Bank Foreclosure Profit Opportunities

Bank Foreclosure Profit Opportunities

In Many Cases, The Lender Or Agency Simply Wants To Get Rid Of Foreclosure Bank Owned Properties Quickly – Even If It Means Selling At A Low Price.

Upkeep of foreclosure bank owned properties costs more than selling them cheap. Whether you are a homebuyer or a foreclosure homes investor, foreclosure bank owned properties allow you to buy properties at a fraction of their market value. Lenders aren't chartered to own and manage property, so they face close scrutiny and pressure from state and federal regulators to dispose of foreclosed properties quickly - especially if they're on a regulator's "watch list".

The second reason why foreclosure bank owned properties are sold at below market value has to do with their condition. And because they're dealing directly with the bank they can eliminate the 6 percent sales commission if they act fast - before the bank lists the property with a real estate agent. Bank foreclosed homes are sought out by investors because of their profit potential.

In many cases, the lender or agency simply wants to get rid of foreclosure bank owned properties quickly – even if it means selling at a low price. Foreclosure bank owned properties are an excellent opportunity for anyone who wants to save money on their next real estate purchase. It is not uncommon to find bank foreclosed homes sold at prices much lower than their market value.

Foreclosure bank owned properties are priced at up to 5% to 50% off their market value, simply because of the way you can buy and sell foreclosure bank owned properties. It is possible to gain a nice return on your investment when you invest in bank foreclosed homes. Foreclosure bank owned properties are homes that have been repossessed by a government agency or lender due to non-payment of the mortgage. When their REO departments are loaded with foreclosures, investors are able to finagle below-market interest rates with little or no cash down.

When A Homeowner Cannot Pay The Mortgage For A Few Months At A Time, The Bank Will Initiate Foreclosure Proceedings Against The Owner.

In order to get the best deals on foreclosure bank owned properties, you need to be prepared and shop wisely. The owner will be anxious to sell to avoid having a foreclosure as a black mark on their credit report. Bank foreclosed homes are homes that are owned by banks or other lending institutions because of the lender having foreclosed on the property. Once you find some foreclosure bank owned properties you like, though, you still need to research.

Researching foreclosure bank owned properties can help you tell the deals from the duds. After the foreclosure is final, the bank foreclosed home will be offered for sale, either directly by the bank, or through real estate auctions. When a homeowner cannot pay the mortgage for a few months at a time, the bank will initiate foreclosure proceedings against the owner.

You cannot let emotions rule your purchase, and you cannot assume that all foreclosure bank owned properties are sold at below market value. If the property has accumulated enough equity, the investor will make a very nice profit. What Are Bank Foreclosed Homes?

Bank Foreclosed Homes Auctions.

Bank Foreclosed Homes Auctions. For each home you consider, determine your closing costs, actual house costs, incidental costs, and financing costs. Sometimes the bank foreclosed homes will be sold at real estate auctions.

Once you calculate the cost of any repairs needed, add it to the total cost of the property. Remember to account for the time that it will take to repair the bank foreclosed home.

This approach means that you wouldn't reimburse them for any accumulated charges such as interest, late charges, foreclosure fees, legal fees, nor any advances they might have made toward senior loans, property taxes, insurance. Sometimes an inspection is not possible, so you should only make bids that leave a nice margin for any unknown repairs. Get a market value for the home and an estimate for the repairs that need to be done.

To figure the number of loan payments made, start when the deed of trust recorded and end with the delinquency date that's listed on the recorded Notice of Default. On the other hand, if you do it carelessly, you could end up paying a lot more for the bank foreclosed home than it is worth. Hiring a professional assessor and inspector to examine the property for you.

Find out how much homes in the same neighborhood sell for as well. At the most, you shouldn't pay the bank any more for their equity in the property than what they originally lent on it minus the payments that were actually made on the loan.

If You Are Looking For An Investment, Make Sure That You Will Get At Least 15% Or More In Profit Through Renting Or Selling, And Remember That Many Foreclosure Bank Owned Properties Allow You To Earn More On Your Investment.

An important aspect of investing in bank foreclosed homes is having good listings so that you can get to the properties before they are gone. Good bank foreclosed homes do not stay in the market long.

If you are seeking a home, look for foreclosure bank owned properties in areas you would like to live that have the amenities you want. A better use of your time and money is to sign up with an online bank foreclosed homes listings service.

Whether you are looking for foreclosure bank owned properties that are investments or a home will determine which foreclosure bank owned properties are deals for you. These foreclosure bank owned properties you are considering should save you money on your home so that you can enjoy equity fast. If you are looking for an investment, make sure that you will get at least 15% or more in profit through renting or selling, and remember that many foreclosure bank owned properties allow you to earn more on your investment.

Bank Foreclosed Homes Listings. Buying up lenders' REO's (real estate owned) is a workable approach when it's a Buyer's market and lenders have lots of REO's they are anxious to get rid of. Finally, insist that the lender provide you with all the customary buyer safeguards such as escrow, title insurance, homeowner's warranty, termite clearance. You can get bank foreclosed homes listings from courthouses, lending institutions, government agencies.

And Lender Deals Typically Include Title Insurance, Which Removes Much Of The Risk That Accompanies Buying Homes Earlier In The Foreclosure Process.

If the property fails to sell at auction, or if the lender ends up as the highest bidder, the home becomes REO, or "real estate owned" by the bank. Often these homes are sold to buyers who don't even know they are buying a foreclosure, and go through the entire process as they would with any other home. And lender deals typically include title insurance, which removes much of the risk that accompanies buying homes earlier in the foreclosure process.

BY EDSON CANO

BALLON STRANGLES, A BETTER TRADES STRATEGY

BALLON STRANGLES, A BETTER TRADES STRATEGY


I have often taught that there is a countermove for everything that a market or stock can throw at you. You may not know it but there is one. This is generally a true statement because if you wait too long, there are some situations you can't get out of but for the most part there is a way to respond to and survive just a bout anything. IF YOU KNOW WHAT TO DO AND HOW TO DO IT. The emphasis is to make the distinction that knowing is not enough. You must know how and that takes training. However it does start with knowing what.

I developed the Balloon Strangle as a way to counter the effects of high volatility and unpredictability (ie. Danger) of news announcements that happen when the market is closed. This would be like earnings after hours or an anticipated Board meeting or a court ruling. Something that could move the stock in a big way but you don't know for sure which way. Conventional wisdom (and it is good advice) is to avoid this like a plague.

