Trading Credit Spreads For Income

The median credit spread on May 19 was 0.859% and the average was 1.254%. The next histogram graphs the ratio of credit spread to default probability for
The median credit spread on May 19 was 0.859% and the average was 1.254%. The next histogram graphs the ratio of credit spread to default probability for

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trading, Credit Spreads derive their income from a low risk strategy
trading, Credit Spreads derive their income from a low risk strategy

Wednesday 12/10 8:30 AM EST – 10:00 AM: Premarket research + market open 4:30 PM EST – 6:00 PM: STTG Market Recap start to finish, from research to publishing live

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Posted by Blain Reinkensmeyer | Last modified on Dec 9th, 2014 | Published Dec 8th, 2014 "@context": " "@type": "Article", "headline": "Ticker.TV – Live Streaming for Investors and Traders", "MainEntityOfPage": "@type":"WebPage", "@id": " , "dateModified":"2014-12-09", "datePublished":"2014-12-08", "author": "@type": "Person", "name": "Blain Reinkensmeyer" , "publisher": "@type": "Organization", "name": "StockTrader", "logo": "@type":"ImageObject", "url": " , "image": "@type": "ImageObject", "url": "", "width": "@type": "Intangible", "name": "" , "height": "@type": "Intangible", "name": ""

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Vertical Spread Strategy Explained - Options Trading Strategies
Vertical Spread Strategy Explained - Options Trading Strategies

Recommended Read: 10 Questions You Must Answer To Stay On Top Of Your Portfolio

Before your transfer your assets over, go over the fees with your existing broker. You should look for Account transfer fees or ACAT fees. Here’s what you need to know.

The ACAT is normally initiated from the new broker not the existing broker.

For your convenience, here’s a list of ACAT fees charged by brokers.

MoneyCone Tip: In order to avoid this fee, don’t do a full ACAT, instead do a partial ACAT, leave one share of the asset, liquidate it and take the cash out. Most brokers don’t charge for partial ACAT. So taking the AAPL example:

MoneyCone Tip: Move any cash with your current broker to your bank as an ACH and and then to your new broker instead of doing an ACAT to your new broker.

So you’ve been thinking of switching your online broker. But how does this work? What happens to the stocks you hold? Do you have to sell and re-purchase them? Are there fees involved? Taxes?

When you switch brokers you’d normally do a full ‘in kind’ ACAT. And chances are that you’d be hit with a $50 fee on your way out by your existing broker.

Learn How To Trade WEEKLY OPTIONS For INCOME. Watch This FREE VIDEO
Learn How To Trade WEEKLY OPTIONS For INCOME. Watch This FREE VIDEO

The $9.99 Etrade cost per trade relates to stocks and options. However, if you are trading simple options, tack on an extra $0.75 per trade. This is due to the options regulatory fee and will not be reduced, regardless of the amount you trade. For instance, if you sell less than 150, the total for the Etrade cost per trade for simple options will come out to $10.74. If you sell more than 150, the total will be $8.74.

The stock exchange is an entirely different world – one full of unpredictability. Learning your way around the system is an invaluable asset for how the rest of your future will go. Unfortunately, much of the information needed in order to learn how to succeed for new or casual investors is full of unintelligible jargon. Do not let the foreign language and terms keep you from getting your feet wet. It can often help to focus on one piece of information at a time, so let’s start small and discuss the Etrade cost per trade.

As with any platform of this importance and magnitude, there are also other costs other than the Etrade cost per trade to consider when making your decisions and purchases. The additional costs can be just as detrimental to your bank account, so comparing these numbers to the competition’s mirroring fees will allow you to get the best deal possible.

The majority of us are not sitting in an office on Wall Street, so chances are that we are unsure of where to go in order to sell stocks. Thankfully, our modern day and age has produced methods for trading stocks online. This advancement lets anyone, anywhere in the world, with Internet connections set up an account (with the necessary funds) and start trading.

Etrade is a platform which allows millions of users to keep their stocks and assets virtual. It is recommended for use by professionals who trade for a living or those who want to trade extensively. This is the reason why knowing the Etrade cost per trade is vital to calculating it into your budget or comparing it to other sites.

Here comes the final drum roll. Etrade cost per trade comes in at $9.99 – however, if you plan on trading frequently, the average price can drop down to $7.99. In order to get the cheaper price, you are going to have to trade 150 or more times during the quarter. This could end up saving you $1,200 a year and is one of the reasons why Etrade is recommended for power users who make it their living to trade.

If you would like to be assisted by a broker, the Etrade cost per trade comes out to $25, plus the applicable commission given to who works with you. This is a great option if you would like to discuss your ideas or proposals with someone who does this for a living. It could obviously get expensive if you are a power user and opt for broker-assisted trades for every exchange you make. If that’s the case, it is recommended that you hire your own advisor who can work for you part or full time and probably end up saving you money in the long run.

Having an intimate understanding of the costs associated with your trades will drastically help in ensuring that you are getting the most out of your money. What is seen here should only be considered a brief synopsis; for a more thorough look, check out the breakdown listed on the Elance site itself for an up-to-date list.

