ntrader

Investors are very bullish about the market and that makes me feel very uncomfortable, this week the VIX hit 16, i am expecting with the S&P correction, VIX will be above 20 in the coming weeks.

Talking about volatility, the vega of an option expresses the change in the price of the option for every 1% change in underlying volatility. For example, if the theoretical price is 2.5 and the Vega is showing 0.25, then if the volatility moves from 20% to 21% the theoretical price will increase to 2.75. Vega is most sensitive when the option is at-the-money. Vega does not have any effect on the intrinsic value of options; it only affects the “time value” of an option’s price.

Still it is not easy to make an investment decision on gold, i will wait to see the price behavior this week and then open a position..

I believe you can help more in the Northrop Grumman Corporation Analysis if you can make some comments about the financials of the company or you view about the future earnings or provide some technical analysis of the company. Providing just a description of the company it doesn't help us to make an investment decision.

Portfolio managers use the Greeks in order to better hedge their portfolio and remove some risk factors from their position. For traders calculating the greeks can give an idea if someone should open a position or not.

Exchange rates are an expression of one unit of a currency in terms of another. One important factor that affects the forex prices is the rate of inflation. Inflation occurs when the rate of money growth in an economy is higher than the rate of growth in real GDP. In an inflation environment more money is buying less goods which in turn drive up the prices of these goods, so inflation essentially changes the relative value of this currency relation between two economies.

More volatility does not mean better performance. I believe for inexperienced traders the safest way to start trading is with stocks and when the trader get experienced can move to CFD's or Forex. In the forum you can find a lot of stock trading ideas with analysis and research.

I believe that leverage is a two-edged sword, but especially for inexperienced traders most of the times work’s against them. The young traders tend to act as gamblers, doubling their exposure in order to turn the losing position around but most of the times are closing the position with huge losses. That is why money management is very important in forex trading, and you can make the right decision knowing the risk/reward ratio you only if you have long term experience, trading is a never ending learning process.

One assumption is that there are no dividends and you are right that most traders in general prefer bull call spread instead of covered call and of course the traders should take consideration the breakeven point but also the volatility of the stock

Thank you Larry1234, I didn't assign a target price for the stock for March. With my analysis i try to evaluate the stock using fundamental and technical analysis. I am using this analysis just to decide if i will go long or short in a stock for the next 6 months. I am looking for a model which can give a trustworthy target price, do you know any, you will help me a lot if can tell me where to find a model for the target price.

Northrop Grumman Corporation provides products, services, and solutions in aerospace, electronics, information systems, and technical services worldwide. Highlights: The stock closed yesterday’s trading session at $65.69. In the past year, the stock has hit a 52-week low of $56.59 and 52-week high of $71.25. Technical indicators for the stock are bullish. NOC has a market cap of $15.71 billion and is part of the industrial goods sector. GROWTH AND BALANCE SHEET The company reported earnings of $2.06 per share compared with $1.85 in the fourth quarter of 2011. . Its revenue fell 0.5% to $6.48 billion. However, analysts expected earnings of $1.74 per share on revenue of $6.33 billion. The company expects revenue to be approximately $24 billion in 2013. It expects earnings from continuing operations to be in the range of $6.85 to $7.15 in 2013. VALUATION NOC PE stands at 8.41 below the industry’s average of 16.27. The stock is currently trading 18% below its intrinsic value of $80.46 this suggests that the stock is undervalued at these levels. NOC's current Price/Sales of 0.62 is below the average of its industry of 0.76. The beta of 1.06 implies higher volatility of the stock with respect to the S&P 500. Northrop Grumman ended 2012 with cash and cash equivalents of approximately $3.9 billion, up from $3 billion at year-end 2011. Long-term debt remained approximately flat year over year at $3.9 billion at the end of Dec 31, 2012. Cash generated from operations in 2012 totaled $2.6 billion versus cash from operations of $2.1 billion in the year-ago period. The firm pays a very nice dividend yield of 3.4% with a 28% payout ratio. My view: The company has demonstrated bullish technical signs, and has been generating economic value for shareholders for the past few years. NOC stock is -2.80% lower year to date. I am optimistic about the stock price and i will buy the stock and also some March, strike 67.50 calls.

Major Events: Eurogroup Meetings, GDP data and the G20 meetings are the highlights of this week that will influence EUR/USD. I will not open any position on Monday until I can "feel" the sentiment. Here are some technicals that I am looking for: 1.40 is the ultimate resistance line for the pair. 1.3360 is the recent peak of January 2013 and worked nicely as support during February. 1.3255 provided support during January 2013.