A conventional strategy to mitigate the effects of volatility is the strangle or straddle play. Traditional positions for a strangles and straddle are at or near the money. You take opposing positions so that either way it goes you have a winning position. You hope that the move is big enough that the losing position goes to zero and then the winning one can make money. Problem… near the money position are expensive and the move must be quite large to erase one position and still move far enough to make money on the other one. But the idea is that you are somewhat insulated from the unknown. At least you can stay even as one goes up in value and the other goes down.

The Balloon Strangle was a twist using the leverage of Out of the Money positions. If you use a graphic to show the option prices you will often see a leverage point in the curve created by plotting the option prices. It occurs in the Out of the money positions. It represents a spot where the value of the option changes much faster in one direction than the other. In other words if the stock moves one way the value of the option changes very fast but very slow if it moves the other way.

Here is an example of a Balloon Strangle on an earnings play with YHOO. I played this because of the potential YHOO had to move far enough to make the cost of both an Out of the money call and a put pay off. The potential was for a double of my money.

Now YHOO sits ½ way between the important price levels. This is the perfect setup for this play. The YHOO earnings usually has a big move and it is has clear targets.

Now here is what happened. YHOO moves like it was following a script. The upside move goes right to resistance.

Now the results… YHOO moved up to resistance and hesitated. 2 hours into the trading day and at the next sign of hesitation I pulled the plug on the trade. Resistance seemed to be holding, I got what I was looking for in an up side move so I sold both positions. The net of $1.75 was very close to the estimate of $1.70.

By the way, as the day wore on and YHOO did not make any attempt to move higher, the Oct 42.50 began to drop in value much faster than the stock sagged. This dropped the 42.50 calls over .50 while the stock pulled back .60. Waiting for the end of the day would have cost me over .50. The play was to be in only to catch the reaction to the news.

This strategy takes practice and applies to potentially good sized moves. Always practice with out funding first.


Ryan with Better Trades

Angel Investors Bring Big Ideas to Reality

Angel Investors Bring Big Ideas to Reality

Insurance, Loans, Mortgages, Lawyers, Credit, Attorneys, Donate, Graduation, Hosting, Complaints, Conference Call, Trade, Software, Recovery, Transfers, Gas and Electricity, Classes, Rehabilitation, Treatment, Umbilical Cord Blood, Forex, Investments ,

If you're an emerging company with the next great product, sometimes you need an angel on your side.

A study by the University of New Hampshire's Center for Venture Research showed that "angel investors" - high-net-worth individuals willing to invest in entrepreneurial companies at an early stage - shelled out more than $18 billion into early-stage companies last year alone, compared to $304 million by venture capitalists.

Finding an angel investor, however, is not an easy task. Safer Smokes Inc. is one company that understands the challenge of attracting the right investors.

This development-stage company is tapping the smoking cessation market with a unique tobacco-free, nicotine-free smoke called Bravo, which has the appearance of a traditional cigarette and burns like tobacco, but is actually made from lettuce fibers.

"Bravo lets you smoke your way out of the tobacco habit gradually," said Puzant C. Torigian, chief executive officer of Safer Smokes.

For companies like Safer Smokes, it may be too soon to approach large venture capital firms, yet time to move beyond networking with family and friends. Angel investors to the rescue.

"The challenge for raising capital in today's market is in harnessing the courage and vision of the angel to see through to the real investment opportunity," said Torigian.

So how do companies like Safer Smokes attract their angel? 

* Have a clear-cut target market for your product or service. For example, Safer Smokes is targeting the smoking cessation market, which has sales approaching $10 billion per year, up from $6 billion just three years ago.

Most angel investors prefer companies that are likely to show positive cash flow within their first 18 months, so having these kinds of statistics about your market can be an incentive.

* Match the business plan objectives to the angel's risk tolerance. Investors want to know the product or service will be unique and well-cultivated. Safer Smokes has a patented solution that company officials say will "affect the landscape of the health care industry."

BY EDSON CANO

Angel Investors Bring Big Ideas To Reality/Radio

Angel Investors Bring Big Ideas To Reality/Radio

Insurance, Loans, Mortgages, Lawyers, Credit, Attorneys, Donate, Graduation, Hosting, Complaints, Conference Call, Trade, Software, Recovery, Transfers, Gas and Electricity, Classes, Rehabilitation, Treatment, Umbilical Cord Blood, Forex, Investments ,

If you're an emerging company with the next great product, sometimes you need an angel on your side.

A study by the University of New Hampshire's Center for Venture Research showed that "angel investors" - high-net-worth individuals willing to invest in entrepreneurial companies at an early stage - shelled out more than $18 billion into early-stage companies last year alone, compared to $304 million by venture capitalists.

Finding an angel investor, however, is not an easy task. Safer Smokes Inc. is one company that understands the challenge of attracting the right investors.

This development-stage company is tapping the smoking cessation market with a unique tobacco-free, nicotine-free smoke called Bravo, which has the appearance of a traditional cigarette and burns like tobacco, but is actually made from lettuce fibers.

"Bravo lets you smoke your way out of the tobacco habit gradually," said Puzant C. Torigian, chief executive officer of Safer Smokes.

For companies like Safer Smokes, it may be too soon to approach large venture capital firms, yet time to move beyond networking with family and friends. Angel investors to the rescue.

"The challenge for raising capital in today's market is in harnessing the courage and vision of the angel to see through to the real investment opportunity," said Torigian.

So how do companies like Safer Smokes attract their angel? 

* Have a clear-cut target market for your product or service. For example, Safer Smokes is targeting the smoking cessation market, which has sales approaching $10 billion per year, up from $6 billion just three years ago.

Most angel investors prefer companies that are likely to show positive cash flow within their first 18 months, so having these kinds of statistics about your market can be an incentive.

* Match the business plan objectives to the angel's risk tolerance. Investors want to know the product or service will be unique and well-cultivated. Safer Smokes has a patented solution that company officials say will "affect the landscape of the health care industry."

