Multi index option

What does the option multi index?

A type of investment where the performance difference between two indexes or other financial assets depends on the payment. The payout option is by changing the spread between the indexes or assets. These options are generally cash settled.

Investopedia explains multi index option Payment a multi-option of index depends on on market direction, rather a change in the spread. Consider for example a multi index option the probability the S & P 500 Canada's TSX Composite exceeds one year by five percentage points. After one year when the S & P-500 declined 2%, but the TSX decreased 9%, can still positive cash than S and - P-500 exceeded the TSX by seven percentage points. If the S & P-500 a year less than five percentage points surpasses, the option expires worthless.

An introduction to pairs trading with ETFs

Tutorial: Introduction to exchange-traded funds

As a hedging strategy, the goal is to have gains from one side of the transaction offset the losses of the other. Although most people use individual stocks in pairs trading, the technique can also work well with exchange-traded funds (ETFs) that cover a particular sector or a broad market index. Here we look at ETF pairs trades and provide historical examples where they would have created a profit for a savvy pairs trader. (To learn more, see ETFs: How did we live without them? and how to use ETFs in your portfolio.)

Intra-sector ETF pairs trade
ETFs have become increasingly popular over the years, and several ETFs are often available in a given sector. Although ETFs in the same sector may have similar names, they are often very different from one another, both in terms of the stocks they invest in and their investment returns.

One of the most popular investment themes is the emerging markets, particularly interest in China. Two major ETFs that invest specifically in Chinese stocks include the iShares FTSE/Xinhua China 25 ETF (PSE: FXI) and the PowerShares Golden Dragon Halter China ETF (AMEX: PGJ). As an example of a possible pairs trade here at investor who believes in China as a solid investment, but at the believes the Chinese same time the market may be faltering, could go long on FXI and short PGJ based on the holdings and strategies of the respective ETFs. (Keep reading about emerging markets in the new world of emerging market currencies and Broadening the borders of your portfolio.)

Intra-sector pairs trades such as this one are the least popular type of trade. While ETFs in the same sector might experience dissimilar performance over a given period, the opportunities for success are limited because the difference is likely to be narrower than it would be for pairs trades that use ETFs from different sectors.

Inter sector ETF pairs trade
Instead of focusing on ETFs that invest in the same sector, this strategy matches different ones to create a true portfolio hedge. To do this, an investor would be long the sector or sectors that have the best outlook and short the sectors that could be vulnerable to a downturn. (Want to know more about pairs trades?) (Check profit in pairs finding out.)

The strategy makes sense since individual sectors can perform quite differently from each other and from the market as a whole. For example, during the first 4.5 months of 2008 the S & P 500 index was down 3% for the year. During that same time period, the best-performing ETFs all focused on the energy sector, with PowerShares DB energy ETF (AMEX: DBE) up 36%, and the leading performers, the United States natural gas ETF (AMEX: UNG), up 51%.

At inter-sector ETF pairs trade would have proved useful in October 2007, when the stock market reached a new high, and the fears of a possible credit crunch in the U.S. began to hit the headlines. The finance sector appeared shaky, because credit issues have a direct impact on banks and other financial institutions. The Fed was on the verge of lowering interest rates several times and the stock market appeared poised for a correction. An investor who was concerned about the market, but who did not want to unload his stocks, could have bought the iShares Utilities ETF (PSE: IDU) because the utilities sector has historically outperformed in rough times. To hedge the long play on IDUS, the short side could have been the vanguard Financials ETF (AMEX: VFH), which represented a sector that appeared vulnerable.

From October through the middle of May 2008, IDUS lost 1% and VFH fell 24%. The hedge was not perfect because IDUS did not move higher, but shorting the finance sector ETF made the trade very profitable. The net gain of 23% what much better loss than the 9% of the S & P 500 in the same time frame.

Index ETFs pairs trade
From year to year, money flows in and out of the varying asset classes. Initially, the trend of the early 2000s the small-cap stocks involved beating the large caps. From 2000 through 2007, the Russell 2000, a small-cap index gained 52%, while the Dow Jones industrial average gained only 14%. Typically, one asset class does not stay on top for more than a few years before falling to the bottom as the investing cycle progresses. Investors who want to play the future flow of money between asset classes can exploit this pattern with index ETF pairs trading.

