Derivative Instruments
Auction Rate Securities
There are many ways that investors can invest their money over a long term period. Long term investments are known to be more secure than short term investments are. One of the tools the investors use for long term investments is called auction-rate securities. Auction-rate securities, also called ARSs, have a long term maturity date. [...]
Call Options
One of the most popular terms used in the investment world is call options. What are call options? Call options deal with a contract that is tied between two parties, usually a buyer and a seller. Call options allow investors to purchase shares for a certain time in the future. Call options can also be [...]
Options Trading System
When searching for the right investment, stock options are very popular right now and for good reason. If you are interested in these, it will be important to find an options trading system that can work for you. One of the primary reasons that more and more people are starting to choose options is because [...]
Hybrid Securities
Hybrid securities are investment tools that blend the typical features of both debt and equity securities. Also referred to as simply hybrids, these investment options create situations that allow hybrid securities to pay an identifiable return until a certain date in the maturity of the investment. After the specified date the security is very likely [...]
Equity Swap
Equity swaps may be a bit difficult to understand at first because to the layman it seems more like a 'concept' than an actual transaction. In effect, an equity swap is where two parties agree to swap assets at some future date which allows them to diversify their holdings (portfolio) in the present. This diversification [...]
Options Trading Risks
In a nutshell, risk is taken to be the probability loss in capital. In simple terms, it can be taken as probability of losing your money. In stocks, the phrase ‘options trading risks’ is something very common to hear every now and then. Option trading is considered to be risky in the sense that high [...]
Credit Linked Note
In trying to understand credit linked notes, the first thing to understand that the concept itself is a bit complicated. Actually, a note is similar to a bond as it receives regular payments that are generally paid twice each year. On the other hand, bonds aren’t generally customized whereas a note can be. One of [...]
Binary Options
What are binary options? What this boils down to is a contract that is going to pay the person doing the trading an amount, already determined, when certain conditions or price movements have been fulfilled. This depends on the official text at the end of the contract which will specify either ‘out of money’ or [...]
Is Trading Currency Options Risky?
Are currency options risky? Well, that’s a yes and a no. While options of all types are considered to be higher risk than other financial instruments, it does not mean they are inherently risky. It all boils down to how you define risk. Commonly, risk is defined by the volatility of a particular instrument. Bonds, [...]
Options Trading Courses
Unlike buying stocks as an investment, when trading options you actually only take control of a stock at a fraction of its worth per-share, without ever actually owning it. Because options trading is leveraged and highly volatile you can actually learn to make significant amounts of money quite quickly as opposed to actually trading stocks [...]
Variance Swap
Variance swaps are used as a form of speculation of market movement. They are focused on underlying contributors such as exchange rate movements, interest rate charges or stock index performance. As an over the counter trade, variance swaps are between two parties rather than in the general exchange trading system. The variance swap that is [...]
Inflation Swaps
By definition inflation swaps make use of either inflation-indexed derivatives or inflation derivatives in order to transfer the risk of inflation from one party to another. They have actually become quite popular within the past decade within pension funds because of the need to match inflation assets with future liabilities. The derivatives in the swaps [...]
Non-Marketable Securities
When making an investment in securities it is vitally important to understand the difference between marketable securities and non-marketable securities. If you are making an investment in order to resell that product to realize a profit you would not want to invest in non-marketable securities. On the other hand, if you are investing in your [...]
Rainbow Options
For those who want to hedge against a bit of extra uncertainty when investing, a rainbow option provides the perfect vehicle since its value is based on more than one underlying asset. They are a bit tricky to understand, but many investors use them to hedge risks that could arise from various events. The Sports [...]
Collar Options
A collar option is a particular investment strategy the hedges exposure to fluctuating interest rates. Derivatives are usually used to hedge the exposure, which therefore 'collars' the risk for the investor when it comes to the fluctuations. Collar options help limit the amount of interest paid, and increases the chance of more profits if the [...]