BY EDSON CANO

Angel Investors Definition

Angel Investors Definition

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Angel investors are one of the financing options that you can look into when you decide to start your own business venture. Business start-up is not only a crucial process it also requires a lot of time, effort, and of course money. If you do not have the money needed to fund your business, then how can you start your operation? That is why, when you start planning your business venture, you have to carefully consider your capital. And if you do not have a large amount to start with, you can rely on angel investors to provide you capital. But before looking for one, you have to make sure that you understand the angel investors definition.

Angel investors are high-net worth and accredited individuals that give financial aid to future business owners who are in need of start-up money. They are well-educated, have valuable experience in business, and possess a large sum of money which they invest in exchange for ownership equity. They are usually the best financing option during the early stage of the business. Nowadays, lots of individuals choose to become angel investors. And so when you start your search for the right angel investor, it is important that you know the angel investors definition of each type.

Corporate Angel Investors Definition

Corporate angels are former business executives who have retired early or have been replaced. Although investment is one of their goals, they look for personal opportunity at the same time. So, usually they want to acquire a position in the business as part of the deal. But this should be thoroughly discussed since some corporate angels can be too controlling.

Entrepreneurial Angel Investors Definition

Entrepreneurial angels are successful business owners themselves. Unlike the corporate angels, they can take bigger risks and provide larger amount of money since they have a steady income source. Usually, these businessmen want to assist future business owners to have a successful start-up and eventually a competitive business. The major advantage of these angels is that they are less demanding and they allow the business owner to grow in his own, with them only as financial back-up.

Enthusiast Angel Investors Definition

Enthusiast angels are retirees who simply enjoy getting involved in different business deals and transactions. They are mostly above 65 years old and are already wealthy even before they start their own businesses. Just like the entrepreneurial angels, they also don’t want to play any role in business management.

Micromanagement Angel Investors Definition

Micromanagement angels are individuals who have exerted their own efforts in order to become wealthy. Because of their experience, they believe that they know exactly how a business should be managed. Although they are not active participants in management, they can be very visible when the management of the business starts to have problems and is not doing well.

Professional Angel Investors Definition

Professional angels are lawyers, accountants, and doctors who want to make investments in companies that offer a service or product with which they have little experience. Their main goal of investing is to be hired by the business at the same time as consultant in their area of expertise.

These are the different types of angel investors that you might encounter when you start looking for the right angel investor for your business. By keeping these angel investors definitions in mind, you can easily decide which one is appropriate for you.

BY EDSON CANO

Basic Principles Of An Investing Club

Basic Principles Of An Investing Club

Investment clubs are created by individuals who not only want to pool their funds together to make a joint investment but would also like to gain knowledge on the various types of viable investment opportunities that are available in the market. Each member of the club contributes periodically an agreed amount of money to purchase growth stocks by means of a dollar cost averaging approach.

The dividends as well as the capital gains are usually reinvested to gain more interest. The security purchases are voted upon by the club members. This is also one way of decreasing personal risk of club members. There are also investment clubs that allows non-club investors to participate in larger investments of the club provided of course that the non-member investors receive a much lower share of commissions.

Likewise, it is also the role of investment clubs to assist their club members in becoming more knowledgeable in all aspects of investments. A well-known trade group for investments clubs is the National Association of Investors Corporation (NAIC) which is a non-profit organization that provides guidance as well as imparting investment knowledge as part of its membership.

A good choice of investment clubs are those that have been around for many decades already and have a track record of having a continuous increasing interest in the stock market. By joining investment clubs, small investors are given the opportunity to increase their buying power, share their collective knowledge and socialize while earning from their investment. Another good benefit derived from investment clubs is the fact that investors are not expected to invest a great deal of money but still will be able to receive a greater amount of interest that is usually possible if you have similarly invested a big lump money.

A typical investment club usually meets once a month and members are given individual responsibility of researching investments and then sharing their ideas with the other members of the club. Likewise, these meeting also served as an occasion for members to contribute to their monetary fund, which is intended for purchasing stocks, mutual funds as well as other types of feasible investments.

One of the main goals and objectives of an investment club is the opportunity to learn. Most investment clubs spent a great deal of effort and time in research since they believe that a well-researched investment plan has a much greater chance of success. This is also the reason why risk is minimized when joining an investment club.

Starting an investment club is not really that difficult and does not require any special knowledge. In fact, a group of friends or even co-workers can decide to set up an investment club. This is usually a good place to start as you will know the people you dealing with.

BY EDSON CANO

BetterTrades

BetterTrades

Everyone dreams of financial stability, but achieving that dream is not always easy. Fortunately, there is a better method – the stock market.

The stock market is an excellent way to not only earn a bit of extra money, but also to be able to quit your day job and live comfortably for the rest of your life. Wondering how to navigate through the stock market as an inexperienced trader?

In order to use the stock market effectively, you need to have the proper training. BetterTrades gives you that training and a wealth of knowledge to help you be a successful investor. BetterTrades teaches real people how to understand the terminology of the stock market as well as how to make the most out of your initial investment dollars.

The BetterTrades Model

Combine unique articles and tips with interactive classes taught by experienced traders and you have BetterTrades – an exclusive method of training potential investors with their individual needs in mind.

Each instructor offers a different focus, background, and teaching method. Using their experience and skills to help people just like you, novice investors earn more money than they thought possible. The great part about learning from teachers who have such different methods is that everyone is sure to find something that works for them.

BetterTrades has a number of different Webshops, and each focuses on a different method and lesson. These lessons range widely in difficulty. From lessons for those who have never approached the stock market to webshops for people who require advanced help, each course is specifically designed with your needs in mind.

New webshops are forming on a daily basis, and armed with just a bit of knowledge from a single BetterTrades webshop, you could become one of the hundreds of stock market success stories overnight.

With thousands of happy subscribers, you'll find the BetterTrades community is one you can count on again and again to achieve your personal wealth goals. Start trading everyday with experience and knowledge in your court. Start your trading career as a BetterTrades member.

If you want to achieve the dream of being comfortably wealthy, one of the best ways to do it is through the stock market. In order to have the greatest chance of making real money, get training from people who have already made their fortunes – people like the teachers at BetterTrades.

BY EDSON CANO

Why You Must Invest In Gold Today

Why You Must  Invest In Gold Today

Gold. Rare, beautiful, and unique. Treasured as a store of value for thousands of years, it is an important and secure asset. It has maintained its long term value, is not directly affected by the economic policies of individual countries and doesn't depend on a 'promise to pay'.

