Forex

When searching for Forex information on the internet you are likely to find articles relating to trendlines and trendline analysis. Tom DeMark is a specialist in the field of technical market analysis and his best-selling book The New Science of Technical Analysis is chalk-filled with technical indicators and rationale to explain the market.

Derivatives

Derivatives are a class of securities whose price is derived from one or more underlying assets but may include additional factors such as interest rates, time to expiration and various other economic factors. The derivative itself is a contract between two or more parties to exchange a fixed amount of the underlying security at a given date and price. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes. Most derivatives are characterized as risky investments because of their high leverage. 

This page will primarily focus on the two most common forms of derivatives: options and futures. The primary difference between options and futures is that options allow the right to buy or sell the underlying asset at expiration, whereas futures have an obligation to buy or sell the underlying asset at expiration.

Options
Options are a contract between two people for the right to exchange a fixed amount of shares (typically 100 shares per contract) of a given security at a given strike price on a given date. Stock options are issued as puts (downside exposure) or calls (upside exposure) and can be combined to create spreads, which are used for effective risk management.

Common options spreads:
  • Vertical Spread
  • Covered Call
  • Collars
  • Diagonal Spreads
  • Backspreads
  • Iron Condors
  • Straddles and Strangles
  • Butterflies and Condors
  • Calendar Spreads
Futures
Futures are a financial contract obligating the buyer/seller to purchase/sell an asset--such as a physical commodity or a financial instrument--at a predetermined future date and price. A futures contract will include the type and quantity of the underlying asset in a standardized format that is traded on a futures exchange. Some futures contracts require physical delivery of the asset, while others are settled in cash. The futures markets are characterized by the ability to use very high leverage relative to stock markets.

Futures can be used either to hedge or to speculate on the price movement of the underlying asset. For example, an oil producer can use futures to lock in a given price to sell his oil at and reduce risk (hedge). However, individuals and hedge funds are allowed to speculate on the direction of oil by purchasing or selling oil futures.

This page will gradually expand to include ways to dynamically hedge your derivatives positions and explain various ways of pricing options and futures premiums.

Fundamental Analysis

Fundamental Analysis evaluates a security by examining the intrinsic value of the underlying company, country, or financial sector through measuring economic, financial and other qualitative and quantitative factors. Fundamental analysts also study macroeconomic and microeconomic factors that effect the security's value.

The goal of fundamental analysis is to produce a value that can be compared against the security's current price, to determine if the given security is overbought or oversold.

This method of security analysis is considered to be the opposite of technical analysis. For an exhaustive reference of fundamental analysis, consider purchasing a copy of Benjamin Graham's Security Analysis.

Eventually, this page will contain live updates of stock analysis and resources.

Technical Analysis

Technical Analysis is a method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts does not attempt to measure a security's intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity.

The majority of information provided on this site is based on technical analysis and these are several very common studies used to generate that information:
  • MACD
  • Stochastics
  • RSI
  • Bollinger Bands
  • Guppy Multiple Moving Averages

Daily Levels



S&P 500



Note:
The Russell 2000 levels are calculated from the IWM ETF.

Disclaimer:
Quotes may be delayed up to 20 minutes. Information is provided 'as is' and solely for informational purposes, not for trading purposes or advice.

September 2, 2009

Today was a lackluster day. The market is looking forward to the employment numbers coming out on this Friday, so I would expect the market to drift lower until then.

On a side note, Agriculture stocks have been getting some attention recently. Big names like Potash(POT) and TerraNitrogen (TNH) are at decent valuations and might be worth taking a look at.

As the market consolidates, I wouldn't look to do much until Friday comes along.

Disclosure:
At the time of this write, I had no position in any of the stocks mentioned.