis Trading Strategies No Comments Setting Up a Solid Trading Plan Friday December 21st 2012 The importance of proper planning in your trading can t be overstated This holiday season take some time to review your plan and be ready to trade with confidence in the new year To design a complete trading plan you must take into account the following details 1 Setup The setup is a series of conditions that must be in place before even considering a trade This may include fundamental criteria overall market conditions economic conditions sector performance a technical trend or a history of strong performance It s not the entry that makes a profitable trade it s the setup that provides the opportunity to gain a profit in the market 2 Entry The next step in the trading plan is to decide when to buy the shares you have monitored in your watchlist The entry criteria will normally be determined by technical analysis factors e g if the share continues to rise above resistance or an indicator provides a signal by crossing over a particular level Some investors will look at market depth to determine buyer support or news announcements Once the criteria have been met the share is bought 3 Exits to Cut Losses Once you have bought a share there are only two things that can happen You ve done all your analysis and decided to buy the share because you are convinced that it will rise and you were either right or wrong about this It is vitally important to plan for both situations Most people plan for making profits and forget about what to do if things do not work out as planned 4 Risk Management Risk management is determining how much you lose if the trade goes wrong This area includes how much money to put on one trade and how much you are prepared to lose if things don t go as planned A simple approach to risk management is to divide your capital into 5 10 parcels It is however important to have enough money on each trade to make it worthwhile When trading shares a minimum parcel size of 3 000 5 000 is required dependent on the amount of brokerage that you are paying 5 Exits to Take Profits It s as important to have an exit strategy if the trade does go as planned as when it doesn t work out When are you going to take profits This could be at a set level or when the share hits a trailing stop loss or when a fundamental valuation is reached This exit must be planned before entering the trade as it is very easy to change your mind once you own the shares as the emotions come into play A trading plan can be as simple as a check list of criteria that must be in place before entering the trade or it can be a formal written document It is up to you how you create this but ensure you spend some time on it before getting into the markets This will make a huge difference to your success Tags entry signals risk management stop loss trading criteria trading plan trading shares Posted in Trading Strategies No Comments Stocks for the 2012 Christmas Hamper Friday December 14th 2012 Last Christmas in our end of year note we highlighted high yielding stocks as the place to park your money Christmas Hamper for 2012 and that has proven to be a fantastic strategy for our clients While trading in high yielding stocks is not guaranteed to deliver strong returns to investors or traders dividends do offer a margin of safety which can in turn boost any capital return on the company s shares as evidenced by this year s performance Dividends also offer Super Funds the additional benefit of franking credits which can boost the portfolio s annual performance A review of the stocks we highlighted in last year s note paints a far rosier picture If you had simply constructed a portfolio with the 15 stocks highlighted then you could have returned 14 8 for the year in capital growth plus an additional 6 2 in dividends There were some standout performers with capital returns Perpetual was up 70 and NiB Health was up 40 while Telstra and Tatts were up 30 and Commbank and Westpac returned 25 Note these returns were did not include the dividends There were also a couple of dogs Metcash and Oz Minerals were both down over 23 2013 Outlook At this stage the prospects for 2013 appear to be clearer than they were at the same time last year In the US investors are facing the fiscal cliff in the short term but they are factoring in a resolution to that in the New Year The European markets are now at 18 month highs and the German market which is the European powerhouse is at 5 year highs The Europeans have battled their way through the year without any major catastrophes Greece was bailed out belatedly and the Spanish banks were also provided with bailout funding The eurozone is making progress on a unified banking system with the European financial leaders agreeing to put the European Central Bank in charge of all large eurozone lenders rather than their national regulators Some 200 banks will qualify for oversight by the ECB Germany is even considering the idea that it may allow Greece to write off some of its debt The Asian region as a whole has been underperforming on the world stage led by the Chinese market which went into hibernation as they grappled with stricter corporate governance standards and the once in a decade leadership changes The Chinese market recently hit its lowest levels since the GFC ended in 2009 However data out of China is now indicating that the economy is bottoming which should be positive for a move higher in New Year All in all we are definitely seeing some green shoots in markets globally which bodes well for 2013 The markets look set to move higher next year even though there will no doubt be some setbacks along the way as we saw this year in April and October Let s Go Shopping One way to trade into the New Year is to take a more domestic focus trading in stocks with consistent fundamentals that reward shareholders through a strong dividend stream This worked fantastically this year so here are some suggestions for 2013 We have done a quick review using the d2mxIRESS software searching the S P ASX200 stocks that have consistent fundamentals that reward shareholders through a strong dividend stream The shortlist of stocks is summarised in the table and chart below Note we have sorted these stocks by year to date performance There are a number of ways to utilise this information for your investing in 2013 including Choose the stocks that have performed the best in terms of YTD return and Yield such as Telstra Corporation Spark Infrastructure Westpac Bank and Tatts Group This method assumes that these stocks will continue to outperform into 2013 Choose the stocks that offer the best in terms of Dividend Yield such as Tabcorp Holdings Tatts Group Myer Holdings Metcash and National Bank Choose the stocks that have performed the best in terms of Return on Equity and Yield such as Tabcorp Holdings Tatts Group Myer Holding Metcash and National Bank Choose the stocks on a contrarian basis that is those stocks that have been sold off in the past year and are trading on single digit PE on the hope of a recovery into 2012 such as Tabcorp Holdings Metcash and National Bank Note this is a similar methodology to the Dogs of the Dow methodology used by traders in the Untied States to select high yielding underperforming stocks So decide on your selection criteria and add some of these stocks to your Christmas hamper Additionally keep a watchlist of these stocks so that you can start accumulating if there is a pullback in the first quarter of the New Year Wishing you all a Merry Christmas from the D2MX Advisory Team and we trust that Santa Claus delivers you exactly what you want for Christmas and we will return in the New Year Bonus For trade ideas and recommendations on how to trade in this market sign up for a free trial of the D2MX Daily Trading Report which provides a daily serving of insightful market analysis from the D2MX Advisory team including Trade ideas and strategies Dividend enhancement strategies Market scans to watch International market analysis and Highlights from the S P ASX 200 To request an obligation free trial call 1300 610 024 or email advisory d2mx com au Michael Hevern Investment Adviser D2MX This report was prepared by Michael Hevern It represents the views and opinions of the author It is not intended for use by any third party without the approval of Michael Hevern While this report is based on information from sources which are considered reliable its accuracy and completeness cannot be guaranteed Any opinions expressed reflect my judgment at this date and are subject to change Contracting Hevern Pty Ltd is a Corporate Authorised Representative No 408868 of D2MX Pty Limited ABN 98 113 959 596 AFSL No 297950 D2MX and Michael Hevern has been appointed as an Authorised Representative of Contracting Hevern Pty Ltd Opinions conclusions and other information expressed in this report are not given or endorsed by D2MX unless otherwise indicated The information contained in this Report is General Advice only as the information or advice given does not take into account your particular objectives financial situation or needs Past performance does not guarantee future returns Disclaimer Using leverage to invest can be a two edged sword as it can magnify your returns when the stock price rises but will in turn magnify the losses if the trade does not perform as expected Tags asx 200 australian shares dividend yield stock recommendations stock tips stockmarket 2013 Posted in Stock Market Analysis Trading Strategies No Comments Calendar Call Strategy Part 11 of Options Trading for All Types of Market Environments Friday December 7th 2012 Investors who want to participate in this market can use options to limit their risk to an adverse move Today we investigate the simple Calendar Call Option Strategy of buying and selling calls of the same strike price but different expiration months to participate in profits when the underlying stock price trades sideways or modestly rises or falls The S P ASX 200 has had a fantastic couple of weeks since it bounced sharply off its 200 day moving average Markets have a cyclical tendency to drift higher into the end of the year and if you want to participate in this move the Calendar Call Option Strategy is a defined risk way to trade The index is now searching for support around the key medium term pivot level of 4500 and this level has provided support in previous months There are a number of reasons why a long term investor may not want to jump into an outright stock position in this market environment such as the risk of a pullback near term and being exposed to stock price movements ahead of the resolution of the US fiscal cliff Calendar Call Option Strategy The Calendar Call Spread is a cheaper alternative to buying the stock outright and is a neutral to modestly bullish options strategy that profits when the underlying stock trades sideways or trades within a tight price range By using this option strategy you can limit the cost of the exposure to a stock while also limiting the risk in holding this position The downside is a limited exposure to a sharp up move In a Calendar Call Spread the trader buys and writes Call options simultaneously at the same strike price but with different expiration months This is classified as a Horizontal Call Spread A Calendar Call Spread profits primarily from the difference in rate of time decay in the option premium between the near term short options and the longer term option This is possible as near term option premiums decay faster than longer term option premiums You should use a Calendar Call Spread when you want to profit from an underlying asset that is expected to trade sideways or trade within a tight price range and want to take a bullish position on the stock in the longer term The Calendar Call Option Strategy is very flexible and provides a limited risk exposure to the underlying stock The strategy allows you to profit from an underlying stock price which is rising and or falling modestly or trading sideways gaining a leveraged bullish position if the short option expires worthless For the trader the maximum risk is limited to the initial premium paid for the call option while the maximum profit is also limited Profit Potential of Calendar Call Spread The Calendar Call Option Strategy spread reaches its maximum profit when the underlying stock closes just below the strike price of the short call options at expiration of the short call options The value of a Calendar Call Option Strategy during the course of the trade and prior to the expiration of the short call options can only be arrived at using an options pricing model such as the Black Scholes Model which can determine the expiration value of the longer term call options Equally the breakeven point of a Calendar Call Spread is the point below which the position will start to lose money if the underlying stock rises or falls strongly and can only be calculated using an options pricing model In summary the keys to the risk reward of Calendar Call Spread at expiry are the upside maximum profit is limited the maximum loss is limited to the net debit paid Time Decay Time decay is the enemy of most options traders particularly those who are long options Some traders visualise the impact of time decay like PACMAN because it continuously eats away at the value of the option particularly if the underlying stock trades sideways This is where the Calendar Call Spread excels because time decay is working for you Advantages Disadvantages of a Calendar Call Spread The primary advantage of a Calendar Call Spread is that it makes the mathematics of option trading work for you because the Calendar Call Spread profits primarily from the difference in rate of premium time decay between the near term short options and the longer term option This is possible as near term option premiums decay faster than longer term option premiums and this is most profound in the last few weeks of an option s life This strategy will profit if the underlying stock trades sideways or drifts higher and or lower before the short option expiry If the trade acts according to the initial trade plan then the short option position expires worthless and you are then exposed to bullish movements in the underlying asset which can be controlled at a discount for the longer term There are disadvantages in using this type of spread because profits will be limited even if the underlying asset rises strongly Losses can also be sustained if the short call options are assigned when the underlying asset rallies but this risk can be eliminated by using European options which can only be exercised at expiry Additionally you do have the option to adjust your position during the time of the trade by either closing out of the short options position if you consider that either the underlying stock prices is due for a bounce or you expect a strong rally to continue or simply closing out the position Recent Trade National Bank NAB A recent trade taken by our clients was to buy a NAB Calendar Call Spread two weeks prior to the November options expiry National Australia Bank NAB shares had suffered a 15 slide since its recent peak when it was trading at over 27 00 The share price had fallen to around 23 00 and was trying to establish support around this level The 22 50 support level has held for the past 18 months and this was a trade for a bounce from these levels While the chart looked oversold there was a chance NAB would just trade sideways around the 23 50 level so the trade was entered to profit from a sideways and bullish move on NAB while helping to reduce the risk To profit from this view we opened a NAB Calendar Call Spread The objective of this trade is for NAB to ideally be below the sold call strike at expiry So instead of trying to profit from a sharp bounce from NAB we were looking to profit from a steady recovery of NAB near term To put it more simply we felt NAB would hold around 23 51 before November