Completely free of credit risk, although it bears a market risk gold has always been a secure refuge in unsettled times. Its ‘safe haven’ attributes attract wise investors. Gold has proved itself to be an effective way to manage wealth.

For at least 200 years the price of gold has kept pace with inflation. Another important reason to invest in gold is its consistent delivery within a portfolio of assets. Its performance tends to move independently of other investments and of key economic indicators. Even a small weighting of gold in an investment portfolio can help reduce overall risk.

Most investment portfolios are invested primarily in traditional financial assets such as stocks and bonds. The reason for holding diverse investments is to protect the portfolio against fluctuations in the value of any single asset class.

Portfolios that contain gold are generally more robust and better able to cope with market ncertainties than those that don't. Adding gold to a portfolio introduces an entirely different class of asset.

Gold is unusual because it is both a commodity and a monetary asset. It is an 'effective diversifier' because its performance tends to move independently of other investments and key economic indicators.

Studies have shown that traditional diversifiers (such as bonds and alternative assets) often fail during times of market stress or instability. Even a small allocation of gold has been proven to significantly improve the consistency of portfolio performance during both stable and unstable financial periods.

Gold improves the stability and predictability of returns. It is not correlated with other assets because the gold price is not driven by the same factors that drive the performance of other assets. Gold is also significantly less volatile than practically all equity indices.

The value of gold, in terms of real goods and services that it can buy,has remained remarkably stable. In contrast, the purchasing power of many currencies has generally declined.

Traditionally, access to the gold market has been through: investment in physical gold, usually as gold coins or small bars,or, for larger quantities, by way of the over the counter market; gold futures and options; gold mining equities, often packaged in gold-oriented mutual funds.

BY EDSON CANO

Why your share market investing is failing?

Why your share market investing is failing?

Every investor has several characteristics that combine to make them successful. The degree of success depends on how well you can implement these and how well your strategy works.

The method investors have for selecting shares that they want in their portfolio is arguably one of the most important areas of being a successful investor. For me personally I have stuck to selecting shares that are leading ie blue chip companies, whose price histories are in a long term uptrend and that are themselves doing better than the market average.

The next vital component is the trading plan. This doesn’t need to be overly complex.  You just need to know what you will do if the share price goes up, down or sideways. If you can cover these three things then you have a contingency for anything the share price can throw at you. And more importantly you will prevent yourself from reacting to sudden market fluctuations that happen all of the time.

The trading plan should also incorporate an overall strategy for the share that you have selected and explain the reasoning behind why you’re doing what you’re doing ie why you decided to place your order level at this particular point.

You will need a robust risk management strategy and to be successful in the long term you will need to implement the strategy. The number of times I’ve seen people unwilling to action there risk management plan when the share price reaches their pre-determined value price is a little bit scary.

The above three things are great to have in place but don’t forget that you must be disciplined in implementing them otherwise you’re setting yourself up for failure.  And you should remember that to get good at anything you need to practice and you need to gain experience.  Champions are made in training.  Not on the track.

After identifying these strategic factors you should consider how much you are willing to outlay on each share. It is important to try and spend the same amount on each share ie $5000 across a portfolio of 10 shares in different industries in order to maintain a balanced portfolio.

Finally before deciding to go ahead with any investment you should asses whether its risk to return is worth it. There is no point risking $1 to try to make 50 cents.  Over my investing lifespan I have stuck with a ratio of 1:3.  For every dollar that I am risking I stand to make at least three or if I stand to make $3000 from a trade then I am willing to risk $1000 in order to make it. The reasoning behind this ratio is that no matter how good you are you will always loose in some of your investments. Having a ratio like this ensures that when the of the investments pay off they more than compensate for any that lose.

To recap any successful investor must exhibit these characteristics over the long term.

Take responsibility for themselves and make their own decisions. They take the credit for making profit and accept the responsibility for any losses. They learn from these decisions and improve over time;

Make investment or trading plans and stick to them. They make trading plans based on reliable information in the clear calm light of day and not emotional reactions that may emanate from the panic or euphoria of the share market. And, they stick to their plan;

Assess the Risk/Return Ratio of each trade. They only enter into investments that offer reasonable potential for profit;

Manage the risk of every investment . And never lose too much;

Allow for contingencies in the plan so they know what they are going to do if the share being traded goes up, down or sideways in price. The share price can do nothing else.  But you can do what you planned.  The plan then dictates the actions and prevents unprofitable emotional reactions;

Only put their money into financially secure companies ;

Buy shares when they are cheap and sell those that are expensive relative to their price trends;

Only trade in companies whose prices are in trending up; 

Trade unemotionally and have the discipline to trade the plan. They plan the trade and trade the plan;

Keep taking money out of the market. You only make money when you sell shares;  and

Have sufficient confidence that has been gained from experience.

BY EDSON CANO

How robust is your equity strategy?

How robust is your equity strategy?

In other articles from me, I have already pointed out the importance of a good equity strategy for a successful long-term stock trading.

After the interest rate cut in the last week, the first investor nervousness appears to be over and the situation after the mortgage crisis relaxes on the stock market rapidly.

Now it is time to draw a first summary and to check how robust your strategy really is. A good http://www.rockwelltrading.de/ equity strategy code is not optimized for a market situation - it adapts to the market situation, that they would have worked in recent weeks.

Question thus:

What happened to your stock portfolio in the last two months?

Possibility Number 1:

The profits in the last two months are similar to those of the weeks and months before.

Congratulations! They seem to have a very robust equity strategy that places in seemingly every market situation their functionality test.

Option 2:

Although they made profits, but much smaller than the weeks and months before.

It would take you to worse, after all, you are still in positive territory. However, I would advise you to watch your equity strategy in more detail in the coming weeks and months. Your equity strategy appears in a bull market (steadily rising prices, as we know it in Germany in recent years) to run very well, but will continue this market? You should eventually get used to the last made smaller profits ...

Option 3:

They suffered losses - sometimes quite large losses

Apparently, your equity strategy works only in a bull market and is precisely this market situation (over) optimized. Unfortunately fared most investors so: A short crisis and many previously tedious achieved gains have been made in record time naught.

In this case, you should revise your equity strategy urgently, because the long term has an optimized on a market situation strategy no chance of success.