How To Trade High Probability Credit Spreads
How To Trade High Probability Credit Spreads

The Options Industry Council (OIC), an industry resource funded by OCC and the U.S. options exchanges, announced the results of a study, How Financial Advisors Use and Think About Exchange-Listed Options.

Find out how OIC is implementing more eco-friendly practices.

The Options Industry Council (OIC) today announced that Gina McFadden, a long-time leader in the U.S. listed equity options industry, will be the first woman to receive the 2017 Joseph W. Sullivan Options Industry Achievement Award.

Learn what a LEAP option is and how it compares to regular-term equity options.

Learn about capital markets and how they can be used for investments.

Getting started with options is easier than you think, click to learn more.

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The Best Investment Advice You Never Hear about: The Trailing Stop Strategy

PEARL Credit Spreads Swing Trading System - SlingShot Options
PEARL Credit Spreads Swing Trading System - SlingShot Options
From looking at the chart above some traders prefer the 70% probability iron condors that comprise both a bear call spread and bull put spread that shoot
From looking at the chart above some traders prefer the 70% probability iron condors that comprise both a bear call spread and bull put spread that shoot

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The median credit spread of the 310 trades was 0.848% and the median credit spread to default probability ratio was 9.099. The average credit spread to
The median credit spread of the 310 trades was 0.848% and the median credit spread to default probability ratio was 9.099. The average credit spread to

I have been researching this topic for the last eight years and I have found four specific products that I trade Short Strangle on. I never touch the SPY, any other ETF's or stocks because they just don't give you the desirable credit / margin ratios and the highest probability.

I know that the general public freaks out when they hear about naked options selling but this is only due to the fact that the beginners have no idea how to adjust a losing position and also which underlying product to trade Short Strangle on.

On the other hand if you have no idea where the market moves, you can sell a call and a put simultaneously which is called a Short Strangle. This creates a trading range. If the market stays in this range at expiration you get to keep the premium received for shorting those options. This is nice, however, you are facing unlimited loss potential if something terrible happens in the market place. You can increase your chances by selling very wide ranges on very specific instruments. If you, for example, start with a 90% probability range to short then the chances of incurring the unlimited loss is slim to none. Unlimited loss potential only exists in theory. If you know how to adjust your positions there is no way to incur unlimited loss. Although admittedly the potential is there.

You are buying options for $500 and you lose 8 out of 10 times which is a $4,000 loss but in a limited fashion, or you are selling those options and make $4,000 (8 out of 10) but you will have two trades (2 out of 10) where you have to make adjustments or might incur a loss?

On the other hand, selling options creates a track record of being right 8 out of 10 trades. That is a big difference. By selling options I don't have to be right on the direction and timing. Since I am trading in a 90% range probability, the market can move strongly against my position and still making money.

Credit Spread Bonanza, Easy Weekly Income
Credit Spread Bonanza, Easy Weekly Income

An expression such as “3 + 4 = 5” is nonsense within the scope and definition of real numbers, but it fits nicely within the scope and definition of complex numbers (think of a right triangle with opposite and adjacent sides of 3 and 4, with a hypotenuse of 5). Because complex numbers are two-dimensional, they are able to “add” with one another trigonometrically as single-dimension “real” numbers cannot.

The English mathematician George Boole (1815-1864) sought to give symbolic form to Aristotle’s system of logic. Boole wrote a treatise on the subject in 1854, titled An Investigation of the Laws of Thought, on Which Are Founded the Mathematical Theories of Logic and Probabilities, which codified several rules of relationship between mathematical quantities limited to one of two possible values: true or false, 1 or 0. His mathematical system became known as Boolean algebra.

For instance, when calculating quantities in AC circuits, we find that the “real” number quantities which served us so well in DC circuit analysis are inadequate for the task of representing AC quantities. We know that voltages add when connected in series, but we also know that it is possible to connect a 3-volt AC source in series with a 4-volt AC source and end up with 5 volts total voltage (3 + 4 = 5)! Does this mean the inviolable and self-evident rules of arithmetic have been violated? No, it just means that the rules of “real” numbers do not apply to the kinds of quantities encountered in AC circuits, where every variable has both a magnitude and a phase. Consequently, we must use a different kind of numerical quantity, or object, for AC circuits (complex numbers, rather than real numbers), and along with this different system of numbers comes a different set of rules telling us how they relate to one another.

All arithmetic operations performed with Boolean quantities have but one of two possible outcomes: either 1 or 0. There is no such thing as “2” or “-1” or “1/2” in the Boolean world. It is a world in which all other possibilities are invalid by fiat. As one might guess, this is not the kind of math you want to use when balancing a checkbook or calculating current through a resistor. However, Claude Shannon of MIT fame recognized how Boolean algebra could be applied to on-and-off circuits, where all signals are characterized as either “high” (1) or “low” (0). His 1938 thesis, titled A Symbolic Analysis of Relay and Switching Circuits, put Boole’s theoretical work to use in a way Boole never could have imagined, giving us a powerful mathematical tool for designing and analyzing digital circuits.