In 2007, for example, money was coming out of the small-cap stocks and moving into the large cap asset class for the first time in years. Investors seeking to remain in the market but wishing to hedge a long position could have gone long the diamonds ETF (AMEX: DIA), which tracks the large-cap Dow Jones industrial average, and short the iShares Russell 2000 ETF (PSE: IWM), which tracks small cap stocks. In 2007, DIA gained 6.5% and IWM lost 2.7%, resulting in a net gain of 9.2% on the position. (Keep reading on this subject in understanding cycles - the key to market timing and sector rotation: the essentials.)

Timing an ETF pairs trade
Although the timing of any pairs trade is critical, the hedging aspect of the strategy lowers the risk of mis timing the trade. If an investor does not feel completely certain about a new long ETF position, it may be prudent to hedge it with a sector or index ETF that might lower the risk of the trade without removing all of the reward.

For those with a good understanding of market volatility, pairs trading can be a profitable way to take advantage of it.

by Matthew McCall (Contact author |) (Biography)

Matthew McCall is the president of Penn financial group, LLC, a registered investment advisor. He also publishes two newsletters, the ETF bulletin and the PFG letter as well as other educational material. As a registered investment advisor, he manage clients' investments based on their specific goals and objectives.

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Introduction to the Gemology

TUTORIAL: 20 Investments You Should Know

Gems as an Alternative Investment
Many wealthy investors overlook the disadvantages of gemstone investing because of the potential for exponential gains. Gemstone investing is one of the riskiest kinds of investments; there are many ways to lose invested capital including fraud, political risk, subjective valuations, low liquidity and the potential for stones to be damaged when they are cut. Most of the people who invest in gemstones do so knowing that they're taking a very large risk. However, significant returns can be realized when an investor buys a large, uncut, colored stone, has it cut and then sells the gem for a lot more than he or she paid for the stone and the cost of cutting it.

Traditionally, gemstone investing has happened in the exclusive circles of certain families. A few families in Belgium, Holland, New York, Israel, Africa, Brazil and India have been involved in most of the trade of large stones. Lately, these closed circles have (by necessity) started to open up to outside investors who are willing to part with hundreds of thousands - if not millions - of dollars in exchange for a piece of the action. The main reason why new financiers are being let into gemstone circles is that more stones than ever before are being found and, as a result, buyers and traders need more money to continually finance the purchase of stones.

For those with the means and the connections, gem investments offer a great opportunity for diversification. The price of a gem has more to do with the characteristics of the stone itself, not the market in which that stone trades. Gem investing is also a great way to realize exceptional returns in a flat stock market. Even in the most bearish of markets, uncut gems can still be cut, increasing their worth by as much as hundreds of times their original price. Furthermore, buying one of the rarest materials on earth in a lavish London auction house such as Sotheby's or Christie's, having it cut in Antwerp and then selling it in Dubai is a thrill ride that would excite any tycoon. (For further reading, see Introduction To Diversification.)

The Basics of Gem Investment
If you have a mountain of risk capital and you want to invest prudently in gemstones, there are a few basics that you need to know.

First of all, there are thousands of kinds of valuable stones, but gemstones are usually limited to emeralds, rubies, sapphires and, of course, diamonds. Gemstones are valued according to a number of characteristics and increase in value exponentially if they have a perfect combination of the most desirable characteristics.

In general, the larger a gemstone, the higher its worth - even small increases in size affect the value of a stone.

A stone's grade - which is directly related to the stone's clarity - also works to determine its price tag. Two things contribute to grade: the purity of a stone and its likelihood of cleaving (breaking). Stones with no flaws are almost completely pure and are less likely to cleave during the cutting process.

The color of precious stones has always been important to valuation, but in the last decade, colored stones have experienced tremendous price appreciation. Depth of color and intensity are two of the terms that are frequently used by gemologists to describe gems. Colored diamonds, in particular, have become extremely sought after in North American markets. In fact, large, intensely colored, flawless diamonds are among the most valuable luxury items on earth.

Like precious metals, gemstones are internationally priced in U.S. dollars.(To learn more, see Determining Risk And The Risk Pyramid.)

Gems and Investment Risk
Despite their undisputedly high value, gemstone investments include very high levels of risk, which arise from a number of different factors. Professional gemologists are experts at mitigating many of the risks associated with gemstone investment, but they command very high fees. As we mentioned earlier, some unique risks associated with gemstones include subjective valuations, low liquidity, cleaving and fraud.