BY EDSON CANO

Winners of the 1997 Nobel Prizes in Economy

Winners of the 1997 Nobel Prizes in Economy

The Royal Swedish Academy of Sciences has decided to award the Bank ofSweden Prize in Economic Sciences in Memory of Alfred Nobel 1997, to Professor Robert C. Merton, Harvard University, and to Professor Myron S. Scholes, Stanford University, jointly. The prize was awarded for a new method to determine the value of derivatives.

This sounds like a trifle achievement - but it is not. It touches upon the very heart of the science of Economics: the concept of Risk. Risk reflects the effect on the value of an asset where there is an option to change it (the value) in the future.

We could be talking about a physical assets or a non-tangible asset, such as a contract between two parties. An asset is also an investment, an insurance policy, a bank guarantee and any other form of contingent liability, corporate or not.

Scholes himself said that his formula is good for any situation involving a contract whose value depends on the (uncertain) future value of an asset.

The discipline of risk management is relatively old. As early as 200 years ago households and firms were able to defray their risk and to maintain a level of risk acceptable to them by redistributing risks towards other agents who were willing and able to assume them. In the financial markets this is done by using derivative securities options, futures and others. Futures and forwards hedge against future (potential - all risks are potentials) risks. These are contracts which promise a future delivery of a certain item at a certain price no later than a given date. Firms can thus sell their future production (agricultural produce, minerals) in advance at the futures market specific to their goods. The risk of future price movements is re-allocated, this way, from the producer or manufacturer to the buyer of the contract. Options are designed to hedge against one-sided risks; they represent the right, but not the obligation, to buy or sell something at a pre-determined price in the future. An importer that has to make a large payment in a foreign currency can suffer large losses due to a future depreciation of his domestic currency. He can avoid these losses by buying call options for the foreign currency on the market for foreign currency options (and, obviously, pay the correct price for them).

Fischer Black, Robert Merton and Myron Scholes developed a method of correctly pricing derivatives. Their work in the early 1970s proposed a solution to a crucial problem in financing theory: what is the best (=correctly or minimally priced) way of dealing with financial risk. It was this solution which brought about the rapid growth of markets for derivatives in the last two decades. Fischer Black died in August 1995, in his early fifties. Had he lived longer, he most definitely would have shared the Nobel Prize.

Black, Merton and Scholes can be applied to a number of economic contracts and decisions which can be construed as options. Any investment may provide opportunities (options) to expand into new markets in the future. Their methodology can be used to value things as diverse as investments, insurance policies and guarantees.

Valuing Financial Options

One of the earliest efforts to determine the value of stock options was made by Louis Bachelier in his Ph.D. thesis at the Sorbonne in 1900. His formula was based on unrealistic assumptions such as a zero interest rate and negative share prices.

Still, scholars like Case Sprenkle, James Boness and Paul Samuelson used his formula. They introduced several now universally accepted assumptions: that stock prices are normally distributed (which guarantees that share prices are positive), a non-zero (negative or positive) interest rate, the risk aversion of investors, the existence of a risk premium (on top of the risk-free interest rate). In 1964, Boness came up with a formula which was very similar to the Black-Scholes formula. Yet, it still incorporated compensation for the risk associated with a stock through an unknown interest rate.

Prior to 1973, people discounted (capitalized) the expected value of a stock option at expiration. They used arbitrary risk premiums in the discounting process. The risk premium represented the volatility of the underlying stock.

In other words, it represented the chances to find the price of the stock within a given range of prices on expiration. It did not represent the investors' risk aversion, something which is impossible to observe in reality.

The Black and Scholes Formula

The revolution brought about by Merton, Black and Scholes was recognizing that it is not necessary to use any risk premium when valuing an option because it is already included in the price of the stock. In 1973 Fischer Black and Myron S. Scholes published the famous option pricing Black and Scholes formula. Merton extended it in 1973.

The idea was simple: a formula for option valuation should determine exactly how the value of the option depends on the current share price (professionally called the "delta" of the option). A delta of 1 means that a $1 increase or decrease in the price of the share is translated to a $1 identical movement in the price of the option.

An investor that holds the share and wants to protect himself against the changes in its price can eliminate the risk by selling (writing) options as the number of shares he owns. If the share price increases, the investor will make a profit on the shares which will be identical to the losses on the options. The seller of an option incurs losses when the share price goes up, because he has to pay money to the people who bought it or give to them the shares at a price that is lower than the market price - the strike price of the option. The reverse is true for decreases in the share price. Yet, the money received by the investor from the buyers of the options that he sold is invested. Altogether, the investor should receive a yield equivalent to the yield on risk free investments (for instance, treasury bills).

Changes in the share price and drawing nearer to the maturity (expiration) date of the option changes the delta of the option. The investor has to change the portfolio of his investments (shares, sold options and the money received from the option buyers) to account for this changing delta.

This is the first unrealistic assumption of Black, Merton and Scholes: that the investor can trade continuously without any transaction costs (though others amended the formula later).

According to their formula, the value of a call option is given by the difference between the expected share price and the expected cost if the option is exercised. The value of the option is higher, the higher the current share price, the higher the volatility of the share price (as measured by its standard deviation), the higher the risk-free interest rate, the longer the time to maturity, the lower the strike price, and the higher the probability that the option will be exercised.

All the parameters in the equation are observable except the volatility , which has to be estimated from market data. If the price of the call option is known, the formula can be used to solve for the market's estimate of the share volatility.

Merton contributed to this revolutionary thinking by saying that to evaluate stock options, the market does not need to be in equilibrium. It is sufficient that no arbitrage opportunities will arise (namely, that the market will price the share and the option correctly). So, Merton was not afraid to include a fluctuating (stochastic) interest rate in HIS treatment of the Black and Scholes formula.

His much more flexible approach also fitted more complex types of options (known as synthetic options - created by buying or selling two unrelated securities).

Theory and Practice

The Nobel laureates succeeded to solve a problem more than 70 years old.

But their contribution had both theoretical and practical importance. It assisted in solving many economic problems, to price derivatives and to valuation in other areas. Their method has been used to determine the value of currency options, interest rate options, options on futures, and so on.

Today, we no longer use the original formula. The interest rate in modern theories is stochastic, the volatility of the share price varies stochastically over time, prices develop in jumps, transaction costs are taken into account and prices can be controlled (e.g. currencies are restricted to move inside bands in many countries).

