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Quadruple Witching: What Retail Traders Should Know█ Quadruple Witching is Happening Today: What Retail Traders Should Know! Today marks Quadruple Witching, a pivotal event in the financial markets that occurs four times a year—on the third Friday of March, June, September, and December. During Quadruple Witching, four types of derivative contracts expire simultaneously: Stock Index Futures Stock Index Options Single Stock Futures Single Stock Options When all four of these contracts expire simultaneously, it can lead to increased trading volume and heightened volatility in the markets. The term "witching" is derived from the "Triple Witching" event, which involves the simultaneous expiration of three types of contracts (stock index futures, stock index options, and single stock options). Quadruple Witching adds the expiration of single stock futures to this mix. This convergence leads to a surge in trading activity and heightened market volatility as traders and investors adjust or close their positions. █ When Does Quadruple Witching Occur? Quadruple Witching takes place on the third Friday of March, June, September, and December each year. These dates align with the end of each fiscal quarter, making them significant for various market participants. █ What Retail Traders Should Be Aware Of ⚪ Increased Volatility Price Swings: Expect more significant and rapid price movements in both individual stocks and broader market indices. Unpredictable Trends: Sudden shifts can occur, making it challenging to anticipate market direction. ⚪ Higher Trading Volume Liquidity Peaks : Trading volumes can spike by 30-40%, enhancing liquidity but also increasing competition for trade execution. Potential for Slippage: High volumes may lead to slower order executions and potential slippage, where trades are executed at different prices than intended. ⚪ Potential for Market Manipulation Large Institutional Trades: Institutions managing vast derivative positions can influence stock prices, creating opportunities and risks. Short-Term Opportunities: Retail traders might find short-term trading opportunities but should exercise caution. ⚪ Emotional Discipline Stress Management: The fast-paced and volatile environment can be emotionally taxing. Maintain a clear trading plan to avoid impulsive decisions. Risk Management: Use stop-loss orders and position sizing to protect against unexpected market moves. █ Historical Perspective and Market Behavior Historically, Quadruple Witching days have been associated with noticeable market movements. ⚪ Price Trends Some studies suggest that markets may trend in the direction of the prevailing market sentiment leading into the expiration day. ⚪ Volatility Patterns Volatility tends to spike during Quadruple Witching, especially in the final hour of trading, as traders finalize their positions. ⚪ Volume Spikes Trading volumes can increase by 30-40% compared to regular trading days, reflecting the high level of activity as contracts expire. █ Tips for Navigating Quadruple Witching ⚪ Avoid Trading Some traders prefer to stay out of the market to avoid unpredictable price movements and potential losses. ⚪ Stay Informed Market News: Keep abreast of financial news and updates that may influence market sentiment. Contract Expirations: Be aware of which contracts are expiring and their potential impact on specific stocks or indices. ⚪ Focus on Liquidity Trade Liquid Stocks: Opt for highly liquid stocks and ETFs to ensure smoother trade executions and tighter bid-ask spreads. Avoid Thinly Traded Assets: Steer clear of stocks with low trading volumes to minimize execution risks. ⚪ Use Limit Orders Control Entry and Exit Points: Limit orders allow you to set specific prices for buying or selling, helping manage execution prices amidst volatility. ⚪ Monitor Key Levels Support and Resistance: Keep an eye on critical technical levels that may act as barriers or catalysts for price movements. Volume Indicators: Use volume-based indicators to gauge the strength of price movements. ⚪ Maintain Discipline Stick to Your Plan: Adhere to your trading strategy and avoid making decisions based on fear or greed. Manage Risk: Implement strict risk management practices, such as setting stop-loss levels and not overexposing your portfolio. █ Key Takeaways ⚪ Frequency: Occurs four times a year on the third Friday of March, June, September, and December. ⚪ Impact: This leads to increased trading volume and volatility due to the expiration of four types of derivative contracts. ⚪ Strategies: Traders may choose to avoid trading, focus on liquid assets, implement strict risk management, or exploit short-term volatility. ⚪ Risks: These include unpredictable price movements, liquidity issues, execution challenges, and emotional stress. █ Conclusion Quadruple Witching can significantly impact market dynamics, presenting both opportunities and challenges for retail traders. By understanding the mechanics of this event and implementing strategic measures, traders can better navigate the heightened volatility and make informed decisions. Remember to stay disciplined, manage your risks effectively, and focus on liquid assets to optimize your trading performance during Quadruple Witching days. ----------------- Disclaimer This is an educational study for entertainment purposes only. The information in my Scripts/Indicators/Ideas/Algos/Systems does not constitute financial advice or a solicitation to buy or sell securities. I will not accept liability for any loss or damage, including without limitation any loss of profit, which may arise directly or indirectly from the use of or reliance on such information. All investments involve risk, and the past performance of a security, industry, sector, market, financial product, trading strategy, backtest, or individual's trading does not guarantee future results or returns. Investors are fully responsible for any investment decisions they make. Such decisions should be based solely on evaluating their financial circumstances, investment objectives, risk tolerance, and liquidity needs. My Scripts/Indicators/Ideas/Algos/Systems are only for educational purposes!
