What is a put time spread?
A put time spread is an options strategy that has the investor implementing a short put and a long put at the same strike price, but with different expirations. Time spreads can also be called calendar spreads or horizontal spreads. A put time spread will use two put contracts on the same underlying security but with different expiration dates. One of the puts will be sold short, and one will be held long (this is the nature of spreads). Continue reading...
What is a ratio put spread?
A ratio put spread uses multiple put contracts in a certain ratio that makes them start off delta-neutral. Ratio put spreads are similar to regular spreads, but instead of using the same number of put contracts sold short as are held long, ratio spreads are set up with more of one than the other, in a ratio such as 2:1 or 3:2. The short contracts will have different strike prices than the long contracts. Continue reading...
What will Long-Term Care Insurance Cover?
Long-term care insurance is designed to pay benefits for the elderly in need of daily medical services, such as an at-home nurse, room and board in an assisted living facility, adult daycare, respite care, hospice care, and/or medical supplies needed for daily living. Depending on the insurance company offering the services and the policy selected, the menu of benefits will vary. The more benefits offered the higher the premium for the policy. Continue reading...
What is the Investment Company Act of 1940?
The ‘40 Act, as it’s sometimes called, defined and delineated rules for investment companies, which today are known as mutual funds, investment trusts, ETFs, and so on. The ‘40 Act, along with the Securities Act of 1933, and the Securities Exchange Act of 1934, have formed the foundation for regulation in the investment industry in the US. The ‘40 Act defines investment companies and stipulates how they are to represent themselves and disclose information about the funds they sell to the public. Continue reading...
What is Form 8891?
IRS Link to Form — Found Here Form 8891 was previously used by individuals with retirement plans held in Canada when they were living in America, each time they took distributions. The process proved to be cumbersome for many good-natured Canadians, and caused the IRS a lot of trouble as well. This form has been retired in favor of an acknowledgement on the IRS Form 1040. Form 8891 is no longer used, which came as a relief to many Canadian-Americans who had retirement plans from work they did in Canada. Certain filing requirements still exist, such as a new form replacing the FBAR, for foreign bank accounts, now called the FinCEN Form 114. Continue reading...
What is Discounted Cash Flow?
Discounted Cash Flow (DCF) uses an estimated future cash flow amount and a Discount Rate to determine the Present Value (PV). An investor or business executive might project an estimated future cash flow for a business based on recent growth rates, industry information, futurism, estimated inflation, etc. The most common future cash flow to use is free cash flow, which takes out capital expenditures. Continue reading...
What is Foreign Investment Funds (FIF) tax?
New Zealand and Australia, in particular, have instituted a tax regime for offshore investments that fall into the definition of Foreign Investment Funds (FIFs). FIFs will generally be mutual fund companies that are based overseas, but can also include cash value life insurance underwritten by a foreign company and some stock portfolios from overseas stock exchanges. The US has the PFIC tax, which is a passive foreign investment corporation tax. The PFIC category generally applies to mutual funds or pooled investment companies from foreign countries. Continue reading...
What are index futures?
Index futures are futures contracts written on an index in which a large position can be held with a relatively small margin requirement. Index futures can be used for hedging or speculation. A "good faith" initial margin deposit (also called a performance bond) of a fraction of the contract size is all that is required to hold a substantial position, with a notional value worth significantly more than the amount invested. Continue reading...
What were the Biggest Single Day Market Moves?
Since the Dow Jones Industrial Average’s creation in 1896, there have been several crashes and several days of huge gains. The biggest moves can be defined in two ways: either by percentage change or by change in points. In terms of gains, the largest single-day point gain occurred on October 13, 2008, when the Dow rose 936 points (11%) – the sudden leap occurred during a time of wild upside and downside volatility, and was in response to unexpected positive global economic news. Continue reading...
What are Growth Mutual Funds?
Companies that generally have high P/E ratios, high expected growth rates, and that generally do not pay dividends are likely to be found in the portfolio of a growth mutual fund. Growth mutual funds invest in companies that are developing and/or have a high potential for growth, as the name implies. Growth Funds are typically riskier because the companies they invest in have a heightened chance of both profiting and failing. Continue reading...