options expiry 29 Nov 12 and trade higher from then on The maximum possible profit on this trade would be achieved if NAB held just below the short strike 23 51 level at November options expiry The maximum risk on the trade was the initial debit this would occur if NAB is above 23 51 at November options expiry or significantly below that level CHART 1 National Bank NAB Calendar Call Spread Trade Details In this trade we entered the position when NAB was trading around 23 84 two weeks prior to expiry The trade was established by Buying to Open NAB 2350 DEC12 Call for 58c and simultaneously Selling to Open the NAB 2351 DEC12 Call for 36c The total cost was limited to the initial 23 cents premium paid Payoff Diagram at Expiry CHART 2 Payoff Diagram at Expiry for the NAB Calendar 2351 NOV12 DEC12 CALL Spread Note if your view changed during the trade you could have bought back the short call or closed the trade prior to expiry Risks and Profit Potential The Calender Call Spread profits when the stock price trades sideways or finishes below the short strike price The maximum risk is limited to the initial premium paid for the option spread The maximum profit is also limited In summary the Calendar Call Spread strategy offers limited upside profit while the maximum risk is limited to the Net Debit Paid These risk rewards are shown in the Payoff diagram above Note the Calendar Call strategy can be used in order to gain an exposure to National Bank while limiting the outlay and risk to the premium paid Result NAB shares traded sideways up to expiry and we were of the view that they were likely to push higher for the end of month portfolio rebalancing We were able to buy back the SHORT NAB 2351 DEC12 Call for 29c on the day before expiry We held the LONG NAB 2350 DEC12 Calls until the day after expiry and were able to sell them for 92c for an overall total CREDIT of 41c a profit of around 180 for a two week trade Note transaction costs have not been included in these calculations The Trade Options can be used in order to gain leveraged exposure with limited risk while still participating in potential profits in the underlying stock The Calendar Call strategy can allow you to participate if a stock is trading sideways or modestly up or down while limiting your loss to the premium paid Please note your may need to refer to a tax professional regarding eligibility of franking credits Bonus There is another trade setting up right now that you could potentially profit from before Christmas If you would like more information please call 1300 610 024 or email advisory d2mx com au For trade ideas and recommendations on how to trade in this market sign up for a free trial of the D2MX Daily Trading Report which provides a daily serving of insightful market analysis from the D2MX Advisory team including Trade ideas and strategies Dividend enhancement strategies Market scans to watch International market analysis and Highlights from the S P ASX 200 To request an obligation free trial call 1300 610 024 or email advisory d2mx com au Michael Hevern Investment Adviser D2MX Trading See Also Options Trading for All Types of Market Environments Part 1 The Protective Put Options Trading for All Types of Market Environments Part 2 The Covered Call Options Trading for All Types of Market Environments Part 3 The Covered Call Collar Options Trading for All Types of Market Environments Part 4 The Stock Repair Strategy Options Trading for All Types of Market Environments Part 5 Limited Risk Short Selling Strategy Options Trading for All Types of Market Environments Part 7 Dividend Capture Covered Call Collar Options Trading for All Types of Market Environments Part 8 Hedging With a Bear Put Spread Options Trading for All Types of Market Environments Part 9 The Bull Call Strategy Options Trading for All Types of Market Environments Part 10 Dividend Capture Covered Call Collar This report was prepared by Michael Hevern It represents the views and opinions of the author It is not intended for use by any third party without the approval of Michael Hevern While this report is based on information from sources which are considered reliable its accuracy and completeness cannot be guaranteed Any opinions expressed reflect my judgment at this date and are subject to change Contracting Hevern Pty Ltd is a Corporate Authorised Representative No 408868 of D2MX Pty Limited ABN 98 113 959 596 AFSL No 297950 D2MX and Michael Hevern has been appointed as an Authorised Representative of Contracting Hevern Pty Ltd Opinions conclusions and other information expressed in this report are not given or endorsed by D2MX unless otherwise indicated The information contained in this Report is General Advice only as the information or advice given does not take into account your particular objectives financial situation or needs Disclaimer Using leverage to invest can be a two edged sword as it can magnify your returns when the stock price rises but will in turn magnify the losses if the trade does not perform as expected Tags calendar call spread Derivatives options strategies options trading trading NAB Trading Strategies Posted in Trading Strategies No Comments Webinar Playback The Top Five Fundamental Indicators Friday December 7th 2012 A company s share price can only ignore the fundamentals for so long before reality bites In this webinar we looked at our 5 favourite fundamental indicators and how to use them to identify companies that are fundamentally sound Thanks to everyone who attended we hope you enjoyed it For a free trial of the software used in this presentation visit http www d2mx com au personal trading trading software Tags company fundamentals d2mx fundamental analysis Market Analyser webinar Posted in Market Analyser 7 Trading Software Trading Strategies No Comments The Power of Position Sizing Friday November 30th 2012 Mary is a trader who enters three trades and buys 1000 Commonwealth Bank CBA shares 1000 Telstra TLS shares and 1000 BHP Billiton BHP shares If Mary was to make 10 per cent on her CBA trade lose 10 per cent on her TLS trade and breakeven on her BHP trade then overall she was profitable It may seem strange that Mary was profitable here but it is possible because of the different position sizes At the end of November 1000 shares of CBA are worth 59 000 1000 shares of TLS are worth 4 250 and 1000 shares of BHP are worth 34 000 A 10 per cent gain on the CBA trade yields a healthy 5 900 return while a 10 per cent loss in TLS is a loss of 425 and by breaking even on her BHP trade Mary s result is an overall gain of 5 475 Overall the outcome of the CBA trade is critical to Mary s overall profitability due to the imbalance caused by poor position sizing John decides to follow a trend following strategy that trades Newcrest Mining NCM shares as his back testing indicated a profitable strategy Rather than buying NCM shares John chooses to use CFDs to access the same amount of shares with just a 10 per cent deposit Following a sharp drop in the gold price NCM shares drop 18 per cent before going on to recover over the next few weeks and then climb higher Without leverage John s trading system would have exited at a profit of 23 per cent Unfortunately John s original position was fully leveraged while gold dropped sharply and as a result of his leverage he magnified his losses to 180 per cent This meant John was closed out of the position before the positive move which resulted in losses larger than his starting balance John was unable to hold for the recovery in the stock because of poor position sizing Following a series of wining trades Ewan decides that the move in Forge Group FGE is likely to continue Ewan has been trading 1000 shares of FGE but decides to enter 5000 shares as his confidence in the move increases A sharp reversal in FGE very quickly wipes out the gains on his previous trades and eats into his capital If Ewan had stuck with his original position size he could have been profitable overall taking only a small loss on the last position These are three examples of how position sizing can have a significant effect on your overall profitability Poor position sizing can turn a winning strategy into a losing strategy it can even turn a winning trade into a losing trade or a series of winning trades into an overall loss So let s take a look at the pros and cons of different position sizing models Fixed unit position size The amount traded is a set number of contracts regardless of the underlying security being traded This approach is widely used in the futures market due to the large contract sizes with many traders trading just one contract each time a trade signal is generated but it s not often used when trading shares The limitations of this approach should have become obvious already with position sizes varying widely depending on the share that is being traded This strategy does not work well in most cases because the price of the shares varies significantly This position sizing model is also static and you must then decide when to increase the number of contracts you are trading Fixed dollar position size A fixed dollar amount can be allocated to a trade ensuring consistent position sizing across a number of different shares This means you would trade say 5000 10 000 or 20 000 on each position and trade as many contracts as required to get close to a position size of your nominated dollar amount This is a far better approach than a fixed unit method because it does take into account the variation in share price If the price is low more shares are traded while a higher price means that fewer shares are traded As with the fixed unit approach this is a static position sizing model and you will need to implement a clear cut method that identifies when it s best to move from say 5000 to 6000 or 10 000 to 11 000 parcel sizes as well as what increments you ll move up in Fixed fraction position size When using fixed fraction position sizing you divide your capital into 10 equal parcels and place the same dollar amount onto each trade The fixed fraction approach is widely used when trading unleveraged instruments such as shares This approach allows a trader to spread the risk of any individual trade and ensures there is capital available for other trade signals as the signals are generated This is a dynamic approach to position sizing As your account balance increases your position size increases and as your account balance decreases your position size decreases It becomes much more difficult to employ this method when trading with leverage as margin requirements do not require you to allocate all of your capital to a trade It is possible to over leverage If you were to allocate say 10 per cent of your capital 5000 as initial margin on a CFD trade or an option trade you have unwittingly taken on a huge amount of risk Fixed risk position size The fixed risk model allocates a set amount to place at risk on a trade If the trade hits your stop loss you will lose the set amount As an example an entry at 50 with an exit at 49 50 on Commonwealth Bank CBA means you are risking 50 cents per share times the number of shares If you bought 1000 shares your risk is 500 To apply the fixed risk model choose the number of shares to trade that will result in the same risk for each trade The fixed risk model works well in leveraged instruments such as currency CFDs or futures where you calculate the risk you are prepared to take on any individual trade It also works very well when trading shares In this way any losing trade in any market will lose close to the same amount If the risk is too high then you simply do not enter the trade A fixed risk model can be applied using a set dollar amount or a percentage of capital The second approach is preferred for example 2 per cent of your capital is placed at risk on any trade as this adjusts automatically in conjunction with your account fluctuations This will enable you to increase your parcel size while keeping your risk at 2 per cent when winning and decrease your parcel size while keeping your risk at 2 per cent when losing As with fixed fraction this has the effect of increasing the size of your wins when winning and it will keep the size of your losses to your set percentage when losing A string of losing trades will reduce your account balance and as a result of this will reduce your position size The fixed

    Original URL path: http://blog.traderdealer.com.au/category/trading-strategies/ (2013-02-02)
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  • Covered Call Collar | Online Stockmarket Trading Update
    decided that it is now prudent to protect the near 10 gains achieved in just over 2 months We considered a covered collar was appropriate for this position Based on technical analysis you can see from the chart that the 27 50 resistance level has held since 2008 So we bought protection at 26 50 by buying 2650 MAR13 Put for 0 365 and then wrote the 2750 MAR13 Calls for 0 27 We paid 9 5c contract insurance for this trade and the position remains open We are protected until March expiry below 26 50 and profits will be capped at 27 50 Chart 1 ANZ Bank ANZ Covered Call Collar Trade Chart 2 The payoff diagram for the ANZ Bank ANZ Covered Call Collar trade Trade Note ANZ Bank ANZ is still trading between the 26 50 and 27 50 option strike levels and only time will tell whether the share price will end up at expiry but we are protected until March expiry down to 26 50 and profits will be capped at 27 50 for a cost of 9 5c contract Note you can close either side of the trade before expiry if you believe the insurance is no longer necessary Trading Software Utilise the features in the d2mxIRESS software to plan your trades for the options strategy using your specific trade selection criteria You will save time and potentially reduce your trading risk Sign up for a free 14 day software trial here Bonus For trade ideas and recommendations on how to trade in this market sign up for a free trial of the D2MX Daily Trading Report which provides a daily serving of insightful market analysis from the D2MX Advisory team including Trade ideas and strategies Dividend enhancement strategies Market scans to watch International market analysis and Highlights from the S P ASX 200 To request an obligation free trial call 1300 610 024 or email advisory d2mx com au Good luck in your investing and please give us a call if you would like assistance in boosting protecting your investment returns Michael Hevern Investment Adviser D2MX This report was prepared by Michael Hevern It represents the views and opinions of the author It is not intended for use by any third party without the approval of Michael Hevern While this report is based on information from sources which are considered reliable its accuracy and completeness cannot be guaranteed Any opinions expressed reflect my judgment at this date and are subject to change Contracting Hevern Pty Ltd is a Corporate Authorised Representative No 408868 of D2MX Pty Limited ABN 98 113 959 596 AFSL No 297950 D2MX and Michael Hevern has been appointed as an Authorised Representative of Contracting Hevern Pty Ltd Opinions conclusions and other information expressed in this report are not given or endorsed by D2MX unless otherwise indicated The information contained in this Report is General Advice only as the information or advice given does not take into account your particular

    Original URL path: http://blog.traderdealer.com.au/tag/covered-call-collar/ (2013-02-02)
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  • Derivatives | Online Stockmarket Trading Update