It should be clearly understood that Boolean numbers are not the same as binary numbers. Whereas Boolean numbers represent an entirely different system of mathematics from real numbers, binary is nothing more than an alternative notation for real numbers. The two are often confused because both Boolean math and binary notation use the same two ciphers: 1 and 0. The difference is that Boolean quantities are restricted to a single bit (either 1 or 0), whereas binary numbers may be composed of many bits adding up in place-weighted form to a value of any finite size. The binary number 100112 (“nineteen”) has no more place in the Boolean world than the decimal number 210 (“two”) or the octal number 328 (“twenty-six”).

In this chapter, you will find a lot of similarities between Boolean algebra and “normal” algebra, the kind of algebra involving so-called real numbers. Just bear in mind that the system of numbers defining Boolean algebra is severely limited in terms of scope, and that there can only be one of two possible values for any Boolean variable: 1 or 0. Consequently, the “Laws” of Boolean algebra often differ from the “Laws” of real-number algebra, making possible such statements as 1 + 1 = 1, which would normally be considered absurd. Once you comprehend the premise of all quantities in Boolean algebra being limited to the two possibilities of 1 and 0, and the general philosophical principle of Laws depending on quantitative definitions, the “nonsense” of Boolean algebra disappears.

Logic is much like mathematics in this respect: the so-called “Laws” of logic depend on how we define what a proposition is. The Greek philosopher Aristotle founded a system of logic based on only two types of propositions: true and false. His bivalent (two-mode) definition of truth led to the four foundational laws of logic: the Law of Identity (A is A); the Law of Non-contradiction (A is not non-A); the Law of the Excluded Middle (either A or non-A); and the Law of Rational Inference. These so-called Laws function within the scope of logic where a proposition is limited to one of two possible values, but may not apply in cases where propositions can hold values other than “true” or “false.” In fact, much work has been done and continues to be done on “multivalued,” or fuzzy logic, where propositions may be true or false to a limited degree. In such a system of logic, “Laws” such as the Law of the Excluded Middle simply do not apply, because they are founded on the assumption of bivalence. Likewise, many premises which would violate the Law of Non-contradiction in Aristotelian logic have validity in “fuzzy” logic. Again, the defining limits of propositional values determine the Laws describing their functions and relations.

Binary Options System Fix

While Basel I is generally credited with improving bank risk management it suffered from two main defects. It did not require capital for all off-balance sheet risks (there was a clumsy provisions for derivatives, but not for certain other off-balance sheet exposures) and it encouraged banks to pick the riskiest assets in each bucket (for example, the capital requirement was the same for all corporate loans, whether to solid companies or ones near bankruptcy, and the requirement for government loans was zero). 19

LONG-FORM math The gross total amount of asset performance following the leveraged purchase is equal to the total quantity of asset purchased multiplied by the Asset Return. In this case, the quantity of asset purchased is equal to 9 (8 from loan funds + 1 from equity funds) and the Asset Return is +5%. So the gross total profit from the leveraged asset purchase = 9 times +5% = +45% gross total profit from leveraged asset purchase. To arrive at net profit, the leverage cost is subtracted from the gross total costs. The cost of the loan is 4% of the loan amount, and the loan is 8 per dollar of equity or 8 times −4% = −32% cost. So the sum of total profit and total cost is +45% profit minus 32% cost = 13% net profit from the leveraged purchase per dollar of equity investment = expected leverage return on equity investment.

So while adding leverage to a given asset always adds risk, it is not the case that a levered company or investment is always riskier than an unlevered one. In fact, many highly levered hedge funds have less return volatility than unlevered bond funds, 7 and public utilities with lots of debt are usually less risky stocks than unlevered technology companies. 6

Leveraging enables gains and losses to be multiplied. 1 On the other hand, there is a risk that leveraging will result in a loss — ie., it actually turns out that financing costs exceed the income from the asset, or because the value of the asset has fallen.

SHORT-FORM math Asset Leverage Differential = sum of Asset's Return and the Cost of Leverage Debt = +5% − 4% = +1% Rate Leveraged Asset Return Leveraged Debt to Equity Investment Ratio = 8 divided by 1 = 8 Leverage Factor Multiply first two lines = Rate of Leveraged Asset Return x Leverage Factor = + 1% × 8 = +8% Return on Leverage Add Return on Asset's = 5% Equals Rate of Leveraged Asset Return = sum of Asset Return and Leverage 8% + 5% = 13%

Leverage can arise in a number of situations, such as:

Here is an example showing the calculation of the expected return resulting from leverage. There is a short-form calculation and a long-form that is more intuitive. 8 Given: The following example is for an investor who seeks to purchase shares of a well performing asset (+5% expected growth). The investor seeks to increase the total amount purchased by leveraging the purchase with borrowed money. A lender and the investor establish the following terms: the lender will permit the investor to leverage the purchase by agreeing to a loan that is equal to eight times the equity investment; for every 1 dollar invested (equity), the lender will lend 8 (leverage). The cost of the loan is 4% of the loan amount. +5% asset return −4% leverage cost 8:1 leverage ratio

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