Specific Applications of the Formula: Corporate Liabilities

A share can be thought of as an option on the firm. If the value of the firm is lower than the value of its maturing debt, the shareholders have the right, but not the obligation, to repay the loans. We can, therefore, use the Black and Scholes to value shares, even when are not traded. Shares are liabilities of the firm and all other liabilities can be treated the same way.

In financial contract theory the methodology has been used to design optimal financial contracts, taking into account various aspects of bankruptcy law.

Investment evaluation Flexibility is a key factor in a successful choice between investments. Let us take a surprising example: equipment differs in its flexibility - some equipment can be deactivated and reactivated at will (as the market price of the product fluctuates), uses different sources of energy with varying relative prices (example: the relative prices of oil versus electricity), etc. This kind of equipment is really an option: to operate or to shut down, to use oil or electricity).

The Black and Scholes formula could help make the right decision.

Guarantees and Insurance Contracts

Insurance policies and financial (and non financial) guarantees can be evaluated using option-pricing theory. Insurance against the non-payment of a debt security is equivalent to a put option on the debt security with a strike price that is equal to the nominal value of the security. A real put option would provide its holder with the right to sell the debt security if its value declines below the strike price.

Put differently, the put option owner has the possibility to limit his losses.

Option contracts are, indeed, a kind of insurance contracts and the two markets are competing.

Complete Markets

Merton (1977) extend the dynamic theory of financial markets. In the 1950s, Kenneth Arrow and Gerard Debreu (both Nobel Prize winners) demonstrated that individuals, households and firms can abolish their risk: if there exist as many independent securities as there are future states of the world (a quite large number). Merton proved that far fewer financial instruments are sufficient to eliminate risk, even when the number of future states is very large.

Practical Importance

Option contracts began to be traded on the Chicago Board Options Exchange (CBOE) in April 1973, one month before the formula was published.

It was only in 1975 that traders had begun applying it - using programmed calculators. Thousands of traders and investors use the formula daily in markets throughout the world. In many countries, it is mandatory by law to use the formula to price stock warrants and options. In Israel, the formula must be included and explained in every public offering prospectus.

Today, we cannot conceive of the financial world without the formula.

Investment portfolio managers use put options to hedge against a decline in share prices. Companies use derivative instruments to fight currency, interest rates and other financial risks. Banks and other financial institutions use it to price (even to characterize) new products, offer customized financial solutions and instruments to their clients and to minimize their own risks.

Some Other Scientific Contributions

The work of Merton and Scholes was not confined to inventing the formula.

Merton analysed individual consumption and investment decisions in continuous time. He generalized an important asset pricing model called the CAPM and gave it a dynamic form. He applied option pricing formulas in different fields.

He is most known for deriving a formula which allows stock price movements to be discontinuous.

Scholes studied the effect of dividends on share prices and estimated the risks associated with the share which are not specific to it. He is a great guru of the efficient marketplace ("The Invisible Hand of the Market").

BY EDSON CANO

With Property Investment You can Retire Young And Live Off Your Profits.

With Property Investment You can Retire Young And Live Off Your Profits.

In the fast-paced, exemplary world today, money matters more than most other things. This is the era of LPG (Liberalization, Privatization, and Globalization.)  People are interested in exponential growth of money rather than slow growth. So, instead of saving all your income and using it for your post-retirement life, you can invest your income in a judicious manner to multiply it and earn much more from it. Investment properties are a hot option for that kind of a plan. Investmentproperty is a property that is not occupied by the owner, usually purchased specifically to generate profit through rental income or capital gains. There are lots of convincing reasons for you to realize the benefits of investment properties.

Property investment is where you make a small investment into a property, typically one still being built, which is known as an off plan property and then go on to rent it out to get good dividends, and then once raised in price, you can sell it to gain a profit or to purchase more property.

No investment today offers the stability and simplicity along with the excellent returns offered by investing in property. The stock market can offer high returns, but it is a very volatile and unsteady place. This is especially true for non-professionals and there are so many external factors that can effect your financial investment. Not to mention the fact that the major stock markets have generally been underperforming and property investment stands head and shoulders above other forms of investments.  There are a lot of options when it comes to investing in property, as you can choose the option of investing in Commercial property such as industrial/offices, hotels, apartments, retail shops and the list goes on. It can be a residential property: you can buy it and sell it at a higher rate for capital gain or rent it for regular dividends.

Property is now the wise investor’s weapon of choice. No other investment allows you to purchase with other people's money (Equity partners) and then pay this back with other people's money (the rental income from tenants). If you own a property, you can release equity against that property. Although there is no law that states that your property will increase in value year on year, it is accepted that a well maintained property in a reasonable area will appreciate in value.

Here are some points which are sure to make you flabbergasted about the profits of property investment.

50% of individuals mentioned on The Times Rich List made their money through investing in Property. A property worth just €4000 30 years ago would be today worth around €225,000

Equities or Stocks can be volatile, as with the .com crash, whereas ay property is historically stable.

It is well documented that on average the value of a property doubles every 7 years.

Property investments provide equity growth and they maintain good cash flow and not to mention, the capital appreciation is higher than any other type of investment. According to figures from FPD Savills Research, the total net return including capital appreciation on a prime central London property was 18.6% last year. In the UK, the total net return was 16.3% and in Spain it was even a stronger performance during last year.

The benefit of investing in a property is that you can remove the emotion from the purchase and look at the property as an investment vehicle. This opens a lot of options for you. You can utilize your re-assignable contract option and sell at a substantial profit prior to completion, carrying no redemption penalty or you can take the "buy to let" situation and generate a good reliable rental income, including substantial capital appreciation.

BY EDSON CANO

Your Steps To Maximize Your HYIP

Your Steps To Maximize Your HYIP

Any investor wishes to make money in HYIP. Finding a successful high yield investment program is not enough to maximize your high yield investments. Certainly it is not easy to maximize your return on investment from best HYIP. The main point of this article is the strategies how to find “fruitful” and prosperous HYIP and to maximize your interests from this HYIP. 

Before we start to discuss the strategies, we should find an answer to the question what is best HYIP. Well, it is difficult to answer because there are various possibilities. For some investors the “fruitful” HYIP is HYIP with huge daily interest, for other HYIPers the “fruitful” HYIP is HYIP with instantly withdraw. Undoubtedly, all these investors are right.