OANDA:SPX500USDEducation
by Zeiierman
4
Catching Boom and Crashe on Deriv Tradingview using TrendlinesCatching booms and crashes on Deriv using TradingView involves utilizing trendlines to identify potential reversal points and breakouts. Here’s a short guide on how to do this: ### 1. Understanding Boom and Crash Indices - **Boom Index**: Represents a market where prices tend to spike upwards occasionally. - **Crash Index**: Represents a market where prices tend to spike downwards occasionally. ### 2. Setting Up TradingView - Open TradingView and ensure you have the Boom or Crash index loaded on your chart. ### 3. Drawing Trendlines - **Identify Highs and Lows**: Start by identifying significant highs and lows on the chart. - **Draw the Trendline**: Connect at least two significant highs for a downtrend line and at least two significant lows for an uptrend line. ### 4. Analyzing Trendline Breaks - **Downtrend Breakout (Boom Index)**: Look for points where the price breaks above a downtrend line. This can indicate a potential upward boom. - **Uptrend Breakout (Crash Index)**: Look for points where the price breaks below an uptrend line. This can indicate a potential downward crash. ### 5. Confirming the Breakout - **Volume**: Higher volume during the breakout can confirm the validity of the trendline break. - **Candlestick Patterns**: Look for reversal candlestick patterns near the trendline to increase the accuracy of your prediction. ### 6. Risk Management - **Stop-Loss**: Set a stop-loss slightly below the breakout point for booms and slightly above for crashes. - **Take-Profit**: Determine your target based on previous highs/lows or use a risk-reward ratio. ### Example: 1. **Boom Index**: - Identify recent highs and draw a downtrend line. - Wait for a candlestick to close above the trendline. - Confirm with volume and possibly a bullish candlestick pattern. - Enter a buy trade with a stop-loss below the trendline and a take-profit at a previous resistance level. 2. **Crash Index**: - Identify recent lows and draw an uptrend line. - Wait for a candlestick to close below the trendline. - Confirm with volume and possibly a bearish candlestick pattern. - Enter a sell trade with a stop-loss above the trendline and a take-profit at a previous support level. By carefully analyzing trendlines and confirming breakouts with additional indicators, you can effectively catch booms and crashes on Deriv's Boom and Crash indices using TradingView.
OANDA:XAUUSDEducation
by FrankFx14
SIMPLE ICT CONCEPTS FOR TRAADING SYNTHETIC INDICES The Inner Circle Trader (ICT) concept for trading Deriv synthetic indices involves using sophisticated market analysis techniques and proprietary trading strategies. It focuses on understanding market mechanics, price action, and order flow to make informed trading decisions. ICT strategies leverage advanced tools and ICT knowledge to predict synthetic market movements, optimizing entry and exit points for higher profitability and risk management.