Subjective valuation: Experts don't always agree on a gemstone's worth. Anyone who buys a stone should consult with at least a couple of professional gemstone valuators.
Low liquidity: Because gems are rare, infrequently traded and lack a global marketplace, it is often hard to attach a firm value to a stone. Anyone considering such an investment should be willing to hold onto it for a number of years, in case a buyer can't be found.
Cleaving: This is the risk that a stone will break apart when cut and polished, shattering into a number of pieces that are worth exponentially less than the larger, uncut stone. Polished, symmetrical gems are much more valuable than those that are uncut and unpolished, but most gems have a tendency to cleave during the cutting and polishing process, making it a very risky venture.
Fraud: This is the most common risk that investors will face when purchasing gems. Unless you are or are working with a professional appraiser, judging whether or not a stone is real can be very difficult.

Despite the drawbacks, the returns from gemstone investment can be high. Beyond buying a raw stone and selling it as a polished gem, you can also buy a cut and polished stone in a down market, or buy from a seller that is having a hard time selling a valuable stone. These gems can then be either sold when the market warms up, or sold in a different country via auction or dealer. Investors buying gems that they believe to be undervalued generally have a longer-term perspective and may be willing to wait years to turn their investments into cash.
Conclusion
No matter your time horizon or your willingness to bear risk, unless you're dealing under the guidance of a reputable professional, gemstone investing is as close to gambling as you can come without setting foot in a casino. If you are considering investing some of your risk capital in gemstones, be prepared to spend some money on professional assistance, and remember, as always, that high potential returns always come with significant risk.

by Investopedia.com (Contact Author | Biography)

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Learn about business models

When analyzing companies investors can easily in caught details such as performance figures, stock ratios and valuation tools while forgetting a more fundamental question: how the company actually make money? A solid business model remains the foundation of every successful investment. To distinguish the big companies of the losers, investors should learn how to describe and to assess business models of companies. (Learn more about assessing your own business model, your business is viable model?) (An 8 point test)

Tutorial: Reading financial tables

What is a business model?
The business model is simple, as the company makes money. It explains the sources of the company's sales how much to pay these sources and how often. It is not enough to say that a company PC or burgers sold. You must go deeper and learn the structure through which the dollars are earned. Closes the doughnut business franchise or company-owned outlets? The outlet properties such as McDonald's, Burger company has or lease space? Generates the PC maker which does most of its money through direct sales, such as Dell, sell it or doing via retailers like Hewlett Packard does?

The business model also refers to the delivery of the product as brings in revenue. Consider shaving industry. Gillette is pleased to sell his Mach III razor handle at cost, or even cut because the company going you can sell profitable razor refills, over and over. Their business model is based on giving away the handle and the profits from a steady stream of margin razor blade sales.

Electric shavers have a different model. You cost much more than the Gillette handle. Remington, a manufacturer of electric shavers, makes most of their money in advance, rather than from a stream blade refill sales.

To change as industries not always companies can afford to stay the same business model. Remember Kodak and the rapidly changing camera business. Traditional film cameras generates a lot of money for the company, since user roll to buy, after roll of film to take pictures and then spend still images developed. But digital cameras get rid of movie sales and processing fees. So, in response, Kodak had to create a new business model has. Has digital printing Center, founded, where users your digital camera images on real Kodak paper to have printed. The business model that was once based sales and processing on film is a model based primarily on photography print become.

A company's business model is not always obvious. You look at General Motors. One might think GM his makes money selling cars and trucks. Indeed score were more than 60% of GM in 2003 from finance payments, not auto sales.

Business models can be also downright counterintuitive. Conventional wisdom says that a trader that crams stores close to each other have store sales cannibalize. But retailers of Starbucks coffee has a business model that only that bench: coffee shops within blocks of each other have. It turns out to market saturation drives consumption, created virtual carpets billboards for Starbucks and cuts back on customer lines at popular retail outlets. It keeps competitors from the road. (Is more about these companies and how they work, check out buying A franchise wise?)

Assessment of the business model
So how do you know if a business model is not good? This is a difficult question. Joan Magretta, former editor of Harvard Business Review, emphasising two critical tests for business models estimate. If business models don't work, it is, because you inappropriate and/or figures add straight up to profits.