    of the exposure to a stock while also limiting the risk in holding this position The downside is a limited exposure to a sharp up move In a Calendar Call Spread the trader buys and writes Call options simultaneously at the same strike price but with different expiration months This is classified as a Horizontal Call Spread A Calendar Call Spread profits primarily from the difference in rate of time decay in the option premium between the near term short options and the longer term option This is possible as near term option premiums decay faster than longer term option premiums You should use a Calendar Call Spread when you want to profit from an underlying asset that is expected to trade sideways or trade within a tight price range and want to take a bullish position on the stock in the longer term The Calendar Call Option Strategy is very flexible and provides a limited risk exposure to the underlying stock The strategy allows you to profit from an underlying stock price which is rising and or falling modestly or trading sideways gaining a leveraged bullish position if the short option expires worthless For the trader the maximum risk is limited to the initial premium paid for the call option while the maximum profit is also limited Profit Potential of Calendar Call Spread The Calendar Call Option Strategy spread reaches its maximum profit when the underlying stock closes just below the strike price of the short call options at expiration of the short call options The value of a Calendar Call Option Strategy during the course of the trade and prior to the expiration of the short call options can only be arrived at using an options pricing model such as the Black Scholes Model which can determine the expiration value of the longer term call options Equally the breakeven point of a Calendar Call Spread is the point below which the position will start to lose money if the underlying stock rises or falls strongly and can only be calculated using an options pricing model In summary the keys to the risk reward of Calendar Call Spread at expiry are the upside maximum profit is limited the maximum loss is limited to the net debit paid Time Decay Time decay is the enemy of most options traders particularly those who are long options Some traders visualise the impact of time decay like PACMAN because it continuously eats away at the value of the option particularly if the underlying stock trades sideways This is where the Calendar Call Spread excels because time decay is working for you Advantages Disadvantages of a Calendar Call Spread The primary advantage of a Calendar Call Spread is that it makes the mathematics of option trading work for you because the Calendar Call Spread profits primarily from the difference in rate of premium time decay between the near term short options and the longer term option This is possible as near term option premiums decay faster than longer term option premiums and this is most profound in the last few weeks of an option s life This strategy will profit if the underlying stock trades sideways or drifts higher and or lower before the short option expiry If the trade acts according to the initial trade plan then the short option position expires worthless and you are then exposed to bullish movements in the underlying asset which can be controlled at a discount for the longer term There are disadvantages in using this type of spread because profits will be limited even if the underlying asset rises strongly Losses can also be sustained if the short call options are assigned when the underlying asset rallies but this risk can be eliminated by using European options which can only be exercised at expiry Additionally you do have the option to adjust your position during the time of the trade by either closing out of the short options position if you consider that either the underlying stock prices is due for a bounce or you expect a strong rally to continue or simply closing out the position Recent Trade National Bank NAB A recent trade taken by our clients was to buy a NAB Calendar Call Spread two weeks prior to the November options expiry National Australia Bank NAB shares had suffered a 15 slide since its recent peak when it was trading at over 27 00 The share price had fallen to around 23 00 and was trying to establish support around this level The 22 50 support level has held for the past 18 months and this was a trade for a bounce from these levels While the chart looked oversold there was a chance NAB would just trade sideways around the 23 50 level so the trade was entered to profit from a sideways and bullish move on NAB while helping to reduce the risk To profit from this view we opened a NAB Calendar Call Spread The objective of this trade is for NAB to ideally be below the sold call strike at expiry So instead of trying to profit from a sharp bounce from NAB we were looking to profit from a steady recovery of NAB near term To put it more simply we felt NAB would hold around 23 51 before November options expiry 29 Nov 12 and trade higher from then on The maximum possible profit on this trade would be achieved if NAB held just below the short strike 23 51 level at November options expiry The maximum risk on the trade was the initial debit this would occur if NAB is above 23 51 at November options expiry or significantly below that level CHART 1 National Bank NAB Calendar Call Spread Trade Details In this trade we entered the position when NAB was trading around 23 84 two weeks prior to expiry The trade was established by Buying to Open NAB 2350 DEC12 Call for 58c and simultaneously Selling to Open the NAB 2351 DEC12 Call for 36c The total cost was limited to the initial 23 cents premium paid Payoff Diagram at Expiry CHART 2 Payoff Diagram at Expiry for the NAB Calendar 2351 NOV12 DEC12 CALL Spread Note if your view changed during the trade you could have bought back the short call or closed the trade prior to expiry Risks and Profit Potential The Calender Call Spread profits when the stock price trades sideways or finishes below the short strike price The maximum risk is limited to the initial premium paid for the option spread The maximum profit is also limited In summary the Calendar Call Spread strategy offers limited upside profit while the maximum risk is limited to the Net Debit Paid These risk rewards are shown in the Payoff diagram above Note the Calendar Call strategy can be used in order to gain an exposure to National Bank while limiting the outlay and risk to the premium paid Result NAB shares traded sideways up to expiry and we were of the view that they were likely to push higher for the end of month portfolio rebalancing We were able to buy back the SHORT NAB 2351 DEC12 Call for 29c on the day before expiry We held the LONG NAB 2350 DEC12 Calls until the day after expiry and were able to sell them for 92c for an overall total CREDIT of 41c a profit of around 180 for a two week trade Note transaction costs have not been included in these calculations The Trade Options can be used in order to gain leveraged exposure with limited risk while still participating in potential profits in the underlying stock The Calendar Call strategy can allow you to participate if a stock is trading sideways or modestly up or down while limiting your loss to the premium paid Please note your may need to refer to a tax professional regarding eligibility of franking credits Bonus There is another trade setting up right now that you could potentially profit from before Christmas If you would like more information please call 1300 610 024 or email advisory d2mx com au For trade ideas and recommendations on how to trade in this market sign up for a free trial of the D2MX Daily Trading Report which provides a daily serving of insightful market analysis from the D2MX Advisory team including Trade ideas and strategies Dividend enhancement strategies Market scans to watch International market analysis and Highlights from the S P ASX 200 To request an obligation free trial call 1300 610 024 or email advisory d2mx com au Michael Hevern Investment Adviser D2MX Trading See Also Options Trading for All Types of Market Environments Part 1 The Protective Put Options Trading for All Types of Market Environments Part 2 The Covered Call Options Trading for All Types of Market Environments Part 3 The Covered Call Collar Options Trading for All Types of Market Environments Part 4 The Stock Repair Strategy Options Trading for All Types of Market Environments Part 5 Limited Risk Short Selling Strategy Options Trading for All Types of Market Environments Part 7 Dividend Capture Covered Call Collar Options Trading for All Types of Market Environments Part 8 Hedging With a Bear Put Spread Options Trading for All Types of Market Environments Part 9 The Bull Call Strategy Options Trading for All Types of Market Environments Part 10 Dividend Capture Covered Call Collar This report was prepared by Michael Hevern It represents the views and opinions of the author It is not intended for use by any third party without the approval of Michael Hevern While this report is based on information from sources which are considered reliable its accuracy and completeness cannot be guaranteed Any opinions expressed reflect my judgment at this date and are subject to change Contracting Hevern Pty Ltd is a Corporate Authorised Representative No 408868 of D2MX Pty Limited ABN 98 113 959 596 AFSL No 297950 D2MX and Michael Hevern has been appointed as an Authorised Representative of Contracting Hevern Pty Ltd Opinions conclusions and other information expressed in this report are not given or endorsed by D2MX unless otherwise indicated The information contained in this Report is General Advice only as the information or advice given does not take into account your particular objectives financial situation or needs Disclaimer Using leverage to invest can be a two edged sword as it can magnify your returns when the stock price rises but will in turn magnify the losses if the trade does not perform as expected Tags calendar call spread Derivatives options strategies options trading trading NAB Trading Strategies Posted in Trading Strategies No Comments Derivatives Features in Market Analyser 7 Friday June 15th 2012 The new Bourse 7 and Market Analyser 7 trading platforms include a comprehensive range of tools for the derivatives market Data is available for all ASX exchange traded options as well as warrants traded on the ASX If the share has derivatives available you can access these with a right click on the share code and click Options Monitor The window shown on the right of the screen will then appear You can also access the Derivatives from the Analytics menu at the top of the screen which contains the Options Monitor Warrants Monitor and the Option Valuation tool You can use the filters at the top of the screen to narrow down your selection to the options you are interested in Choose from Calls or Puts by clicking on the C or P buttons You can display both if you want to You can also select the expiry month from the drop down list and you can sort the data by any of the column headings Click on Exercise Price to display the Puts and Calls next to each other provided you have them both selected with the filters above Click on Volume to see the most actively traded options today or click on Open Interest to see the options with the most interest in them at present Once you find the option you are interested in you can right click on the option and click Option Valuation This window provides more insight into the option including the implied volatility and the Greeks Altering any of the parameters in the right hand pane will update the Results in the left pane You can change the volatility underlying price and days to expiry and see the value of the option update as well as any associated changes in the Greeks If you want to get back to the starting point with today s prices click the Request button For those traders more interested in warrants you can display these in a similar way Click on the Analytics Menu and then select Warrant Monitor Type in the code of the share and click Request to display the warrants for that company Once again you can use the filters at the top of the screen to display only the information you want to see and sort by any column to find the option you are interested in You can also use the Option Valuation to find out more detail about the warrant you are interested in Right click on the warrant and click Option Valuation This will display the data for the warrant and allow you to run What If scenarios on the warrant just as you can do with options Right click on any option or warrant in a quote window and click D2MX Chart to display the chart for that instrument Remember that because of the low volume nature of the options market the chart may contain very little information so this works best on the options and warrants that are actively traded Enjoy using the derivative tools available in the new Bourse 7 and Market Analyser 7 trading platforms These tools are here to assist you to make your trading decisions when trading options and warrants Jeff Cartridge Education Manager For more tutorials select your trading platform Market Analyser 7 The Bourse 7 Tags Derivatives Market Analyser options options monitor options trading software tutorial volatility warrants Posted in Market Analyser 7 Trading Software Trading Strategies No Comments Boosting Dividend Yield Using Warrants Part 2 of Warrant Trading for All Types of Market Environments Friday April 27th 2012 Market cycles drive portfolio performance and one of the more reliable recurring cycles in the market is the cycle that is driven by banks and their dividend payment cycles Banks tend to outperform the overall market in the six weeks prior to going ex dividend and as the bank dividend season is fast approaching we thought it timely to discuss how you can boost your dividend yield by trading bank shares using instalment warrants Instalment warrants allow investors to generate higher franked dividend income compared to a direct share investment and can be traded in your self managed super fund SMSF Instalment Warrants Instalment warrants have been around for a while and are traded on the ASX Instalment warrants are a geared investment which give the investor all the benefits of share ownership including access to the full cash dividend amount and the associated franking credits SMSF investors can gain the economic benefit of the share ownership for a fraction of the cost of purchasing the underlying shares outright Instalment warrants have a six letter code eg ANZIOW The first three identify the stock the fourth letter the warrant type I Instalment the fifth letter the issuer and the last letter signals the series or leverage Instalment warrants are a type of warrant listed on the ASX They are a leveraged trading instrument providing investors with upward of 30 gearing on the underlying asset while having all benefits of share ownership Investors can choose their level of leverage based on their own risk profile as there are a number of instalment warrants or leverage levels available for each stock Before trading instalment warrants traders need to read and understand the ASX Understanding Warrants Booklet and then sign the Warrant Agreement form Speak to your broker or contact us at D2MX on 1300 610 024 The key features of instalment warrants include They are instruments traded and regulated on the Australian Securities Exchange You can trade long and participate in the dividends and franking credits There are NO margin calls Instalment warrants are an efficient way to trade dividend paying stocks to boost yields No credit checks or approvals required The main benefits of trading instalment warrants on dividend paying stocks Increased dividend income and franking credits A lower capital outlay is required to achieve the same dividend income Can offer potential tax benefits The maximum loss is limited to the initial outlay Can be traded in your Self managed Super Funds SMSF The risk of trading instalment warrants As with any leveraged investment product the price of the underlying asset may fall prior to the time of sale or even prior to the ex div date The value of the instalment warrant could fall or be significantly less valuable on its maturity date or may expire worthless resulting in a total loss of the initial monies outlaid for the trade Leverage is a two edged sword it enhances any gains but would also increase any loss sustained Instalment Warrant Terminology The instalment warrant is made up of three parameters The Instalment Value the prices at which it trades The Final Instalment Price the loan amount The Maturity Date the date on which the Instalment ceases to trade or is rolled Case Study Sam wants to trade ANZ for the dividend and franking credits and is looking to boost her returns She plans to trade ANZ on 13th of April 2012 when ANZ is trading at 23 00 and Instalment Warrant ANZIOW is trading at 13 40 and ANZ is expected to go Ex div 0 65 on the 12th of May 2012 Note This case study

