Speculative Options Strategies

GENERAL PRINCIPLES OF SPECULATIVE STRATEGIES:

A speculative option strategy is one which attempts to profit if the market price of the underlying security rises or falls.

Therefore, to define a strategy, it is essential to establish in advance the market trend.

Strategies which profit from a rising market are “bull” strategies.

Strategies which profit from falling markets are “bear” strategies.


Speculative strategies involve the higher risk.
Financial risk is synonymous of loss.

Anything that you win, your counterparts, lose it.
This is called a zero-sum game.


There are four speculative strategies:
LONG CALL
LONG PUT
SHORT CALL
SHORT PUT


The purchase of a call (long call) or the sell a put (short put) will give the speculator a profit in a rising market. These are BULL strategies.

The purchase of a put (long put) or the sale of a call (short call) will give the speculator a profit in a falling market. Therefore, are BEAR strategies.

These topics are covered in depth in our seminars.
Write to hallazgofinanciero@gmail.com to contact us and learn all the strategies to make money in the markets.

Buy and Hold Strategy

BUY AND HOLD ONLY FIT WELL ON BULL MARKETS.


The recommendation of many experts is to invest in a diversified portfolio of stocks, bonds, commodities, precious metals oN any circumstance of the market.

Recent experience shows that even diversifying the investment portfolio you may lose value.

The reality has taught us that the buy and hold strategy only applies to bull market.

If the market becomes higly volatile, the strategy must be different.

Technical Analysis on EURUSD

In this short-term graph the areas where the wicks (shadows) of the candles touch the Bollinger Bands are in orange.

As you can see, when the upper wick touches the upper Bollinger band, this indicates a trend change. Signals that a reversal begins.

When the bottom wick is below the bottom band is starting un up signal.

As shown in the graph, this pattern is quite accurate; therefore, it is important to understand its implications.

Also highlighted in the MACD chart when long-term averages cross with the shorter term. As you can see those areas marked with a red circle, crossing of averages is a signal that strengthens the signals that the Bollinger bands give to us.

Press the chart to enlarge

Euro Dollar Relationship

We return the discussion of the pair EUR / USD because this time we see that there has been a strong movement to strengthen the dollar. Slowly but consistently the Dollar was gaining to the Euro, and recovered in 5 cvs. We signaled that earlier in our analysis of March 17 th. (Spanish version only)

At that time, we anticipated the rise from 1.30 to 1.35. As is evident from the graph at that day the USD hit a significant leap upward. Today, it has broken the barrier of 1.30, but downturn, and also in a violent manner.

It is known that when prices touch the bollinger bands on the bottom, that is an indicator of the market botton, and an opportunity to purchase. We will have to see the development of this pair, but if we follow the bollinguer bands we should buy Euro and sell dollar.

If you look at the Relative Strength Index RSI in the graph, we can see that when the EURUSD jump from 1.30 to 1.35 the index was above 70 (overbought) and when fall, is below 30 (oversold). At this time, the RSI is escalating.

Press the image to enlarge.

The 3 elements to be a successful trader

To be a successful trader you must take into consideration 3 points:

Price forecasting, timing and Money management.

The first point indicates Vich way the market is expected to trend. It is a crucial decision. Determines if the trader will buy, sell or wait.

To predict future price movements, as well as trends, you can use the tools provided by technical analysis or fundamental information.

The second point is timing, that means, trading tactics. Determines the specific entry and exit moments. Here is especially usefull technical analysis.

Money management is the efficient allocation of funds. It includes portfolio management, diversification, how much money to invest in any market, the use of stops,and whether to trade conservatively or aggressively, etc.

Many experienced traders consider key to know money management to win in the long run.

Adaptation from: Chapter 16th of “Technical analysis of the financial markets” by John J. Murphy.

Stocks and flows: Why today soybean export taxes must been eliminated.

The exports tax are a 35% discount on the price of soybeans.

The price of soybeans is determined on the Chicago marketplace, where meet suppliers and purchasers worldwide.

The farmer of Argentina takes the prices of Chicago market as a reference, since no individual can influence that price.

The exports tax are a 35% discount on the price of Chicago. Therefore, the soybean producer of Argentina is at a disadvantage of 35% over other producers in the world.

When the farmer sells his grain, generates a flow of money, the income from sales. It is also a flow of money payments made by the producer. For example: payments of seeds, fertilizers, insecticides, herbicides, fungicides, fuel, transport to the collection, transport to port, taxes, etc .... All these payments made by the producer are a cash flow which is inverse to the flow of revenue.

The difference between the flow of income and expenditure, TODAY, with deductions of 35% and fall in international prices is negative. That means the producer is losing money to produce. How is this possible? This is possible because the producer has a very large stock of capital, primarily due to the high value of each productive hectare.

What happens when the inflows of funds are lower than the outflows of funds in a business cycle? Decrease stocks. Fall the price of an hectare, and the agricultural producer has less capital backing funds in a bank.

But the producer is well aware that in addition to good prices for their crop, he needs to have good yields for a positive return on investment. Poor yields, are a scourge to the farmer, both for the country, since it reduces the amount of grain available for sale.

The yields depend on many factors, soil quality, amount of rain, chance of rain, hail, frost, previous crops, geographic location, etc..

The drought that hit this summer to most of the crops, directly resulted in significant yield losses.

Genuine farmers measure the yields and production costs in quintales, QQ. The average cost of producing soybeans in the year 2008/2009 amounts to 20QQ.

Therefore, the reports says that a positive cash flow should be greater than 20QQ.

But the reality is that in the core area, the best land and climate suitable for agricultural production, the yields of 2009 soybean range from 6QQ to 25QQ.

If the government do not want to eliminate farmers, must eliminate exports tax.

Translation soon

Thank you for understanding.

You can read our Spanish version using google translator.