Do Stop or Limit Orders Protect You Against Gaps?

July 7, 2024 No Comments

A: Many are hesitant to invest in the stock market because of the large gaps in prices. It is not uncommon to see a stock that closed the previous session at $55 open the next trading day at $40. This kind of volatility can result in massive

Does a negative alpha automatically mean I should sell?

July 7, 2024 No Comments

A: Investors and analysts use numerous technical indicators to assess the relative risk associated with a given stock. Optimal risk management involves assessing an investment’s risk and profitability potential from all angles, including its performance relative to that of the broader market. Consistent underperformance may

Does the seller (the writer) of an option determine the details of the option contract?

July 7, 2024 No Comments

A: The quick answer is yes and no. It all depends on where the option is traded. An option contract is an agreement between the buyer and the seller of the contract to buy or sell an underlying asset at a certain price, amount and

Are Stocks With Large Daily Volume Less Volatile?

July 7, 2024 No Comments

A: Stock volatility refers to a drastic decrease or increase in value experienced by a given stock within a given period. There is a relationship between the volume of a traded stock and its volatility. When a stock is purchased in large quantities, the stock

Where can I purchase options?

July 7, 2024 No Comments

A: In the United States, all options contracts go through one of several options exchanges. An investor must have an account with a brokerage firm that provides options trading as part of its product offerings. As a brokerage customer, your options orders will be routed

Where does the name “Wall Street” come from?

July 7, 2024 No Comments

A: Wall Street, located in lower Manhattan, has become synonymous with the the US financial markets. Yet the history of the street goes back much further the New York Stock Exchange (NYSE). Wall Street is a direct reference to a wall that was erected by Dutch settlers

Why are call and put options considered risky?

July 7, 2024 No Comments

A: As with most investment vehicles, risk to some degree is inevitable. Option contracts are notoriously risky due to their complex nature, but knowing how options work can reduce the risk somewhat. There are two types of option contracts, call options and put options, each

Why is the initial value of a forward contract set to zero?

July 7, 2024 No Comments

A: Forward contracts are buy/sell agreements that specify the exchange of a specific asset and on a specific future date but on a price that is agreed upon today. They do not require early payment or down payment unlike some other future commitment derivative instruments.

Why Should I Invest?

July 7, 2024 No Comments

Why Should I Invest?A: There are only two ways to make money in our modern world: by working, for yourself or someone else, and/or by having your assets work for you. If you keep your life savings in your back pocket or under a mattress, instead of investing, the

What is the difference between derivatives and swaps?

July 7, 2024 No Comments

A: A derivative denotes a contract between two parties, with its value generally determined by an underlying asset’s price. Common derivatives include futures contracts, options, forward contracts and swaps. Swaps comprise one type of the broad derivatives universe but its value isn’t derived from an underlying security or asset. The Difference Between Derivatives and

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