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    trade acts according to the initial trade plan then the short option position expires worthless and you are then exposed to bullish movements in the underlying asset which can be controlled at a discount for the longer term There are disadvantages in using this type of spread because profits will be limited even if the underlying asset rises strongly Losses can also be sustained if the short call options are assigned when the underlying asset rallies but this risk can be eliminated by using European options which can only be exercised at expiry Additionally you do have the option to adjust your position during the time of the trade by either closing out of the short options position if you consider that either the underlying stock prices is due for a bounce or you expect a strong rally to continue or simply closing out the position Recent Trade National Bank NAB A recent trade taken by our clients was to buy a NAB Calendar Call Spread two weeks prior to the November options expiry National Australia Bank NAB shares had suffered a 15 slide since its recent peak when it was trading at over 27 00 The share price had fallen to around 23 00 and was trying to establish support around this level The 22 50 support level has held for the past 18 months and this was a trade for a bounce from these levels While the chart looked oversold there was a chance NAB would just trade sideways around the 23 50 level so the trade was entered to profit from a sideways and bullish move on NAB while helping to reduce the risk To profit from this view we opened a NAB Calendar Call Spread The objective of this trade is for NAB to ideally be below the sold call strike at expiry So instead of trying to profit from a sharp bounce from NAB we were looking to profit from a steady recovery of NAB near term To put it more simply we felt NAB would hold around 23 51 before November options expiry 29 Nov 12 and trade higher from then on The maximum possible profit on this trade would be achieved if NAB held just below the short strike 23 51 level at November options expiry The maximum risk on the trade was the initial debit this would occur if NAB is above 23 51 at November options expiry or significantly below that level CHART 1 National Bank NAB Calendar Call Spread Trade Details In this trade we entered the position when NAB was trading around 23 84 two weeks prior to expiry The trade was established by Buying to Open NAB 2350 DEC12 Call for 58c and simultaneously Selling to Open the NAB 2351 DEC12 Call for 36c The total cost was limited to the initial 23 cents premium paid Payoff Diagram at Expiry CHART 2 Payoff Diagram at Expiry for the NAB Calendar 2351 NOV12 DEC12 CALL Spread Note if your view changed during the trade you could have bought back the short call or closed the trade prior to expiry Risks and Profit Potential The Calender Call Spread profits when the stock price trades sideways or finishes below the short strike price The maximum risk is limited to the initial premium paid for the option spread The maximum profit is also limited In summary the Calendar Call Spread strategy offers limited upside profit while the maximum risk is limited to the Net Debit Paid These risk rewards are shown in the Payoff diagram above Note the Calendar Call strategy can be used in order to gain an exposure to National Bank while limiting the outlay and risk to the premium paid Result NAB shares traded sideways up to expiry and we were of the view that they were likely to push higher for the end of month portfolio rebalancing We were able to buy back the SHORT NAB 2351 DEC12 Call for 29c on the day before expiry We held the LONG NAB 2350 DEC12 Calls until the day after expiry and were able to sell them for 92c for an overall total CREDIT of 41c a profit of around 180 for a two week trade Note transaction costs have not been included in these calculations The Trade Options can be used in order to gain leveraged exposure with limited risk while still participating in potential profits in the underlying stock The Calendar Call strategy can allow you to participate if a stock is trading sideways or modestly up or down while limiting your loss to the premium paid Please note your may need to refer to a tax professional regarding eligibility of franking credits Bonus There is another trade setting up right now that you could potentially profit from before Christmas If you would like more information please call 1300 610 024 or email advisory d2mx com au For trade ideas and recommendations on how to trade in this market sign up for a free trial of the D2MX Daily Trading Report which provides a daily serving of insightful market analysis from the D2MX Advisory team including Trade ideas and strategies Dividend enhancement strategies Market scans to watch International market analysis and Highlights from the S P ASX 200 To request an obligation free trial call 1300 610 024 or email advisory d2mx com au Michael Hevern Investment Adviser D2MX Trading See Also Options Trading for All Types of Market Environments Part 1 The Protective Put Options Trading for All Types of Market Environments Part 2 The Covered Call Options Trading for All Types of Market Environments Part 3 The Covered Call Collar Options Trading for All Types of Market Environments Part 4 The Stock Repair Strategy Options Trading for All Types of Market Environments Part 5 Limited Risk Short Selling Strategy Options Trading for All Types of Market Environments Part 7 Dividend Capture Covered Call Collar Options Trading for All Types of Market Environments Part 8 Hedging With

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    when NAB was trading around 23 84 two weeks prior to expiry The trade was established by Buying to Open NAB 2350 DEC12 Call for 58c and simultaneously Selling to Open the NAB 2351 DEC12 Call for 36c The total cost was limited to the initial 23 cents premium paid Payoff Diagram at Expiry CHART 2 Payoff Diagram at Expiry for the NAB Calendar 2351 NOV12 DEC12 CALL Spread Note if your view changed during the trade you could have bought back the short call or closed the trade prior to expiry Risks and Profit Potential The Calender Call Spread profits when the stock price trades sideways or finishes below the short strike price The maximum risk is limited to the initial premium paid for the option spread The maximum profit is also limited In summary the Calendar Call Spread strategy offers limited upside profit while the maximum risk is limited to the Net Debit Paid These risk rewards are shown in the Payoff diagram above Note the Calendar Call strategy can be used in order to gain an exposure to National Bank while limiting the outlay and risk to the premium paid Result NAB shares traded sideways up to expiry and we were of the view that they were likely to push higher for the end of month portfolio rebalancing We were able to buy back the SHORT NAB 2351 DEC12 Call for 29c on the day before expiry We held the LONG NAB 2350 DEC12 Calls until the day after expiry and were able to sell them for 92c for an overall total CREDIT of 41c a profit of around 180 for a two week trade Note transaction costs have not been included in these calculations The Trade Options can be used in order to gain leveraged exposure with limited risk while still participating in potential profits in the underlying stock The Calendar Call strategy can allow you to participate if a stock is trading sideways or modestly up or down while limiting your loss to the premium paid Please note your may need to refer to a tax professional regarding eligibility of franking credits Bonus There is another trade setting up right now that you could potentially profit from before Christmas If you would like more information please call 1300 610 024 or email advisory d2mx com au For trade ideas and recommendations on how to trade in this market sign up for a free trial of the D2MX Daily Trading Report which provides a daily serving of insightful market analysis from the D2MX Advisory team including Trade ideas and strategies Dividend enhancement strategies Market scans to watch International market analysis and Highlights from the S P ASX 200 To request an obligation free trial call 1300 610 024 or email advisory d2mx com au Michael Hevern Investment Adviser D2MX Trading See Also Options Trading for All Types of Market Environments Part 1 The Protective Put Options Trading for All Types of Market Environments Part 2 The Covered Call Options Trading for All Types of Market Environments Part 3 The Covered Call Collar Options Trading for All Types of Market Environments Part 4 The Stock Repair Strategy Options Trading for All Types of Market Environments Part 5 Limited Risk Short Selling Strategy Options Trading for All Types of Market Environments Part 7 Dividend Capture Covered Call Collar Options Trading for All Types of Market Environments Part 8 Hedging With a Bear Put Spread Options Trading for All Types of Market Environments Part 9 The Bull Call Strategy Options Trading for All Types of Market Environments Part 10 Dividend Capture Covered Call Collar This report was prepared by Michael Hevern It represents the views and opinions of the author It is not intended for use by any third party without the approval of Michael Hevern While this report is based on information from sources which are considered reliable its accuracy and completeness cannot be guaranteed Any opinions expressed reflect my judgment at this date and are subject to change Contracting Hevern Pty Ltd is a Corporate Authorised Representative No 408868 of D2MX Pty Limited ABN 98 113 959 596 AFSL No 297950 D2MX and Michael Hevern has been appointed as an Authorised Representative of Contracting Hevern Pty Ltd Opinions conclusions and other information expressed in this report are not given or endorsed by D2MX unless otherwise indicated The information contained in this Report is General Advice only as the information or advice given does not take into account your particular objectives financial situation or needs Disclaimer Using leverage to invest can be a two edged sword as it can magnify your returns when the stock price rises but will in turn magnify the losses if the trade does not perform as expected Tags calendar call spread Derivatives options strategies options trading trading NAB Trading Strategies Posted in Trading Strategies No Comments Dividend Capture Covered Call Collar Part 10 of Options Trading for All Types of Market Conditions Friday June 22nd 2012 The Dividend Capture Covered Call Collar is an options trading strategy traders can use to protect an existing position that has recently surged into a key resistance level and is about to pay a dividend Rather than simply taking profits on the share position paying capital gains tax and potentially missing out on the dividend and future upside the trader enters into a Dividend Capture Covered Call Collar This strategy seeks to protect your existing share position while still participating in some of the upside including the dividend for a modest outlay The Dividend Capture Covered Call Collar allows you to participate in some of the future gains up to the sold strike price and hopefully the dividend while being protected by the put position Dividend Capture Covered Call Collar is ideal for participating in future gains and picking up the dividend while being protected on the downside If you are of the opinion that the stock market is likely to sell off and the share has little chance of breaking the key resistance level but you still want to hold on to it for the dividend you could use a Dividend Capture Covered Call Collar options strategy The Dividend Capture Covered Call Collar strategy is similar to the protective put options strategy in that you also buy put options as protection The difference is that you will now finance the purchase of those put options with the proceeds from writing an equal number of out of the money call options The position will still protect you from losses below the strike price of the put options at minimal cost to yourself but it will stop the position from profiting beyond the strike price of the short call options should the stock stage a rally and you could miss out on the dividend if this rally happens before the ex dividend date That is you would miss out on a strong rally in exchange for putting on the protection of the put options for free apart from commissions of course Use a Dividend Capture Covered Call Collar when you expect the share price to move modestly higher or pull back significantly from current levels and you want to hang on for the dividend Income Trade Telstra for Dividend Here at D2MX Advisory we recommended buying Telstra for the dividend yield in January this year when Telstra was trading at 3 30 This trade was intended to capture the dividend s but the share price has subsequently jumped to as high as 3 75 where it met resistance Recently we ve had queries from clients worried about the overall state of the markets and who want to hold on to Telstra for the next dividend while protecting themselves on the downside So this week we discuss how you can hold on to your Telstra shares for the dividend TLS goes ex div 0 14 on 22 Aug 12 by utilising the Dividend Capture Collar Strategy Given the turmoil in the eurozone which has been triggered by the worsening problems with the eurozone financial system and the debt crisis we considered a Dividend Capture Covered Collar was appropriate for this position Based on technical analysis you can see from the chart below that the 3 80 resistance level has held for over three years So when Telstra was trading around 3 66 we bought protection at 3 60 by buying 360 JUL12 Put for 0 05 and then sold the 380 JUL12 Calls for 0 03 This trade cost 2 cents but we are protected until the end of July expiry down to 3 65 and profits will be capped at 3 80 Chart 1 Telstra Dividend Capture Covered Call Collar Trade You can plan and analyse your trade as shown above using the Derivatives functionality in the Market Analyser 7 software refer to the Market Analyser 7 Derivatives Video Tutorial for a demonstration Trade Note Telstra TLS is still trading between the 3 60 and 3 80 option strike levels and only time will tell where the share price will end up at expiry However we are protected until July expiry down to 3 55 but profits will be capped at 3 80 The Trade Options can be used to reduce your risk while still participating in potential profits from a significant move by the underlying stock The Dividend Capture Covered Call Collar strategy allows you to participate is some of the future gains up to the sold strike price and hopefully the dividend while being protected by the put position Note due to the low volatility in the Telstra stock you could have simply just bought the puts because you are paying approximately 1 5 of the stock value to protect your position down to 3 55 until the end of July with the prospect of a 4 dividend plus franking credits due in August Utilise the features in the Market Analyser 7 software to trade plan your options trades for the particular options strategy using your specific trade selection criteria You will save time and potentially