US Treasury Securities
Just like debt issued by companies or cities, the federal debt of the United States is bought and sold on freely trading markets known as the US Treasury markets. When investors go to buy debt, they don’t go buy it from Uncle Sam, and in fact, it may be many days or weeks before a [...]
Learn Option Trading
Option trading is extremely risky and isn’t for the faint of heart or the inexperienced. New investors should gain knowledge through normal trading before entering into the world of option trading. It is complex and many events and world issues can affect stock prices in the future. Option trading however, gives the investor more control [...]
Options Trading Tools
There are a variety of options trading tools that will allow you to enjoy successful options trading. The four tools that are crucial for creating strategies include chains, graphs, volatility studies and Greeks. Without the use of various options trading tools you are merely gambling your money away on your investments. Understanding these tools and [...]
ETF Wraps
One of the newer investment products that many people are quickly becoming familiar with is ETF wraps. While electronically traded funds have been popular for quite a while now, packaging several ETFs into one managed account provides more than the sum total of each individual indexed fund would on its own. There are in fact [...]
Exchange-Traded Options
Most investors would just call exchange-traded options by their less unique name, “options” never knowing that there are, in fact, two different types of options that trade on the financial markets. Exchange-traded options are the most common type bought and sold because their inherent benefits entice traders to use them. The two types of options, [...]
Compound Options
Options are a form of investments that investors undergo when investing in the markets. Compound options are essentially an option on an option where the value is associated with another option. Since a compound option is dealing with two options, they will have two strike prices as well as two dates in which they expire. [...]
Mortgage Backed Securities
Although investing in mortgage backed securities isn’t meant to be a philanthropic venture, one of the nice things about investing in them is that you will actually be helping someone to finance their home! Actually, mortgage backed securities are debt obligations (mortgages) that have been purchased from a mortgage company, bank or other financial institution [...]
Fixed Income Options
For the better part of two decades, the leading investment advice appeared to be 'go for stocks.' For millions of investors, ranging from low-volume casual investors to professionals aiming to squeeze as much as possible out of the market before its downturn, that advice didn't quite work. The crisis of the past few years hurt [...]
Correlation Swaps
Financial derivatives have created some interesting opportunities that investors are able to capitalize on. Correlation swaps are a type of derivative that allows a certain amount of speculation about risks by the investor. These speculations can be made about commodities, interest rates and exchange rates. During the early 2000’s, correlation swaps were created to counter [...]
Barrier Options
Derivatives can be quite complex and difficult to understand for any new investor. There are many different types of options that investors can invest in and barrier options are one of them. Before taking a dive into a barrier option, it’s highly advised to get to know just how they work. They may be similar [...]
Credit Default Swaps
When investors look for new alternative ways to invest their money, they look for ways that promote a certain level of insurance. Credit default swaps, or (CDSs), are often looked at as insurance to the investor. With traditional investments, if the borrower defaults on their loan, then the investment loses a certain amount of value, [...]
Callable Securities
A callable security, also commonly referred to as a redeemable security, is a type of security that has a call provision which allows the holder to retire the security early by "calling" or "redeeming" it. With some securities, such redemption may be a required act (also known as mandatory redemption), while other securities leave it [...]
Dividend Swaps
A great number of investors will cringe at the mere mention of dividend swaps. This sometimes risky technique is often overlooked by the typical investor for several reasons. Nevertheless, dividend swaps are a great way to diversify your portfolio while also gaining an additional income stream. Even with the risks involved, today's market is a [...]
GSE Debt Securities
GSE Debt Securities are actually a type of bond that was created by the United States Congress to provide funding for specific types of borrowers such as students, homeowners and farmers. People within those groups might not qualify for other conventional loans so the government sought to address this very real need. Unfortunately, many people [...]
Fixed-Rate Capital Securities
Both domestic corporations and those which are located abroad issue what are referred to as fixed-rate capital securities which are meant to increase long-term capital at a fixed cost which happens to be tax deductible for all of the issuers. Most of the issuers include utility companies for gas and electricity as well as telephone, [...]