Interest rates are an important factor influencing currency exchange rates. When a country’s key interest rate rises higher or falls lower than that of another country, the currency of the nation with lower interest rate will be sold and the other currency will be bought so as to achieve higher returns. Given this increase in demand for the currency with higher interest rate, the value of that currency will rise against other currencies.

I agree with you JasonW, there is no real evidence that it is staging a long term uptrend as of yet, but i would like to play the scenario of a spike, so i have just entered into an options trade, going long on March call with a strike price of 19, priced at 0.60.

Thank you for your reply SIUYA, you are right, most of the times the advantages of options for some traders are disadvantages for some other traders and you are right that you can't be general with options. Your post was very helpful. So here is how our list looks like now: Advantages: Leverage - requires good risk controls Hedging Decaying asset - when you are short Zero sum - if you are constantly winning. Various strategies can be used across months and strikes. Can be used as part of a portfolio hedging strategy Unlimited upside - if long options, and you can run them (subject to expiry, and if put or call) Limited Downside - if long options Dividend and corporate strategy plays - dependent on local laws Disadvantages: Excessive leverage when risk controls are poor Hedging is often misunderstood and the hedge may in-fact merely change the risk profile but not actually act as a hedge Decaying asset - when you are long Zero sum - if you are constantly loosing and have no way of offsetting this Various strategies can be used across months and strikes -dangerous if you dont understand what you are doing You might not have enough capital/assets to effectively implement a portfolio type strategy Unlimited downside - if short options, (subject to expiry, and if put or call)

One common mistake that traders often do is to over leverage their account. Today brokers offer leverage up to 1:500 for trading. Leverage is a two-edged sword it can work in the trader's favor or against him and usually leverage works against traders.

This thread is for those who like to discuss about the Money Management in Forex Trading . I am waiting for your thoughts in the most important ingredient to successful trading. Risk reward is the most important aspect to managing your money in the markets. Every trader in the market wants to maximize their rewards and minimize their risks. A risk-reward ratio of 1:2 means your profit target is twice your stop loss. If your trade has a Risk - Reward ratio of 1:3, it means that for every winner, you will need to lose an equivalent trade three times to lose all your profits. If you gain 900 pips in a trade (with a 300 pip stop loss) you would need to lose three trades using the same Risk-Reward ratio to cancel the profitable trade. This is why a forex trader can have two winners and three losers in a month and still make money.

An alternative to the bull call spread is the Bull Put Spread. Bull Put Spread is a bullish option strategy that works like a Bull Call Spread does, profiting when the underlying stock rises. Bull Put Spread is just a naked Put write which minimizes margin requirement and limits potential loss by purchasing a lower strike price put option. Entering a Bull Put Spread involves the purchase of an Out of The Money put option while simultaneously writing an In the Money or At The Money put option on the same underlying asset with the same expiration.

Covered call strategies can be useful for generating profits in flat markets. Covered calls can also be used to achieve income on the stock above and beyond any dividends. The goal in that case is for the options to expire worthless. I have a post on why I prefer the bull call spread instead of covered call which mabe you find it usefull http://www.traderslaboratory.com/forums/options-trading-laboratory/15367-why-i-prefer-bull-call-spread.html

No Gekko78 i would not share my trading method, and i believe most of the traders will do the same. That's why i am laughing every time i see an advertisement which promises to make you rich. I also believe that there is no a profitable method that can constantly give you the same returns markets are changing every time so all the trading rules need to be adjusted.

Short term RSI works good for me

From what I can see in the chart the VIX was very volatile from 1986-1990 especially when the market crashed in 1987. Then from 1991 through 1994 the VIX was pretty stable as the market traded nearly sideways. When the market started to rally beginning in 1995 the VIX became more volatile again by 1997 and has continued to be volatile ever since with strong fluctuations both to the downside and upside. I believe that soon the VIX will move much higher, i am not sure how i will trade, should i try with ETF or with options?

Thank you for your reply JasonW For the bull call spread options strategy maximum gain is reached when the price of the underlying asset moves above the higher strike price of the two calls and it is equal to the difference between the strike prices of the two call options minus the initial debit taken to enter the position. Bull call spread maximum profit: Strike price of short call – strike price of long call – net premium paid – commissions

One other advantage of options trading is hedging. Options can be used as a hedge in your stock portfolio. So here is a review of advantages and disadvantages of options trading. Advantages: Leverage. Hedging. Disadvantages: Decaying asset. High risk and return profile. Zero sum money.

What i don't like about options is that are a decaying asset, the time value of the price gradually diminishes as the option approaches expiration, at which time it becomes zero.