reduce your trading risk Contact me at D2MX Trading on 1300 610 024 and I can help you trade using a number of strategies that will give you the tools to navigate this market and help you boost your returns on investment Banking stocks like Commonwealth Bank are ideal for this strategy I trust that this information has been helpful Please note your may need to refer to a tax professionial regarding eligibility of franking credits Michael Hevern Investment Adviser D2MX Trading This report was prepared by Michael Hevern It represents the views and opinions of the author It is not intended for use by any third party without the approval of Michael Hevern While this report is based on information from sources which are considered reliable its accuracy and completeness cannot be guaranteed Any opinions expressed reflect my judgment at this date and are subject to change Contracting Hevern Pty Ltd is a Corporate Authorised Representative No 408868 of D2MX Pty Limited ABN 98 113 959 596 AFSL No 297950 D2MX and Michael Hevern has been appointed as an Authorised Representative of Contracting Hevern Pty Ltd Opinions conclusions and other information expressed in this report are not given or endorsed by D2MX unless otherwise indicated The information contained in this Report is General Advice only as the information or advice given does not take into account your particular objectives financial situation or needs Disclaimer Using leverage to invest can be a two edged sword as it can magnify your returns when the stock price rises but will in turn magnify the losses if the trade does not perform as expected See Also Options Trading for All Types of Market Environments Part 1 The Protective Put Options Trading for All Types of Market Environments Part 2 The Covered Call Options Trading for All Types of Market Environments Part 3 The Covered Call Collar Options Trading for All Types of Market Environments Part 4 Stock Repair For Buy and Sell recommendations on ASX listed companies register for a free trial of MDS Financial Research MDS Financial Advisory Services offers general advice on trading options to generate consistent steady income on your investment portfolio Call 1300 610 024 for further information Tags covered call Dividends Ex Dividend options trading Telstra trading for dividends Trading Strategy Posted in Trading Strategies No Comments Derivatives Features in Market Analyser 7 Friday June 15th 2012 The new Bourse 7 and Market Analyser 7 trading platforms include a comprehensive range of tools for the derivatives market Data is available for all ASX exchange traded options as well as warrants traded on the ASX If the share has derivatives available you can access these with a right click on the share code and click Options Monitor The window shown on the right of the screen will then appear You can also access the Derivatives from the Analytics menu at the top of the screen which contains the Options Monitor Warrants Monitor and the Option Valuation tool You can use the filters at the top of the screen to narrow down your selection to the options you are interested in Choose from Calls or Puts by clicking on the C or P buttons You can display both if you want to You can also select the expiry month from the drop down list and you can sort the data by any of the column headings Click on Exercise Price to display the Puts and Calls next to each other provided you have them both selected with the filters above Click on Volume to see the most actively traded options today or click on Open Interest to see the options with the most interest in them at present Once you find the option you are interested in you can right click on the option and click Option Valuation This window provides more insight into the option including the implied volatility and the Greeks Altering any of the parameters in the right hand pane will update the Results in the left pane You can change the volatility underlying price and days to expiry and see the value of the option update as well as any associated changes in the Greeks If you want to get back to the starting point with today s prices click the Request button For those traders more interested in warrants you can display these in a similar way Click on the Analytics Menu and then select Warrant Monitor Type in the code of the share and click Request to display the warrants for that company Once again you can use the filters at the top of the screen to display only the information you want to see and sort by any column to find the option you are interested in You can also use the Option Valuation to find out more detail about the warrant you are interested in Right click on the warrant and click Option Valuation This will display the data for the warrant and allow you to run What If scenarios on the warrant just as you can do with options Right click on any option or warrant in a quote window and click D2MX Chart to display the chart for that instrument Remember that because of the low volume nature of the options market the chart may contain very little information so this works best on the options and warrants that are actively traded Enjoy using the derivative tools available in the new Bourse 7 and Market Analyser 7 trading platforms These tools are here to assist you to make your trading decisions when trading options and warrants Jeff Cartridge Education Manager For more tutorials select your trading platform Market Analyser 7 The Bourse 7 Tags Derivatives Market Analyser options options monitor options trading software tutorial volatility warrants Posted in Market Analyser 7 Trading Software Trading Strategies No Comments Market Analyser 7 Video Tutorial Derivatives Wednesday March 21st 2012 Market Analyser 7 has a comprehensive range of tools for derivatives traders Watch this short video to learn about the Options Monitor Options Valuation and Warrant Monitor screens and how to easily sort and manage the data they provide Or click here to download a high resolution video Tags derivatives trading Market Analyser online trading options trading Trader Dealer warrants trading Posted in Market Analyser 7 No Comments The Bull Call Strategy Part 9 of Options Trading for All Types of Market Environments Friday March 9th 2012 Active traders who want to participate in this market can use options to limit their risk to an adverse move Today we investigate the simple Bullish Call option strategy of buying calls to participate in profits when the underlying stock price rises The S P ASX 200 has sold down sharply this week led by the materials sector The index is now searching for support around the key medium term pivot level of 4180 This level has provided support over the past few months Active traders who want to trade in this market and who are looking for a bounce in the materials sector can buy calls for a limited risk entry into a specific stock There are a number of reasons why a long term investor may not want to jump into an outright stock position in this market environment such as the risk of further falls and being exposed to price gapping overnight The Bull Call option strategy is a cheaper alternative to buying the stock By buying the call option you limit the cost of the exposure to the stock while also limiting the risk in holding this position Buying Calls To Profit From Stock Price Rises Call options are financial contracts between a buyer and a seller for the purchase of a particular stock or whatever other underlying asset it is based on The seller or writer is giving the buyer of the call options the right to buy the stock at a fixed price The buyer or holder of the call options wants the underlying stock price to rise before the options contract expires The buyer of a call option expects the underlying stock to go up and is willing to pay a small price to speculate on such a move Call options enable you to buy the underlying stock at a price fixed right now no matter how high it rallies in the future for a small price relative to the price of the underlying stock without first having to buy the underlying stock Call options are very flexible and provide a limited risk exposure to the underlying stock They allow you to profit from a rising underlying stock price taking advantage of new trends or swings very quickly and can also be used to hedge away positional risks For the buyer of a call option the maximum risk is limited to the initial premium paid for the call option while the maximum profit is unlimited Recent Trade Newcrest Mining NCM A recent trade that our clients took was to buy Newcrest Mining April 31 50 Call options when Newcrest Mining was trading at 30 65 Newcrest Mining has sold down sharply in the past fortnight around 15 and this call position was taken with the view that Newcrest Mining would trade back towards the upper end of the trading range shown in the chart below Note another positive for this trade is that the 30 00 level has held as support all the way back to early 2010 In this trade we entered when NCM was trading at 30 65 and the trade was established by Buying to Open NCM 3150 APR12 Call for 95c The total cost is limited to the initial 95 cents premium paid Note if you were more bullish and expected NCM to surge near term you would have bought a further out of the money call to give you more leverage on the position FIGURE 1 Payoff diagram for the Bull Call on Newcrest at expiry This trade can be analysed using the Derivative Profiler option in the Market Analyser software Risks and Profit Potential The Bull Call profits when the stock price trades above the strike price For the buyer of a call option the maximum risk is limited to the initial premium paid for the call option The maximum profit is unlimited Profit Calculation of the NCM Bull call Maximum Return Unlimited Following up from the recent trade example Buy to open 10 NCM 3150 APR12 Call for 95c per contract Maximum Return Unlimited Maximum Risk Net Debit 95c if NCM share price is Break Even Strike Price Net Debit 31 50 0 95 32 45 In summary the bull call strategy offers a maximum upside profit which is unlimited while the maximum risk is limited to the Net Debit Paid These risk rewards are shown in the Payoff diagram An interesting aside is to examine the payoff as the trade progresses as shown in the diagram below Note that the break even is reached sooner because of the time value left in the option FIGURE 2 Payoff diagram for the Bull Call on Newcrest at two days into the trade Note this Bull Call strategy can be used in order to gain an exposure to Newcrest while limiting your outlay and risk to the premium paid The Trade Options can be used to gain leveraged exposure with limited risk while still participating in potential profits from a significant move by the underlying stock Here we ve explained the Bull Call strategy which can be used to allow you to participate in the rising stock price of the underlying stock while limiting your loss to the premium paid In future articles we will talk about the High Yield Covered Call strategy and the Covered Call Stock Reversal strategy which is particularly relevant to this market Utilise the features in the Market Analyser software to plan your options trading strategy using your specific trade selection criteria You will save time and potentially reduce your trading risk By Michael Hevern MDS Trading Desk Options Trading for All Types of Market Environments Part 1 The Protective Put Options Trading for All Types of Market Environments Part 2 The Covered Call Options Trading for All Types of Market Environments Part 3 The Covered Call Collar Options Trading for All Types of Market Environments Part 4 The Stock Repair Strategy Options Trading for All Types of Market Environments Part 5 Limited Risk Short Selling Strategy Options Trading for All Types of Market Environments Part 7 Dividend Capture Covered Call Collar Options Trading for All Types of Market Environments Part 8 Hedging With a Bear Put Spread For Buy and Sell recommendations on ASX listed companies register for a FREE trial of MDS Financial Research This report was prepared by Michael Hevern It represents the views and opinions of the author It is not intended for use by any third party without the approval of Michael Hevern While this report is based on information from sources which are considered reliable its accuracy and completeness cannot be guaranteed Any opinions expressed reflect my judgment at this date and are subject to change Contracting Hevern Pty Ltd is a Corporate Authorised Representative No 408868 of MDS Financial Services Pty Limited ABN 28 088 190 283 AFSL No 333298 MDS and Michael Hevern has been appointed as an Authorised Representative of Contracting Hevern Pty Ltd Opinions conclusions and other information expressed in this report are not given or endorsed by MDS Financial Services Pty Ltd unless otherwise indicated The information contained in this Report is General Advice only as the information or advice given does not take into account your particular objectives financial situation or needs Tags bull call strategy Market Analyser options strategy options trading options trading strategy Posted in Trading Strategies No Comments Hedging With a Bear Put Spread Part 8 of Options Trading for All Types of Market Environments Friday February 10th 2012 Investors who are currently in the market may be sitting on some handsome profits especially if they were astute enough to have started buying late last year The S P ASX 200 is approaching the key 4350 resistance level This level has been a barrier of resistance since last July and investors should be looking to protect their profits Profit protection can be obtained by outright selling the position or by buying a protective put as discussed last year in the article Options Trading Part 1 The Protective Put However there can be reasons why a long term investor may not want to cash out at this time such as capital gains tax or perhaps an upcoming dividend A cheaper alternative to buying a Protective Put would be to enter into a Bear Put Spread which limits the cost of the protection but also limits the degree of protection Cheaper Protection Using Bear Put Spreads A Bear Put Spread is an options strategy that can be used to buy put options at a discount and can be particularly useful when you have an existing stock position that you want to protect It is a debit spread that can be an effective way of hedging an underlying share position as it allows investors to purchase put options at a relatively cheaper cost than an outright put purchase The Bear Put Spread is an option strategy that makes its maximum profit when the underlying stock declines to the short strike and has its maximum risk if the stock rises in price to the long strike The strategy is to be implemented using puts where an option with a higher striking price is purchased and one with a lower striking price is sold simultaneously both options generally having the same expiration date The Bear Put Spread option strategy is established by selling to open an Out of the Money OTM put option which effectively reduces the cost of the In the Money ITM or At The Money ATM Put options This reduces the upfront payment and therefore the risk of the position making it an ideal option trading strategy for investors who want protection from falls in a down market while holding on to their existing position hedging Standalone the Bear Put Spread is a bearish option strategy that profits when the underlying stock price falls The Bear Put Spread involves simultaneously buying to open and selling to open options of the same expiration month making it a Vertical Spread and because you need to pay money to put on this position resulting in a net debit this is also known as a Debit Spread A debit spread profits from a move in the share price through the purchase of an option near at the money ATM or ITM whilst reducing the cost of the trade by selling an option further out of the money OTM The advantage of the