Because there are companies that have suffered heavy losses and even bankruptcy, the airline industry is a good place to find business models, stopped making sense. Years great American Airlines, Delta and continental built their business around a "hub and spoke" system, where all flights of over a handful of big city airports routed. By ensuring that seats were filled, the business model produced great profits for airlines.

But the business model that once a source of strength for the major airlines was a burden. It became apparent that competitive carriers such as Southwest and JetBlue could aircraft between smaller centres to lower cost – partly due to the lower labor costs, but also shuttle because you of some operational inefficiencies avoided, that occur, in the hub and spoke structure. As competitive carriers moved away more customers, the old institution were made with less passengers - a condition worse to support their large, extended networks, if traffic began in 2001 should be dropped. Airlines had to offer more and deeper discounts to fill seats. No longer able to producing profits, the hub and spoke model made more sense.

Examples of business models that the numbers test failed, we look to U.S. automakers. Offered in 2003 customers such deep discounts and interest-free financing compete against foreign manufacturers, Ford, Chrysler and GM that they effectively sold vehicles for less than it cost to make. This dynamic expressed all gains from Ford's U.S. operations and threatened Chrysler and GM do the same. To stay viable, the big automakers had to renew their business models.

Conclusion
If a company know exactly your money makes you as assess a potential investment as you. Then think about how is more attractive and more profitable, that business model. Admittedly, the business model not learn about the prospects of a company, but investors with a business model state of mind can better feel of the financial data and business information. It simplifies the work the company to identify the best investments. (Check out another way to evaluate a business, do not forget to read the prospectus!)

Ben McClure (Contact author |) (Biography)

Ben McClure is a long-time contribution to the Investopedia.com.

Ben is the Director of the Bay of Thermi limited, an independent research and consulting company which specialized in early stage ventures for new investments and markets prepare. He works with a variety of customers in North America, Europe and Latin America. Ben was a highly rated European equities analyst at London's old mutual securities, and introduced new venture development, a major technology commercialisation consulting group in Canada. He began his career as a writer/analyst at the Economist Group. Mr. McClure graduated from the University of Alberta's School of business with an MBA from.

Ben's investing hard and fast philosophy is that the Flock is always wrong, but heck, if it is worth it nothing is wrong with his sheep.

He lives in Thessaloniki, Greece. You can Bay of Thermi limited at www.bayofthermi.com more information.

Members

What members?

A slang term used to describe women, your own business to run while acting as a full time parent. Mompreneurs are more likely to run a business from home as a commercial building. Because of family commitments Mompreneurs, the requirements of running a business with the needs of your children balance, and most of their work while your children need not so much attention, can do.

Members is a combination of the words "Mom" and "Entrepreneur".

Investopedia explains members

Mompreneurs are a relatively new trend in entrepreneurship and came to prominence in the age Internet, the Internet entrepreneur sell products to increase business brick and mortar home rather than foot traffic. You'll be on the same line of work, as you have children, had remotely logging in Office networks and tele-working.

The advantages of the Central Bank interventions

TUTORIAL: The Forex Market

But that's not the only method that is being used, and the Bank of Japan is certainly not the only one intervening in the FX market. So let's take a look at some other capital control strategies that are being used by global central banks and how to take advantage of such an opportunity.

Korea's Intervention
South Korea, with an export economy similar to Japan's, is a country that has also been known to intervene in the foreign exchange markets directly in order to control the rise and fall of its currency, the South Korean won (KRW). But things have changed, and South Korea's central bank is looking for additional means of control. An alternative to applying direct intervention in the markets, government officials and the Bank of Korea are beginning to audit banks and larger institutions handling currency market transactions.

Aimed at curbing speculation, the regulations tighten requirements on the country's banks trading in large currency derivatives, potentially punishing those that are unprofessionally or improperly transacting in the market.

Aiding in the reduction of currency speculation, the strategy increases government scrutiny over market positioning and would support higher requirements on currency positions for foreign currency speculators. All in all, the measure looks to gradually reduce interest in the South Korean won as it becomes more costly to trade currency in the country.

Another way to curb interest and speculation in a country's currency is through higher foreign investment taxes.

Brazil's Tax Change
The Brazilian government implemented measures in order to curb its own currency's speculation – aside from directly selling Brazilian reals and buying U.S. dollars. One such measure is to increase the foreign tax rate on fixed income (or bond) investments. The tax rate would affect foreign investors attempting to take advantage of a stronger BRL/USD exchange rate through large purchases of Brazilian bond investments. Originally at 2%, the tax rate increased to 6% as of October 2010.