I guess than each investor wishes the “fruitful” HYIP which is online for a long time, not just several weeks or a few months. Moreover, each investor wishes that “fruitful” HYIPs must have fast support. Some HYIPs reply to your questions within 1-2 days and, of course, it is too long! I am a potential investor and I need to get an answer immediately! 

Certainly, you can find many answers in FAQ section of a great number of HYIP web sites but sometimes you need information which you can not find there. If HYIP has phone support so it is very good, you can always phone them and get answers to your questions.

According to many experienced online investors, one of the most important things for the “fruitful” HYIP is fast withdraws. No one wants to wait 1 or 2 days till they receive payment. Certainly, everyone wants to get money within few hours. “Fruitful” HYIPs have to pay fast. 

All investors agree with me that HYIP security is significant in online investments. Of course, the “fruitful” and prosperous HYIP must have the server protection to guarantee that users' accounts are safe and secure. Real “fruitful” HYIPs spend a lot of money for hosting and advertising as well as Ddos protection and security.

If HYIP has Prolexic Ddos protection it is a really good sign of seriousness of this high yield investment program because according to online security data, Prolexic Ddos protection costs more than $2000 per month.

Daily interests are the subject of many hot discussions on online HYIP forums because investors have very different opinions. Some people prefer 10-20% daily and other like 1-2% daily. Undoubtedly, the prosperous HYIP invests money into Forex trading and to other contemporary industries. So if HYIP earn money in Forex they can not offer 10-20%. It is impossible and each investor knows that. 

Now the time is to discuss ways how to maximize your HYIP. After having found the “fruitful” and prosperous HYIP, the key to having successful investments is to build a safe, diversified portfolio and to extract your own money as quickly as possible. This will limit risk to your capital because if one programme closes, you will still have the others to fall back on.

Before investing in any programme, you should do a little research on it. I mean you should remember the main features of prosperous HYIP, namely daily interests of no more than 2-3%, excellent support, high qualified web site design of the HYIP company and best users' account protection.

Besides, HYIP scripts are easily to get a hold of and this makes it easier for fraudsters and scammers to operate. One of the things to look for is the programmer's reputation if they are paying consistently. 

When the investor makes any online investment, his aim is to extract his money as quickly as possible. This is because the investor wants to be able to invest using the profit he made from the high yield investment programme to protect his own capital. For example, a typical investment could be $100 then, after 30 days, the investor would extract his own money and re-invest the profits so that he is making risk that he uses “other people's money”.

Another meaningful thing is that the investor will need to make use of referral systems to explode his profits from his investments. This is when the investor recommends someone to the programme and receives commission for it. This usually creates residual income for the investor which means him the opportunity to invest more of “other people's money” to make even more cash.

This article will help you find “fruitful” and prosperous HYIP and maximize your high yield investments. To grab my collection of golden rules successful HYIP investing visit http://thehyips.net/lessons/.

BY EDSON CANO

Your Stop Loss Is Critical When Day Trading Futures

Your Stop Loss Is Critical When Day Trading Futures

Stop loss orders are great insurance policies that cost you nothing and can save you a fortune.  They are used to sell or buy at a specified price and greatly reduce the risk you take when you buy or sell a futures contract.  Stop loss orders will automatically execute when the price specified is hit, and can take the emotion out of a buy or sell decision by setting a cap on the amount you are willing to lose in a trade that has gone against you.  Stop loss orders don't guarantee against losses but they drastically reduce risk by limiting potential losses.

With my system the only stop I use is what I call an emergency stop.  My stop loss is automatically made when I make my initial trade at two points.  It is only for emergencies, like news I wasn't expecting, or anything that will make the market gyrate drastically and I never enter a trade without it. However I never expect to use this stop loss to exit my trade.  I simply will not let the market move against my trade entry more than a tick or two. If I find that I exited the trade too soon I just reenter the trade but if the trade continues to move against me I have saved the loss of one or two points per. contract.  Usually I will only have to exit and reenter a trade one time if I have entered a trade to early. This means I only lose a small commission per contract instead of fifty dollars per point- per contract, when trading the e-mini, and taking what many consider a normal loss.


Trading the futures markets is a challenging but profitable opportunity for educated and experienced traders.   However it is not easy, without a great trading system, and even traders with years of experience still incur losses.  Finding a good trading system and trading in small increments with an emergency stop loss in place will allow those relatively new to futures trading to be successful.   Once you have learned the skills you need to trade with consistent profits it will not be a problem but until that time it is absolutely critical that you do not take unnecessary losses. If you are new to trading futures you should never trade until you have a mentor with a trading system that gives you consistent profits.

 A great way to protect profits if you have not established an exit strategy is the trailing stop.  The trailing stop loss is an order that is entered once you enter your trade.  Your stop price moves at a specified distance behind the market price.  Trailing stops are raised when a price rises, in a long trade, but will remain stationary when it falls. Trailing will only occur when the market price moves in favor of the trade to which the order is attached.   The trailing stop order is similar to the stop loss order, but you use it to protect a profit, as opposed to protect against losses.  Trailing stops are designed to lock in profit levels and they literally trail along your increasing profit and adjust your stop loss levels accordingly.   Often traders will find tailing stops confusing because they change them while in an open position.  This is not a wise practice, and should be avoided. It is an indication that you are not sure of your trade and if one is not sure of a trade it would be wise to exit immediately. Trailing stops are ideal because they allow for further profit potential to enter due to momentum, while limiting risk.  Trailing stops are an important component to a trader's risk management unless they have an exit strategy in their system that might serve them better.

The market order is the simplest and quickest way to get your order filled to enter a trade or to use as a stop loss.  A market order is a trade executed at the current market price and they are often used to exit trades to ensure that the order has the best possible chance of execution.  A market order to exit is simply an order used to exit the trade immediately.  Be aware that in a fast-changing market sometimes there is a disparity between the price when the market order is given and the actual price when it is filled.

Stop loss orders are used to exit trades, and are always used to limit the amount of loss, but some day traders use them as their only exit, while other traders use them as a backup exit only.  If one uses them as their exit they will risk more than is necessary and might want to find a better system to trade. Stop loss orders allow you to define your risks before you open a position and in my opinion that risk should be minimal.  Stop loss orders are one of the easiest ways to increase your chances of survival when trading commodities and futures and they are a powerful risk-management tool.