debit spread is that the cost of purchasing the option is lowered while the downside to this strategy is that the profit is capped by the sold options and this is why the investors must choose their option strikes carefully so as to attain a good risk reward trade The debit spreads are directional trades as they benefit with an increase in volatility and as such a directional move in the share price Note that if the trader expects a short sharp move in the near term then they would be better off simply buying a protective put Recent Trade Toll Holdings A recent trade that our clients took was to buy Toll Holdings around 4 50 in late January The stock surged 17 in the subsequent couple of weeks Clients were then faced with the dilemma of taking profits now or holding on for the dividend in early March We suggested that they could hedge their position using a bear put strategy by buying a ATM Put Selling an OTM Put In this trade with TOL trading at 5 20 the bear put strategy was established by Buying to Open TOLL 525 MAR12 Put for 23 5c and Selling to Open TOLL 476 MAR12 Put 7c for a total outlay of 17 5c ie Net debit 23 5c 7c Note if you were more pessimistic and expected TOL to fall to 4 50 by expiration you would have sold the 450 MAR12 Puts Risks and Profit Potential The Bear Put Spread profits when the stock price falls towards the short strike as the long put option will rise in price along with the underlying stock price while the short put options continue to decay in premium The maximum profit potential of a bear put spread is when the price of the underlying stock drops down to the strike price of the out of the money OTM short options as beyond that price any gain in the long put options is matched exactly by a loss in the short put options Profit Calculation of the TOL Bear Put Spread Maximum Return Difference in strikes Net Debit Net Debit Following up from the recent trade example Buy to open 10 TOL MAR12 525 Put for 23 5c per contract and sell to open 10 TOL MAR12 476 Put for 7c per contract Maximum Return 525 476 23 5 7 23 5 7 31 5 17 5 180 Maximum Risk Net Debit 23 5c 7c 17 5 if TOL share price is 5 25 Break Even Higher Strike Net Debit 525 17 5 5 075 In summary the Bear Put Strategy offers a maximum risk limited to the Net Debit Paid while the maximum loss is limited and the maximum upside profit is also limited These risk rewards are shown in the Payoff diagram Note this strategy can be used in order to hedge an underlying Toll Holdings stock position while the investor is still eligible for the dividend payment in early March The Trade Options can be used in order to reduce hedge your risk while still participating in potential profits from a significant move by the underlying stock We have explained the Bear Put Spread strategy which can be used to allow you to protect an existing share position while maintaining the benefits of ownership of the underlying stock In future articles we will talk about the High Yield Covered Call strategy and the Covered Call Stock Reversal strategy which is particularly relevant to this market Utilise the features in the Market Analyser software to plan your options trades for a particular options strategy using your specific trade selection criteria You will save time and potentially reduce your trading risk By Michael Hevern Trading Desk Please note your may need to refer to a tax profession regarding eligibility of franking credits See Also Options Trading for All Types of Market Environments Part 1 The Protective Put Options Trading for All Types of Market Environments Part 2 The Covered Call Options Trading for All Types of Market Environments Part 3 The Covered Call Collar Options Trading for All Types of Market Environments Part 4 The Stock Repair Strategy Options Trading for All Types of Market Environments Part 5 Limited Risk Short Selling Strategy Options Trading for All Types of Market Environments Part 7 Dividend Capture Covered Call Collar For Buy and Sell recommendations on ASX listed companies register for a FREE trial of MDS Financial Research MDS Financial Advisory Service offers general advice on trading options to generate consistent steady income on your investment portfolio For further information please call 1300 610 024 Tags bear put spread hedging strategy options trading options trading strategies put options Toll Holdings Posted in ASX Trading News Trading Strategies 1 Comment The Stock Repair Strategy Part 4 of Options Trading for All Types of Market Environments Friday September 9th 2011 Part 4 The Stock Repair Strategy The Stock Repair Strategy is the options trading strategy designed to repair a stock account that has suffered from capital loss due to a drop in price This strategy allows the loss to be recovered with a moderate rise in the price of that stock For example if you bought shares of AAA company and it has dropped significantly since you bought it say 10 you could use the Stock Repair Strategy to recover that 10 loss as long as AAA company stock rises about 5 I m sure buy and hold investors would have a number of likely candidates for this strategy in their portfolios The Stock Repair Strategy is designed to use stock options with limited risk to quickly recover the loss from a drop in the share price Use the Stock Repair Strategy to recover losses in your stock position when that stock is expected to rise moderately If you are of the opinion that the sell off in a stock has finished and the stock is likely to bounce from current levels then the Stock Repair Strategy can help you repair a stock account which has suffered from capital loss due to a drop in price in double quick time The Stock Repair Strategy is achieved through buying 1 contract of at the money ATM call options for every 100 shares you own and then writing twice as many out of the money OTM call options at a strike price where the total proceeds cover or nearly cover the amount spent on the at the money ATM call options Therefore the Stock Repair Strategy does not cost anything to put on apart from transaction fees of course and requires no margin This makes this strategy ideal for anyone who expects the stock price to recover near term and wishes to quickly recover losses sustained in a stock position Traders can use this strategy to double up their position with minimal risk and minimal cost However any gains are capped to the upside at breakeven so that you would exit the original position flat and you do not get any protection on the downside Having this position in place is an excellent way to quickly recuperate stock losses at no extra cost if the stock rallies all the way to the strike price of the short call options Advantages and Disadvantages The Stock Repair Strategy has its advantages as it can bring your stock position back up to breakeven so as long as stock rises moderately There are minimal costs to place the position and it requires no margin However it has the disadvantage of cutting profits at breakeven so that no further profits can be obtained if the stock rallies beyond the strike price of the short OTM calls Example Trade ANZ Bank ANZ traded between 21 00 and 22 00 for over a month through to mid June and was trading on a grossed up yield of over 9 percent If you had purchased the ANZ stock on a breakout you could be holding the stock at a cost of around 22 05 There have been some wild gyrations over the subsequent months but for those buy and hold investors there is still hope utilise the Stock Repair Strategy to recover losses in your stock when that stock is expected to rise moderately near term The stock repair trade for ANZ was priced on September 7th 2011 when the October options had 48 days until expiry and ANZ shares were trading at 20 10 Trade Details Buy 1 contract of at the money ATM 2000 Oct11 call options for 0 96 contract for every 100 shares you own and then write sell 2 of the 2100 OCT11 out of the money OTM call options at 0 46 contract for every 100 shares you own This trade costs 4 cents contract to place and if you are exercised you will sell youf original share parcel at 22 00 5 cents shy of the purchase price Note cost calculations do not include associated transaction costs Chart 1 ANZ Stock Repair Trade You can plan

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    decided that it is now prudent to protect the near 10 gains achieved in just over 2 months We considered a covered collar was appropriate for this position Based on technical analysis you can see from the chart that the 27 50 resistance level has held since 2008 So we bought protection at 26 50 by buying 2650 MAR13 Put for 0 365 and then wrote the 2750 MAR13 Calls for 0 27 We paid 9 5c contract insurance for this trade and the position remains open We are protected until March expiry below 26 50 and profits will be capped at 27 50 Chart 1 ANZ Bank ANZ Covered Call Collar Trade Chart 2 The payoff diagram for the ANZ Bank ANZ Covered Call Collar trade Trade Note ANZ Bank ANZ is still trading between the 26 50 and 27 50 option strike levels and only time will tell whether the share price will end up at expiry but we are protected until March expiry down to 26 50 and profits will be capped at 27 50 for a cost of 9 5c contract Note you can close either side of the trade before expiry if you believe the insurance is no longer necessary Trading Software Utilise the features in the d2mxIRESS software to plan your trades for the options strategy using your specific trade selection criteria You will save time and potentially reduce your trading risk Sign up for a free 14 day software trial here Bonus For trade ideas and recommendations on how to trade in this market sign up for a free trial of the D2MX Daily Trading Report which provides a daily serving of insightful market analysis from the D2MX Advisory team including Trade ideas and strategies Dividend enhancement strategies Market scans to watch International market analysis and Highlights from the S P ASX 200 To request an obligation free trial call 1300 610 024 or email advisory d2mx com au Good luck in your investing and please give us a call if you would like assistance in boosting protecting your investment returns Michael Hevern Investment Adviser D2MX This report was prepared by Michael Hevern It represents the views and opinions of the author It is not intended for use by any third party without the approval of Michael Hevern While this report is based on information from sources which are considered reliable its accuracy and completeness cannot be guaranteed Any opinions expressed reflect my judgment at this date and are subject to change Contracting Hevern Pty Ltd is a Corporate Authorised Representative No 408868 of D2MX Pty Limited ABN 98 113 959 596 AFSL No 297950 D2MX and Michael Hevern has been appointed as an Authorised Representative of Contracting Hevern Pty Ltd Opinions conclusions and other information expressed in this report are not given or endorsed by D2MX unless otherwise indicated The information contained in this Report is General Advice only as the information or advice given does not take into account your particular

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    of Market Environments Part 3 The Covered Call Collar Options Trading for All Types of Market Environments Part 4 The Stock Repair Strategy Options Trading for All Types of Market Environments Part 5 Limited Risk Short Selling Strategy Options Trading for All Types of Market Environments Part 7 Dividend Capture Covered Call Collar Options Trading for All Types of Market Environments Part 8 Hedging With a Bear Put Spread Options Trading for All Types of Market Environments Part 9 The Bull Call Strategy Options Trading for All Types of Market Environments Part 10 Dividend Capture Covered Call Collar This report was prepared by Michael Hevern It represents the views and opinions of the author It is not intended for use by any third party without the approval of Michael Hevern While this report is based on information from sources which are considered reliable its accuracy and completeness cannot be guaranteed Any opinions expressed reflect my judgment at this date and are subject to change Contracting Hevern Pty Ltd is a Corporate Authorised Representative No 408868 of D2MX Pty Limited ABN 98 113 959 596 AFSL No 297950 D2MX and Michael Hevern has been appointed as an Authorised Representative of Contracting Hevern Pty Ltd Opinions conclusions and other information expressed in this report are not given or endorsed by D2MX unless otherwise indicated The information contained in this Report is General Advice only as the information or advice given does not take into account your particular objectives financial situation or needs Disclaimer Using leverage to invest can be a two edged sword as it can magnify your returns when the stock price rises but will in turn magnify the losses if the trade does not perform as expected Tags calendar call spread Derivatives options strategies options trading trading NAB Trading Strategies Posted in Trading Strategies No Comments The Power of Position Sizing Friday November 30th 2012 Mary is a trader who enters three trades and buys 1000 Commonwealth Bank CBA shares 1000 Telstra TLS shares and 1000 BHP Billiton BHP shares If Mary was to make 10 per cent on her CBA trade lose 10 per cent on her TLS trade and breakeven on her BHP trade then overall she was profitable It may seem strange that Mary was profitable here but it is possible because of the different position sizes At the end of November 1000 shares of CBA are worth 59 000 1000 shares of TLS are worth 4 250 and 1000 shares of BHP are worth 34 000 A 10 per cent gain on the CBA trade yields a healthy 5 900 return while a 10 per cent loss in TLS is a loss of 425 and by breaking even on her BHP trade Mary s result is an overall gain of 5 475 Overall the outcome of the CBA trade is critical to Mary s overall profitability due to the imbalance caused by poor position sizing John decides to follow a trend following strategy that trades Newcrest Mining NCM shares as his back testing indicated a profitable strategy Rather than buying NCM shares John chooses to use CFDs to access the same amount of shares with just a 10 per cent deposit Following a sharp drop in the gold price NCM shares drop 18 per cent before going on to recover over the next few weeks and then climb higher Without leverage John s trading system would have exited at a profit of 23 per cent Unfortunately John s original position was fully leveraged while gold dropped sharply and as a result of his leverage he magnified his losses to 180 per cent This meant John was closed out of the position before the positive move which resulted in losses larger than his starting balance John was unable to hold for the recovery in the stock because of poor position sizing Following a series of wining trades Ewan decides that the move in Forge Group FGE is likely to continue Ewan has been trading 1000 shares of FGE but decides to enter 5000 shares as his confidence in the move increases A sharp reversal in FGE very quickly wipes out the gains on his previous trades and eats into his capital If Ewan had stuck with his original position size he could have been profitable overall taking only a small loss on the last position These are three examples of how position sizing can have a significant effect on your overall profitability Poor position sizing can turn a winning strategy into a losing strategy it can even turn a winning trade into a losing trade or a series of winning trades into an overall loss So let s take a look at the pros and cons of different position sizing models Fixed unit position size The amount traded is a set number of contracts regardless of the underlying security being traded This approach is widely used in the futures market due to the large contract sizes with many traders trading just one contract each time a trade signal is generated but it s not often used when trading shares The limitations of this