What are the pros and cons of hedge fund investing?
Hedge funds are sometimes the highest-earning investment vehicles, and sometimes they do that much worse than everything else. They have a high buy-in, low transparency, and limited liquidity. There are also other advantages and disadvantages worth mentioning. A good hedge fund can provide you with an excellent diversification of your investable assets and give you exposure to the best and brightest money managers in the world. Continue reading...
What Are the Contribution Limits for My SIMPLE IRA?
SIMPLEs allow higher employee deferrals than most retirement accounts. Employees are only able to make salary reduction contributions. As of 2016, they are able to defer up to $12,500 a year, but if an employee is over 50, they may defer an additional $3,000 as a “catch-up” contribution. However, an employee may choose not to contribute anything to their SIMPLE IRA. Employers, on the other hand, are required to make either a dollar-for-dollar matching contribution of 3%, or a non-elective contribution of 2% of the employee’s pay. The 3% match can be reduced to 1% in two out of five years if employees are notified before they make contributions. Continue reading...
How to use Andrew's Pitchfork in trading
Alan Andrews designed Andrew’s Pitchfork to define a trend with support and resistance lines around a median line, all three of which are derived from three points at peaks and troughs around the onset of a current trend. The overlay takes the shape of a trident or pitchfork, with Andrews calling the lines “tines,” after a pitchfork’s prongs. The origin point is placed at the location of a major trend reversal or a definitive support/resistance level, forming beginning of the pitchfork’s “handle.” Once the incline of the pitchfork is suitable, traders can attempt to use it for indications of overbought/oversold conditions, or to indicate a transition to a new trend. Continue reading...
What is a Market Order?
A market order is an order to execute a trade (buy or sell) immediately at whatever the current market price. If an investor places a market order after hours, for instance, the order will be filled at the market’s open wherever the price of the security is. Placing a market order, also known as an “unrestricted order,” means the person trading the security is more concerned with timely execution of the trade than they are the actual price. If a market order is placed for a security that has very high volumes and is a common stock, the market order is likely to be filled right away. Continue reading...
What is Market Value?
Market Value refers to the amount an asset can be sold for on the open market, at any given time. If you hold 100 shares of stock ABC that you can sell on the market for $50 apiece, your holdings have a market value of $5,000. Market value does not necessarily refer only to stocks. It can be any asset that can be bought or sold on the open market. Stocks tend to have greater levels of liquidity and broad-based market participation, so it is easier to disseminate a stocks market value at any point in time. Illiquid assets can be more difficult to value, such as real estate or works of art. Continue reading...
What does notional value mean?
Notional Value is used in futures, options, and forex markets to describe the total value of the principal of a contract or transaction, especially when either none or only part of that value has actually been exchanged. Notional value is used most often in interest rate swaps and futures contracts, and is "notional" because either no principal changed hands at the beginning of the contract (such as in an interest rate swap), or only a small payment was used to buy a larger position (such as in a futures contract). Continue reading...
What is a Plus Tick?
A plus tick is a transaction which occurs at a price higher than the transaction before it, also called an uptick, but often used in relation to a zero plus tick, which is explained below. A plus tick is an indication that the security in question is not declining at a given moment in time. In other words, the most recent traded price of a security is higher than the price it traded at prior. The term ‘uptick’ refers to the same thing, but "plus tick" is used in reference to the first part of a zero plus tick event: an uptick occurs in which the price traded is higher than the previous price, and then a trade occurs in which the price remains the same. Continue reading...
What does 'call option' mean?
If you own a Call Option, you have the right (not the obligation) to purchase a security at an agreed-upon price from the seller of the option. Buying a call option means you are bullish on the security. For example, an investor may buy an August 2017 call on stock XYZ for $50/share (strike price). This means that the owner of this call option has the ability to buy XYZ on the expiration date (August) for $50/share. Continue reading...
What is Counter-Party Risk?
Counter-party risk is the risk that the person on the other side of the trade will not meet his or her contractual obligations. In other words, it’s essentially the risk of doing business with someone. In financial contracts, counter-party risk is also known as “default risk.” Continue reading...
What does Ask Mean?
In the financial markets, “Ask” is the price that a seller is willing to accept for a security. It is also known as the offer price. Given the market is constantly changing, Ask prices are rarely set in stone for long. What’s more, the Ask price on a security may not necessarily be the best going price available for it. It merely represents what that particular seller is willing to accept for it. What is a “Spread”? What is a Market-Maker Spread? Continue reading...