Increasing the country's foreign tax rate is going to make transacting in Brazil more costly for speculators in banks and larger financial institutions abroad – supporting a disinterest in the Brazilian currency and decreasing the amount of "hot money" flowing into the Brazilian economy. (To learn more, see The New World Of Emerging Market Currencies.)

Using Central Bank Interventions to Your Advantage
Global central banks sometimes refer to strategies and tools that are already at their disposal. We all know that market speculation accelerates when central banks raise interest rates. During these times, investors look to capture any yield difference between their own currencies and higher yielding currencies. But, in times of massive market speculation, central banks may be forced to actually cut interest rates – hoping to deter any speculation on higher interest rates.

Central banks lowering interest rates are hoping to narrow the yield differential with other economies – making it less attractive for currency speculators attempting to take advantage of a wider yield difference. But, how can one take advantage of these opportunities?

It's simple. Although central banks apply capital controls on their domestic currencies, these policies tend to do little damage to the overall trend. In the short term, the announcement will temporarily shock markets. But, in the long run, the market ultimately reverts back to its original path. (Learn more in Interest Rates Matter For Forex Traders.)

An Example of How to Profit
Announcements of intervention offer great opportunities to initiate positions in the same direction as the recent trend. Let's take a look at the direct intervention efforts of the Bank of Japan on September 15, 2010.

In Figure 1, the USD/JPY exchange rate was moving lower since May 2010 on massive currency speculation. It was during this time that traders bought Japanese yen and sold U.S. dollars on the news that China was investing in Japanese bonds. The momentum helped the Japanese yen appreciate against the U.S. dollar from an exchange rate of about 95 per U.S. dollar to 84 in a matter of three months.

As a result of the yen's quick appreciation, the Bank of Japan decided to intervene for the first time in six years. At 84, the USD/JPY exchange rate was becoming too much for exporters to handle. The stronger yen was making Japanese products uncompetitive overseas. The announcement caused the USD/JPY currency pair to jump almost 300 pips overnight. In Figure 2, we can see the effects of intervention on our daily chart.

Now, this is where it gets interesting.

The intervention efforts by the Bank of Japan drove the currency to test projected resistance (red line) dating back to the currency's short-term top in May. Zooming in (Figure 3), we can see that the next two days produced two dojis just below support at 86.00 (red line). Dojis signify that momentum in the market following the intervention is exhausted – a sign of resistance failure.

Attempting to enter into the current bearish trend, we place a short entry at 85.50. This is just enough to confirm a breakdown in the short-term price action while remaining just below the 86.00 support. A corresponding stop is placed about 100-125 pips above our entry price - just enough to keep us in the position.

As expected, the overall bearish USD/JPY market trend continued with the pair dropping to support 80.25 before retracing a bit. This makes the USD/JPY short trade profitable by a maximum of 525 pips – maintaining a risk to reward ratio of almost five to one.

Bottom Line
With increased speculation in the market, central banks will continue to apply capital controls in order to control their currency's exchange rates. These present great opportunities for retail investors and traders to seize entries into longer-term trends – as intervention scenarios rarely work for the policy makers. (For a step-by-step guide to trading forex, check out our Forex Walkthrough.)

by Richard Lee (Contact Author | Biography)

Richard Lee is currently a contributing editor of the Daily Reckoning. Employing both fundamental and technical models, Lee has previously been featured on DailyFX.com, Bloomberg, FX Street.com, Yahoo Finance and Trading Markets.com. In analyzing the markets, he draws from an extensive experience trading fixed income and spot currency markets in addition to previous stints in options, futures and equities.

Death star IPO

What is the death star IPO?
A company's expected initial public offering (IPO) is a blockbuster with investors. The death star IPO is a reference to the DS-1 Orbital battle station, more popularly known as "death star" from the movie "Star Wars". This planetary weapon had the opportunity to destroy a massive explosion which whole planet with a single beam. On the stock exchange are stocks that have the option of to explode the gate usually high tech stocks expected although stocks from other sectors fit can also the Bill. Investopedia explains death star IPO

And a death star IPO, whole should a multibillion dollar offer IPO also in high demand with investors. Google's IPO are some examples of death star IPOs in 2004 and Yahoo! in 1996. Both IPOs were high expected events and both stocks stock market exploded when the shares became publicly available.