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Short Selling: Positives and Negatives

Short selling are transactions in which investors sell borrowed securities in anticipation of a price decline and are then required to return an equal number of shares at some point in the future. Let’s assume you are bearish on a stock that is currently trading at $50 per share. You then sell 1000 shares short or […]

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The New Stock Market- Algorithmic and High Speed Trading

Quick! Name the four largest US Stock Exchanges. The New York Stock Exchange, the Nasdaq Exchange, uhhhhhhhhh. There are more? Okay can’t answer that one, how about this question Mr. know-it-all stock investor: The heart and soul of Wall Street is located where? New York City, of course. Well you’re right about that but perhaps […]

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The Risk-Reward Profile for Covered Call Writing

(I am writing this article because I have had feedback in the past from investors who reject covered call writing based solely on the theoretical risk-rewrad profile.) A risk reward profile is a chart of the theoretical maximum profit or loss a particular investment can have in your portfolios. For example, let’s look at the risk-reward profile […]

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The Out-Of-The-Money Strike- Pros and Cons

Whenever a study is performed on covered call writing a stock is selected and the nearest out-of-the-money (O-T-M) strike is sold. This is repeated over and over and then the results are compared to the overall market performance. The usual conclusion is that covered call writing slightly outperforms the overall market but with much less […]

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Tax Information by Guest Author Owen Sargent, CPA

Tax Time Is Upon Us First, I strongly urge all BCI members to download IRS Publication 550, Investment Income and Expenses, from the Internal Revenue Service website, at:  http://www.irs.gov/pub/irs-pdf/p550.pdf. You will recognize much of the following information when you read it. The page references below refer to the page in the 2009 Publication 550. Throughout […]

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Penny Pilot Program

Do you get frustrated when something doesn’t make sense? Me too. Here’s an example: You’re viewing an options chain of a great-performing stock in a great-performing industry and you note that the premiums are trading in $.05 increments. This is important information to have when playing the bid-ask spread. Then you check the same options […]

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Protective Puts- The Collar Strategy

As safe a strategy that covered call writing is, there is some risk…the risk is in the stock, not in selling the option. That is why some investors who utilize this strategy buy protective puts to alleviate some of the risk. Definition of a protective put: A put option purchased for a stock that is already owned […]

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Options That Expire Weekly and Conventional Expiration Cycles

There’s a new man in town! A relatively new options product is now available called the Weekly Options Series or Weeklys. These weekly expiration options are listed on a Thursday and expire the following Friday. The exception is that weeklys are not traded the week of expiration Friday and therefore do not list new weeklys on […]

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Types of Customer Orders plus Update on BCSI

When instructing our online discount broker as to the actions we want taken, we submit a customer order. These orders can take several different forms depending on our investment strategies and objectives. We can buy or sell; request a specific price or simply the best available price; we can stipulate an action given a particular […]

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The CBOEs Volatility Index (VIX)

In my books and seminars I discuss determining market tone before making any investment decisions. One of the main factors I utilize in this evaluation is the VIX. The VIX is the ticker symbol for the Chicago Board Options Exchange (CBOE) Volatility Index, which is a measure of the implied or expected volatility of S&P 500 options […]

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