approach should have become obvious already with position sizes varying widely depending on the share that is being traded This strategy does not work well in most cases because the price of the shares varies significantly This position sizing model is also static and you must then decide when to increase the number of contracts you are trading Fixed dollar position size A fixed dollar amount can be allocated to a trade ensuring consistent position sizing across a number of different shares This means you would trade say 5000 10 000 or 20 000 on each position and trade as many contracts as required to get close to a position size of your nominated dollar amount This is a far better approach than a fixed unit method because it does take into account the variation in share price If the price is low more shares are traded while a higher price means that fewer shares are traded As with the fixed unit approach this is a static position sizing model and you will need to implement a clear cut method that identifies when it s best to move from say 5000 to 6000 or 10 000 to 11 000 parcel sizes as well as what increments you ll move up in Fixed fraction position size When using fixed fraction position sizing you divide your capital into 10 equal parcels and place the same dollar amount onto each trade The fixed fraction approach is widely used when trading unleveraged instruments such as shares This approach allows a trader to spread the risk of any individual trade and ensures there is capital available for other trade signals as the signals are generated This is a dynamic approach to position sizing As your account balance increases your position size increases and as your account balance decreases your position size decreases It becomes much more difficult to employ this method when trading with leverage as margin requirements do not require you to allocate all of your capital to a trade It is possible to over leverage If you were to allocate say 10 per cent of your capital 5000 as initial margin on a CFD trade or an option trade you have unwittingly taken on a huge amount of risk Fixed risk position size The fixed risk model allocates a set amount to place at risk on a trade If the trade hits your stop loss you will lose the set amount As an example an entry at 50 with an exit at 49 50 on Commonwealth Bank CBA means you are risking 50 cents per share times the number of shares If you bought 1000 shares your risk is 500 To apply the fixed risk model choose the number of shares to trade that will result in the same risk for each trade The fixed risk model works well in leveraged instruments such as currency CFDs or futures where you calculate the risk you are prepared to take on any individual trade It also works very well when trading shares In this way any losing trade in any market will lose close to the same amount If the risk is too high then you simply do not enter the trade A fixed risk model can be applied using a set dollar amount or a percentage of capital The second approach is preferred for example 2 per cent of your capital is placed at risk on any trade as this adjusts automatically in conjunction with your account fluctuations This will enable you to increase your parcel size while keeping your risk at 2 per cent when winning and decrease your parcel size while keeping your risk at 2 per cent when losing As with fixed fraction this has the effect of increasing the size of your wins when winning and it will keep the size of your losses to your set percentage when losing A string of losing trades will reduce your account balance and as a result of this will reduce your position size The fixed risk position model is the preferred approach to utilise when trading as it incorporates many of the key elements of successful trading Position sizing is critical to your long term trading success and it is important that you gain a good understanding of the different approaches you can use I wish you all successful trading Jeff Cartridge Education Manager Tags position sizing risk in trading stop loss trading shares Trading Strategies Posted in Trading Strategies No Comments Insuring Your Portfolio Part 6 Stock Trading Tips for All Types of Market Environments Friday October 26th 2012 Trading is a business and investors must treat it that way to be successful in the markets One of the keys to running a business is being adequately insured Investors should be aware that markets can go down as well as up as the GFC showed us The markets around the world have had a spectacular run up from their June lows with many markets up by between 15 and 20 supported by the European Central Bank ECB unveiling an unlimited bond purchase plan the Federal Reserve starting a third round of quantitative easing QE3 and the Chinese and Japanese banks easing their monetary policies Markets may well continue to head higher into the end of the 2012 calendar year on the expectation that central bankers will keep economies expanding However many markets are due for a correction at the very least For example the US markets have risen continuously without a 5 pullback from the June lows which has not happened in over 10 years of market history Portfolio Insurance Using Index Put Options One strategy for protecting your portfolio against adverse market movements is through the use of index put options Index put options are used by investors who anticipate a market pullback or are generally concerned about a possible declining market The use of index options avoids the need to liquidate holdings which could trigger a tax gain loss event and avoids expensive transaction costs Additionally in the event that the investors concerns over a falling market prove unfounded the portfolio can continue to participate and appreciate in the rising market Strategy Implementation To insure a portfolio with index put options we need to first have a portfolio which is highly correlated to the index For instance if the portfolio consists of mainly the Top 200 companies on the ASX then you would use S P ASX 200 XJO Index Options We calculate how many contracts to buy to fully protect the portfolio using the following formula No Index Puts Required Value of Holding Index Level x Contract Multiplier Trade Example Imagine an investor with a well diversified portfolio of stocks from within the S P ASX 200 with a combined value of 450 000 This investor is concerned about the slowing global economy and the disappointing quarterly earnings that are currently being reported The investor can insure their holdings by purchasing slightly out of the money S P ASX 200 Index XJO Puts expiring in December two months The current level of the S P ASX200 is 4520 and the DEC 4450 SPX put contracts are trading at 0 60 each CHART 1 S P ASX 200 the yellow region indicates portfolio protection The XJO options have a contract multiplier of 10 and so the number of contracts needed to fully protect his holding is 450 000 4450 x 10 10 1 or 10 contracts Total cost of the options is 10 x 0 60 x 1 000 6 000 or 1 3 of portfolio value for protection of the portfolio for 8 weeks if the S X ASX 200 falls below 4450 CHART 2 S P ASX 200 Index Put Payoff for DEC12 4450 Puts As can be seen from the payoff diagram above should the market retreat the value of the put options rises offsetting the losses taken by the portfolio In cases where the investor is wrong about the direction of the market their holding will continue to appreciate along with the market s rise However there is a downside in that if the market stays flat then there will be a loss equal to the premium paid for the put insurance the index put option Note The example above example assumes full correlation with beta of 1 0 between the portfolio and the index and transaction costs are not included in the calculations If the index pulled back 5 by index options expiry The index would be trading at around 4425 and the 4450 DEC13 index put option would be worth 2 25 while the portfolio would be devalued to 450 000 1 0 05 427 500 so the total position would be at breakeven i e 2 25 1000 10 427 500 450 000 of course you have initially paid the 6 000 for the insurance using the index put options Conclusion You can use index put options as insurance protection in order to protect your portfolio However you need to be consistently correct in your view about the market direction as it would be detrimental to your portfolio performance if you outlaid 1 3 of your portfolio every two months and the market either trades sideways or rose modestly You do have the opportunity to close the option position at any time before expiry if your view of the market changes and there are a number of strategies that you can use to reduce the cost of the insurance Utilising the Index Collar Strategy reduces the cost of protection and allows the investor to finance the purchase of the index put options by simultaneously selling index call options This strategy is also known as the Index Collar and will be discussed in later articles Alternatively you can use a Put Spread strategy to reduce costs If you want to take advantage of portfolio insurance then the index put options are an excellent strategy that can be used to protect your investment portfolio Contact us at D2MX Advisory on 1300 610 024 and we can help you trade using this strategy For more trade ideas and recommendations sign up for a free trial of the D2MX Daily Trading Report which provides a daily serving of insightful market analysis from the D2MX Advisory team including Trade ideas and strategies Dividend enhancement strategies Market scans to watch International market analysis and Highlights from the S P ASX 200 To request an obligation free trial call 1300 610 024 or email advisory d2mx com au Also in this series Part 1 Simple Trend Finder Scanning Method Part 2 Going For Gold Part 3 The Gap Trading Method Part 4 The Power of Compounding Part 5 Measuring Your Trading Performance Michael Hevern Investment Adviser D2MX Trading This report was prepared by Michael Hevern It represents the views and opinions of the author It is not intended for use by any third party without the approval of Michael Hevern While this report is based on information from sources which are considered reliable its accuracy and completeness cannot be guaranteed Any opinions expressed reflect my judgment at this date and are subject to change Contracting Hevern Pty Ltd is a Corporate Authorised Representative No 408868 of D2MX Pty Limited ABN 98 113 959 596 AFSL No 297950 D2MX and Michael Hevern has been appointed as an Authorised Representative of Contracting Hevern Pty Ltd Opinions conclusions and other information expressed in this report are not given or endorsed by D2MX unless otherwise indicated The information contained in this Report is General Advice only as the information or advice given does not take into account your particular objectives financial situation or needs Disclaimer Using leverage to invest can be a two edged sword as it can magnify your returns when the stock price rises but will in turn magnify the losses if the trade does not perform as expected Tags asx 200 index put options investment portfolio options strategies stock trading tips Trading Strategies Posted in Trading Strategies No Comments Identifying Overbought and Oversold Conditions in d2mxIRESS Friday October 19th 2012 You may have heard people talk about the market being overbought or oversold but what do they really mean A share can move to an extreme level that will often lead to a reversal if it moves too far too fast But what is too far and too fast and how can you measure this Today we ll take a look at some of the indicators built into the D2MX Trade Tools plugin for IRESS Trader that can be used to identify when these conditions occur and how you use them to identify entry and exit opportunities when trading Get a free trial of the d2mxIRESS software to test this out for yourself The group of indicators that can be used to measure overbought oversold conditions are known as oscillators These indicators fluctuate up and down between two extremes often 0 100 Indicators like moving averages or On Balance Volume will have different values on every share as the price of every share varies but oscillators remain within their designated range on every share regardless of price or volume Commonly used oscillators include the Stochastic Relative Strength Index RSI Commodity Channel Index CCI and the Williams R These are all available in the Standard Indicators in the D2MX Charts window Oscillators are normally displayed in a separate window to the price and usually have reference levels marked on the chart as well The RSI is displayed in the chart above and fluctuates between 0 100 with reference lines at 30 and 70 on the chart The top reference line marks when the indicator is overbought and the bottom line when it is oversold You can select the timeframes you wish to use for the indicators and it is a good idea to align these with your trading timeframe If your average holding time is a few days then you will use a setting of between 3 5 days for your indicator If you wish to hold a trade for about a month then use a longer timeframe something nearer to 20 25 days The shorter timeframes will allow the indicator to fluctuate more rapidly back and forward between the extremes and will provide more signals of overbought or oversold The Stochastic indicator is usually plotted with a signal line similar to the MACD indicator along with the two reference levels at 80 and 20 The blue dotted line is a moving average of the red stochastic line and is referred to as the D in the chart properties As with the RSI this indicator is overbought when it crosses above the top signal line and oversold when it crosses below the lower signal line The crossover between the indicator K and its signal line D can be used as a buy or sell signal We can test how well trading overbought or oversold signals works using the Trading System tool located under the D2MX Trade Tools menu The following setup uses the Commodity Channel Index CCI oscillator which fluctuates between 100 and 100 The entry signal is to buy shares when the 21 day CCI indicator is below 70 and sell shares when the share hits a 3 trailing stop This strategy will be traded on the top 20 Australian companies ASX20 with 5000 placed on each trade The test will be run over the last 10 years from 2002 2012 The results below show how the strategy performed Overall it has been profitable with strong gains through the bull market from 2002 2007 It did lose money late in 2007 and into 2008 but remember the strategy trades long only and the markets did fall heavily during this time Recently the performance has improved with good results so far in 2012 You can test out the other indicators or alter the parameters of this indicator and view the results for yourself in the D2MX Trading System Get your FREE TRIAL here Now you know how you can identify overbought or oversold conditions in a share and you can test how well different indicators work using the Trading System tool in the D2MX Trade Tools plugin Trading overbought or oversold signals can work very well as seen from the result of just one test we have run here The new d2mxIRESS platform gives you the tools to build your own trading strategy By Jeff Cartridge Education Manager Tags charting d2mx charts d2mxiress Iress Oscillators technical analysis technical indicators Trading Strategies trading systems Posted in Trading Software Trading Strategies No Comments Boosting Dividend Yield Using Instalment MINIs Part 3 of Warrant Trading for All Types Of Market Environments Friday October 12th 2012 Market cycles drive portfolio performance and one of the more reliable recurring cycles is the one driven by banks and their dividend payments Banks tend to outperform the overall market in the six weeks prior to going ex dividend and with the bank dividend season fast approaching we thought it timely to discuss how you can