Obviously, there is a difference between stock options and futures options, and the primary differences are in flexibility as well as overall risk.

Let’s first review what futures contracts are as opposed to stock options. Futures contracts are standardized contracts that guarantee to buy or sell a specific commodity of standard quality, at a particular date in the future. This sum will be at market price. Contracts are traded on what are called future exchanges. So right away we can tell that futures contracts are not direct like stocks or bonds. They are still considered securities, but with a different type of contract.

Price for futures contracts is determined by what is referred to as instantaneous equilibrium, that takes into account basic supply and demand as well as competitive buy and sell orders on the market. The asset here may not necessarily be commodities; it can be anything from securities to [...]

An Exchange Traded Fund (ETF) is a type of investment fund that is traded on stock exchanges.  This type of fund is similar to stock, and holds assets at about the same price as the net asset value.  

The first ETF in the business was introduced in the early 1990s and were called Spiders (SPY).  This ETF tracked the S&P 500 index.  The Qubes (QQQQ) came a few years later and this tracked the 100 largest non-financial companies on the Nasdaq. Some of the biggest players in the ETF market today include State Street Global Advisors, Barclay’s Global Fund Advisors and Vanguard.  Of course there are many types of ETFs, and they can track everything from the United States stock market to just parts of the stock market, like large or small stocks or specific industries.  ETFs even track foreign markets, individual countries, and commodities.

 There are hundreds of ETFs to choose [...]

Is Gold a bubble or the trade of a lifetime?

Maybe both.

I have not been in the gold trade myself. But several of my members are, and doing very well so far.

Here is a chart provide by one such member. It shows that the stock of gold companies, miners, etc continue to appreciate evn though gold prices peaked earlier. If this hold true this time, even if gold has peaked, which it does not look like it has, the miners will continue to rally.

Last week a member emailed saying that it looked like GLD had topped out and would I consider selling calls. My answer: No Way.

This train still has momentum on its side as you can tell from the rally today. What I did do on Friday, was to buy a debit spread in GLD.

I bought the Jan 115 Calls and Sold the Jan 118 Calls. I paid about $100 [...]

Hi,Like most people I have various accounts. The account in question is what I normaly “traded” out of. This is not my retirement account but an account to hopefully help build wealth not preserve. Historically I’d say I only used 5% of it toward option plays (and not whole 5% in one position) since I usually was naked and a 100% loss was possible. I haven’t been trading much of anything lately but do you feel your strategies are designed safe enough to utilize 100% of this type of account? I guess what I’m asking is once somebody says yes they are utilizing risk capital would you suggest devote entire sum to these type of plays or should some percentage still be in other growth tactics? Asking because I’m trying to simplify my life at this point, not make it more complicated.-Paul

I am not licensed to give specific advice. But [...]

I frequently get asked which way I think the market is headed. Especially after the event of recent days where the markets have been on a sprint to the upside but with pull backs the last couple days.

I usually respond the same way every time.

“I don’t know.”

If I could predict the market I wouldn’t be here blogging, I would be out enjoying my billions.

Believe me, I have tried to learn how to predict the markets. That’s what technical and fundamental analysis is – an attempt to understand and predict market direction.  In the end, I gave up.

I cannot predict market direction. The pundits on TV and radio can’t do it, all the blogs and gurus online with their fancy explanations, charts, candles, lines, and waves can’t do it with any regularity and neither can the folks on Wall Street.

So why bother?

Why not trade in a way where it doesn’t matter which way the market moves?

Makes sense to me. And that is why I love option selling.  It does not matter what is going on in the market, what news comes out or doesn’t, the premium I sell loses value everyday, and I profit.

Let me give you an example. This month I have a McDonald’s (MCD) trade on. I want MCD to stay within a range. A couple days after I put the trade on, MCD moved higher and almost out of the range. So I adjusted the trade and made the range bigger.

That day a member emailed me with news that there is a rumor going around the MCD is going to raise its dividend. That might be why it went higher. And if the news about the dividend is correct, it might go higher still.

This member wanted me to know that this trade was not a good idea. He was warning me to what could happen. Thanks to this member, who had my best interests at heart, I began to worry about this position.

What if he was right and MCD shot up higher?

But after a while I calmed myself down and realized that it was not in my hands. If MCD went higher I would evaluate the position, adjust if possible or in the worst case scenario take a small loss. But the odds were on my side.

As it turned out, MCD has behaved fine since and the trade is right in the middle of the profit zone. Let’s hope it stays that way.

But my point is that it does not matter if the dollar is stronger or weaker. It does not matter what oil or gold do. The markets still move in ranges and if you play the ranges, 8 times out of 10 you will win. And those wins allow you to make much higher returns that you will in a savings account, a CD, a money market fund, or a mutual fund.

Microsoft is a huge company and you probably already have their stock either in your personal portfolio or in any mutual funds you may have. Lately MSFT has not been doing much. But I think that is going to change.

For a stock to move it needs a catalyst, some reason that will make it jump or fall. This could be earnings, bad news, new sources of revenue, etc.

For MSFT the catalyst comes in the form of a software upgrade.

I have a friend who one a successful custom software development company. As a software developer he was given an advance copy of Windows 7, Office 2010, and the new version of some developer software.

I have never seen him get so excited about software that he has not written himself. He told me that Windows 7 was awesome, and that every developer that uses Microsoft will upgrade to the new developer software [...]

In another post, I commented how I do not feel very sorry for the “victims” of Bernie Madoff. No one forced these people to give him their money. They did so out of greed. Yes, he was a con-man and the system should have caught him long before, but if they want to blame anyone, they should look first in the mirror. Especially those that gave him all of their savings.

Am I a monster? Hardly. I feel bad for the people who are in hard times through no fault of their own. Like the story I just saw on NBC about the family in Fort Meyers Fl who bought a condo in a new development. With more than 300 units in their building, they are the only occupants. All the other units are empty. The builder has cut off power to most of the building, maintenance, and security.  The builder [...]