BY EDSON CANO

Day Trading With The Camarilla Equation

Day Trading With The Camarilla Equation

Origins of the Camarilla Equation

Discovered while day trading in 1989 by Nick Stott, a successful bond trader in the financial markets, the 'Camarilla' equation uses a truism of nature to define market action - namely that most time series have a tendency to revert to the mean.

The equation produces 8 levels that are meant to predict these reversal points allowing the trader to profit from them. The equation uses nothing more than the previous trading day’s open, close, high and low levels and some interesting mathematics to produce these supports and resistances.

Trading the Signals

Now these levels are numbered L1-4 for the supports and H1-4 for the resistances but it is really the L3, L4, H3 and H4 ones that are most important.

When the price level reaches the H3 level the theory behind the Camarilla Equation says that there is a strong resistance at this point and that a SHORT trade should be made with a stop loss at the H4 level.

Conversely, when the price drops to the L3 level there is a strong support and a LONG trade is the recommendation with a stop loss at the L4 level.

Breakout Possibilities

While the H4 and L4 levels should normally be reserved for setting stop losses on the above trades, occasionally there will come a point when these points are broken through. If this breakout is maintained for a significant amount of time and the price is still on the move then a LONG or SHORT trade should be entered respectively.

These trades are not so common but could provide massive profits (or so the Camarilla Equation suggests)

Choosing entry point with Camarilla Equation

There are two entry points that you may like to consider when using the Camarilla Equation. Firstly you could trade as soon as the market reaches either the L3 or H3 level and go AGAINST the current trend but there is more of a danger that the trend will continue and you will lose out if this is your preferred method.

The alternative is to wait after the market has broken the L3 or H3 level until the reverse actually occurs and enter the trade just as the market passes the respective level once again. This allows you to trade WITH the trend which should prove a safer option.

So does it Work?

If you are interested in whether or not the Camarilla Equation provides a viable trading method then you may wish to follow my experiment which is testing the given levels for the FTSE 100, Dow Jones and DAX 30 stock markets.

BY EDSON CANO

Day trader Versus Investor

Day trader Versus Investor

Insurance, Loans, Mortgages, Lawyers, Credit, Attorneys, Donate, Graduation, Hosting, Complaints, Conference Call, Trade, Software, Recovery, Transfers, Gas and Electricity, Classes, Rehabilitation, Treatment, Umbilical Cord Blood, Forex, Investments ,

The day trader's ultimate objective is to trade expensive and volatile stocks on the NASDAQ and NYSE markets in in increments of 1,000 shares or more, and profit from the small intra-day price movement. The day trader may make many trades in a single day, holding onto stocks for only a few minutes (or hours), and almost never overnight. Day traders are short-term price speculators. They are not investors, and they are not gamblers.

Day trading is not investing. The day trader's time frame of analysis is rather short: one day. Their only intent is to exploit the stock's intra-day price swings or daily price volatility. Unlike stock investors, day traders do not seek long-term value appreciation.

Stock volatility is generally a rule of the market rather than an exception. Most stock prices move up or down in any given day due to a variety of external factors. Even if the market is relatively calm, there are always stocks that are volatile. Day traders seek to identify a stock that has a trend and then go with that trend. "Trend is a friend" is a common motto among day traders. Day traders seek to pick up a relatively small stock movement, 1/8 or more on that stock. If day traders are trading a large block of shares (that is, 1,000 shares per trade), then day traders will profit $125 from a 1/8 price movement. Conversely, if a day trader acquired 1,000 shares and the trader was wrong, which also happens, then the day trader will lose $125 from a 1/8 price movement. Volatility is a double-edged sword.

For expensive stocks that trade for $100 or more, a 1/8 or 12.5 cents movement is such a small relative price change that it happens all the time. Consequently there are plenty of day trading opportunities. It is not common to see a day trader executing many, sometimes as many as 100, trades in a single day. On the other hand, an investor's time frame is much longer. Investors seek a much larger price movement than 1/8 to earn the desired rate of return. That takes time.

In short, day traders seek to extract an income from intra-day price volatility by trading the stock frequently, while the investors seek a long-term capital appreciation.

BY EDSON CANO

Day Trading or Investing for the Long Haul?

Day Trading or Investing for the Long Haul?

Among those who buy and sell stocks there is an on going debate about whether the most profitable approach to stock market trading is short or long term investment. And the two sides rarely reach agreement, because one side is rather conservative in its approach, whereas the other has a more radical and freewheeling attitude. Day traders are usually considered the mavericks of the trading world, and they are known for taking gambler’s risks and making huge profits in short amounts of time – sometimes buying and selling the same stock several times in a single day. Those who prefer to buy and hold their stocks follow a more risk-averse path, and cite historical trends to back up their claim that their method is actually more reliable and is the real shortcut to wealth.

Most investors can enjoy the best of both worlds, by setting aside some of their money for day trades, and the balance of it for longer-term investment. Because day trading tends to be more volatile, and can result in quick profits or fast losses, most of us would be advised to put only as much of our investment capital as we can comfortably afford to lose, into this kind of trading strategy. That way, even if you encounter a worse case scenario, it will not adversely impact your overall financial situation.

There are pros and cons to both styles of investing. Those who do day trades enjoy the fact that they can get in and out of the market quickly, and make money without waiting for the results. But any kind of stock market investment strategy requires research into the companies you decide to invest in, and research can take time to do. If you are buying and selling so fast that you don’t have time to do adequate background analysis, day trading may not be a prudent approach.

Investing in companies that provide slow but steady returns is a time-tested approach to the stock market. In fact, most historical evidence supports the idea that if you buy quality stocks and hold them for long periods of time – at least five years or more – you will do very well in the stock market. For that reason, those who are young enough to have time on their side would probably be wise to buy some stocks and sock them away for retirement. 

With most investments, it is usually best to diversify to minimize risk and maximize potential gains. One way to accomplish this in the stock market is to employ both strategies, and use a portion of your investment capital for short-term trades, while leaving another portion in long term investments. If one basket of investments doesn’t do well, the other probably will. And if both do well, you will enjoy twice as much success.

BY EDSON CANO