boost your dividend yield by trading the bank shares using Instalment MINI Warrants Instalment MINI Warrants are the latest generation of leveraged product that allow investors to generate higher franked dividend income compared to a direct share investment and can be traded in your SMSF Instalment MINI Warrants Instalment MINI warrants provide straightforward and transparent leveraged exposure to Australia s leading companies For Self Managed Super Funds Instalment MINI Warrants are one of the few means of gaining leverage in a portfolio They are listed and traded on the Australian Securities Exchange there are no margin calls no credit checks and importantly investors are unable to lose more than their original investment amount These warrants are designed for individuals and Self Managed Super Funds SMFS seeking medium to long term exposure Investors gain the economic benefits of share ownership including dividends and available franking credits for a small portion of the cost of purchasing the shares outright As the loan is non recourse in nature it is an approved investment product for SMSFs Instalment MINI Warrants have a six letter code eg ANZJOA The first three letters identify the stock the fourth letter identifies the warrant type J Instalment MINI the fifth letter signals the issuer and the last letter refers to the series or leverage Instalment MINI Warrants are a type of warrant listed on the ASX They are a leveraged trading instrument that provides investors with upward of 30 gearing on the underlying asset while having all the benefits of share ownership Investors can choose their level of leverage based on their own risk profile as there are a number of Instalment MINI Warrants or leverage levels available for each stock Before trading Instalment MINI Warrants traders need to read and understand the ASX Understanding Warrants Booklet and then sign the Warrant Agreement form Speak to your broker or contact us at D2MX on 1300 610 024 for further information The key features of Instalment MINI Warrants include Instalment MINI Warrants are traded and regulated on the ASX Stock exchange You can trade long and participate in the dividends and franking credits There are NO margin calls They offer an efficient way to trade dividend paying stocks to boost yields No credit checks or approvals required In summary Instalment MINI Warrants are geared product that are listed on the ASX have known risks are simple flexible and transparent while offering all the benefits of share ownership and there is no risk of a margin call The main benefits of trading Instalment MINI Warrants on dividend paying stocks Listed and traded on the ASX offering flexibility and transparency Increased dividend income and franking credits through leveraged exposure to movements in the share price Pay the Final Instalment any time prior to maturity and receive the underlying shares A lower capital outlay is required to achieve the same dividend income Can offer potential tax benefits The maximum loss is limited to the initial outlay Can be traded in your Self Managed Super Fund SMSF The risk of trading Instalment MINI Warrants As with any leveraged investment product the price of the underlying asset may fall prior to the time of sale or even prior to the ex div date The value of the Instalment Warrant could fall or be significantly less valuable on its maturity date or may expire worthless resulting in a total loss of the initial monies outlaid for the trade Leverage is a two edged sword it enhances any gains but also increases any loss sustained On the maturity date your Instalment MINI warrant may be significantly less valuable or may expire worthless If a Stop Loss Trigger Event occurs the amount a holder receives may be nil Dividends are not final and not guaranteed to be paid Terminology The Instalment MINI warrant is made up of three parameters Instalment Value the price at which it trades Final Instalment Price the loan amount Maturity Date the date on which the Instalment ceases to trade or is rolled Case Study Sam wants to trade ANZ for the dividend and franking credits and is looking to boost her returns She planned to trade ANZ on 4 October 2012 when ANZ was trading at 25 20 and Instalment Warrant ANZJOA is trading at 13 84 ANZ is expected to go Ex div 0 82 on 10 November 2012 Note This case study is general in nature and does not incorporate any specific tax or personal circumstances of the investor Investors should not rely on the information and should obtain specific advice before investing in this product Chart ANZ Trade produced in d2mxIRESS platform The Instalment MINI Warrant and Share Trade Comparisons The trade needs to be held for 45 days to qualify for the franking credits and the calculations are done assuming no capital gain that is assuming ANZ pulls back to the original buying price of 25 20 then the trade calculations are as follows assuming traders tax rate is 46 5 Funding Cost Calculation In order to calculate the amount you are paying in funding costs for holding ANZJOA over the 45 days assumed holding period use the following calculation Funding Cost Loan Amount STRIKE Price Entry date Funding Rate Holding Period 365 11 36 8 5 45 365 0 12 So if ANZ pulls back to its original purchase price after the 45 day holding period and the position is closed there would be no capital gain on the holding but Sam would get to collect 3 254 plus 1 389 worth of franking credits for a grossed up yield of 4 6 in 45 days if she traded ANZ using shares However if Sam traded the ANZJOA instalment MINI warrant then she would collect 5 925 in dividends plus 2 529 worth of franking credits for a grossed up yield of 8 5 in 45 days if she traded ANZ using instalment MINI warrant note if ANZ was trading at 25 20 again there would be a funding cost of 0 12 cents per share part of which would be tax deductible Of course if ANZ is trading above the purchase price after the 45 day holding period then there would be an additional capital gain and conversely a capital loss if ANZ was trading below 25 20 The Trade If you want to take advantage of the bank dividend season then the Instalment MINI Warrants are an excellent way to boost your yield Contact us at D2MX on 1300 610 024 and we can help you trade using Instalment MINI Warrants to boost your returns Each Instalment Warrant has a PDS document which details all the features of the specific warrant For more trade ideas and recommendations sign up for a free trial of the D2MX Daily Trading Report which provides a daily serving of insightful market analysis from the D2MX Advisory team including Trade ideas and strategies Dividend enhancement strategies Market scans to watch International market analysis and Highlights from the S P ASX 200 To request an obligation free trial call 1300 610 024 or email advisory d2mx com au Michael Hevern Investment Adviser D2MX Trading More in This Series Part 1 Shorting With Limited Risk Using MINIs Part 2 Boosting Dividend Yield Using Warrants This report was prepared by Michael Hevern It represents the views and opinions of the author It is not intended for use by any third party without the approval of Michael Hevern While this report is based on information from sources which are considered reliable its accuracy and completeness cannot be guaranteed Any opinions expressed reflect my judgment at this date and are subject to change Contracting Hevern Pty Ltd is a Corporate Authorised Representative No 408868 of D2MX Pty Limited ABN 98 113 959 596 AFSL No 297950 D2MX and Michael Hevern has been appointed as an Authorised Representative of Contracting Hevern Pty Ltd Opinions conclusions and other information expressed in this report are not given or endorsed by D2MX unless otherwise indicated The information contained in this Report is General Advice only as the information or advice given does not take into account your particular objectives financial situation or needs Disclaimer Using leverage to invest can be a two edged sword as it can magnify your returns when the stock price rises but will in turn magnify the losses if the trade does not perform as expected Tags dividend yield Dividends instalment MINI warrants MINIs Trading Strategies warrants Posted in Trading Strategies No Comments Identifying Trends Using the D2MX Chart Tool Friday October 5th 2012 The basis of technical analysis is to identify a trend and then trade in that direction There are a number of different ways to identify a trend and today we will take a look at some of the tools in the D2MX Chart system that can assist you with this process D2MX Charts are part of the D2MX Trade Tools plugin available in the d2mxIRESS Bourse and Market Analyser platforms The simplest way to identify a trend is to take a look at the bars or candlesticks on a D2MX chart A series of green candles or bars show a rising trend while a series of red candles or bars show a falling trend Using this simple analysis allows you to quickly identify a trend It works particularly well in longer timeframes like weekly or monthly as some of the noise is filtered out Taking trend analysis one step further we can take a look at the definition of a trend which was created by Charles Dow who also created the Dow Jones Index This is known as Dow Theory and states an uptrend is defined as a series of higher lows and higher highs A downtrend is defined as a series of lower highs and lower lows At a transition between trends the share fails to make a higher high and forms a lower high This is not yet a downtrend until it breaks below the previous low blue line to form a lower low From this point on there is now a downtrend in place You can also use trend lines to define the direction of a trend A downtrend line is drawn above the share price joining up as many of the highs as possible This line is then monitored for a break to the upside signalling a change in trend An uptrend line can be drawn underneath the share price joining as many lows as possible A break in this line signals a change in trend A word of caution however a break in a steep downtrend line may just mean the share is no longer going down as fast as it was Take a look at the chart below for an example of a break in the downtrend in GRY The initial breakouts did not signal the start of a new uptrend instead the share is no longer falling as fast A break of a flat trend line close to horizontal is better as the share price has no choice but now to move higher Other than just looking at the chart and the candles you can use indicators to identify trends as well The most common of these is the moving average If the share price is above average it is rising and if it is below average it is falling While this simple definition can work it is more common for two moving averages to be combined to identify a trend When the faster moving average red line is above the slower moving average blue line then the share is in an uptrend and when the moving averages turn down and the faster crosses below the slower average the share is now in a down trend One more indicator that is widely used to define a trend is the MACD Before a moving average crosses over the two averages must come closer together The MACD is an indicator based on the distance between two moving averages The MACD was originally calculated as the difference between a 26 period and a 12 period moving average red line A signal line of 9 periods blue line is then used to provide a crossover signal similar to that which occurs in a moving average The indicator is also displayed in the chart below as a histogram with bars above and below the zero line We have looked at a number of different ways here to define a trend It is obviously not possible and certainly not recommended to use all of these approaches Choose one that you are comfortable with and then stick with it Jeff Cartridge Education Manager Tags charting d2mx chart moving averages technical analysis technical indicators Trading Software Trading Strategies Posted in Trading Software Trading Strategies No Comments The Power of Compounding Part 4 Stock Trading Tips for All Types of Market Environments Friday September 14th 2012 Compounding can be used to great effect in your day to day trading I ve had a number of people ask how to use compounding to improve investment returns so today we will discuss this in more detail The Greatest Mathematical Discovery Ever Made Albert Einstein once remarked that the most powerful force in the universe is compound interest He came up with a formula called the Rule of 72 It states that if you take 72 and divide it by the annual percentage return it will give you the number of years it would take for your investment to double For example say you invested 100 into a stock that gave you an annual return of 20 At the end of one year you would have 120 Instead of taking out the 20 profit you leave it inside for another year at the

    Original URL path: http://blog.traderdealer.com.au/tag/trading-strategies/ (2013-02-02)
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  • Stock Market Analysis: Markets Cap Best January for Over a Decade | Online Stockmarket Trading Update
    6 overnight but still remain near their recent highs up and are up over 10 from their November lows In the UK the market fell backing off its highest level since May 2008 Across the region the miners and financials were weaker after disappointing earnings In Germany the market pulled back again but the DAX index was up 2 5 in January Elsewhere Spain has lifted its ban on short selling stocks as the benchmark IBEX 35 Index has rallied strongly and the Spanish banks have taken steps to repair their balance sheets In London the FTSE 100 was down 0 7 at 6 277 in Germany the DAX closed down 0 5 at 7 776 while in France the CAC closed down 0 9 at 3 732 and Spain closed down 2 5 Asian Markets Asian stock markets eased yesterday with the regional benchmark index recording a third consecutive month of gains The MSCI Asia Pacific Index ended flat and the index extended its rally for a third consecutive month up 3 1 in January The move is on the back of news that showed the Chinese economy is recovering The index is up nearly 11 from its June lows led by Japanese stocks on optimism that the new government will take the necessary steps to fight deflation In Japan the market eased back from its 33 month high after capping its longest monthly winning streak since August 2009 After the BoJ Japan s central bank committed to an aggressive asset buying progran to start next January when it will buy about YEN13 trillion US145 billion in Japanese government bonds and treasuries per month Chinese shares rose for a second month up 5 1 percent in January the best performance among the biggest emerging markets The market is at its highest level in eight months and is now up over 20 from its 4 year low of last year and has entered a bull market after government data showed the economy expanded in the last four months of 2012 ending a seven quarter slowdown The Hong Kong market eased back from 21 month highs In China the SSE Composite up 0 1 at 2 385 while in Hong Kong the Hang Seng Index closed down 0 4 at 23 729 and in Japan the Nikkei 225 Index was up 0 2 at 11 138 South Korean KOSPI closed down 0 1 for the session Commodities The Dollar Index was at lower 79 21 on a higher Euro while the Australian Dollar last traded lower at 1 043 Commodities prices traded lower For the session the Benchmark crude NYMEX for February delivery was down 0 5 settled at US97 45 Copper prices are looking for key support level as Copper for February delivery was down 0 4 at US3 736 while February Gold was down 1 2 or US19 40 at US1 660 60 ASX News Today AAC Australian Agricultural Company Australia s largest cattle producer lost 8 4 million

    Original URL path: http://blog.traderdealer.com.au/2013/02/01/stock-market-analysis-markets-cap-best-january-for-over-a-decade/ (2013-02-02)
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