Education
by FrankFx14
How much strength does it take to fill a gap?While I believe $87.50 is the point of contention for price action in the days to come, it’s difficult to say whether SBUX will be either below $70.00 or well above $100.00 by the end of Q4 2024. Either way a set up does present itself. The consumer is undergoing discretionary spending and currently this stock is down 15.43% year to date. When sentiment shifts, I see no reason as to why this asset couldn't be a decent performer in one's portfolio. The trading game plan is as follows. 1.) Short entry at 83.05 from the 100 4HR EMA 2.) SL set at 88.20 3.) TP 1 78.69 4.) TP 2 74.50 5.) TP 3 72.00
NASDAQ:SBUXShort
by Ra_way
AAPL: Time for PutsFirstly I'm a huge NASDAQ:AAPL fan when it comes to their products, however, I believe the time has come to buy some Put Options. Trend Analysis Utilizing the 1D chart, I found a double-top "M" pattern and at the time of this idea we are currently sitting a little under the second peak. The descent can be steep according to a macro-Fibonacci tool where the $125 share price rests around a 50% retracement level. Support at this level has been strong since May 2021. I used two micro-Fibonacci tools to identify areas of minor support during the descent. I believe the use of both is necessary as some traders will be using the uptrend retracement (green) and others will use the downtrend retracement (red). I believe that there is a good possibility for reversal at the 61.8% downtrend Fib retracement as this level has been a key area of support and resistance since August 2021; see image below. It goes without saying that by the time the share price reaches this level, the double top pattern will already be considered valid so it's my opinion that a catalyst in the form of bad news will be required to see further declines. Fundamental Analysis According to the Q3 Earnings Call (Annual Report), Apple has only utilized 17.67% of its $90 billion dollar share repurchase program authorized in May '23. According to a later footnote, Apple repurchased $76.6 billion of its shares during 2023 which leads me to believe there is either a mistake in the report or that most of the $76.6 billion satisfies an earlier repurchase program. On the 10K form, see bottom of page 18 - note 1 and bottom of page 20. Cash on-hand has increased by 27% since September 2022. Current ratio (current assets/current liabilities) is 0.99 which is concerning from a financial standpoint. However, this is an improvement from September 2022 when its current ratio was 0.88. Retained earnings, while still in a deficit, has improved by 93% since September 2022. These deficits were self-inflicted as Apple spent most of its net income on stock repurchases the last three years. Sentiments I didn't find anything that changed my opinion on the current market trend for Apple. While the company does appear to be improving it is still in a rough spot. The aggressive repurchasing of its own stock and placing itself into a deficit doesn't make sense to me as a long-term plan. I understand that companies will do this to raise their EPS and benefit their shareholders but it also says that the company doesn't plan on expanding in the foreseeable future.
NASDAQ:AAPLShort
by Shepherd_Investor
1
Protective Puts to Ride SpeculationOverview SoundHound AI ( NASDAQ:SOUN ) doesn't appear to be fundamentally sound, however, its technicals support a potential spike to around $15.50. While the rest of the market also appears to be nearing a peak, there may be a few more weeks of squeezing which is where SOUN may find a second, yet short-lived, wind. Fundamentals SoundHound AI has experienced significant negative income the last three years. There was an increase in cash flow which appears to be from the solicitation of its company's shares. The company has also downsized by 40% which it annotates in the 10-K Annual Report for 2023. Overall, my impression is that SoundHound is struggling to find its balance and is shrinking. I believe that the only reason it has surged as it much as it has is due to the market's overwhelming interest in artificial intelligence. Strategy Unfortunately it's not enough to be right about the health of a company especially when the rest of the market is chasing a high. Despite SOUN's lack of a healthy fundamentals, I would not be surprised to see a spike to the 1.618 Fibonacci level. This gives me the desire to utilize protective puts in case the market euphoria ends sooner than expected.
NASDAQ:SOUN
by Shepherd_Investor
HP to $60Overview This is a very brief price prediction for HP that will require further review, however, I found the opportunity too affordable to pass up and wanted to share my thoughts. Bottom line: the call options are very cheap and HPQ's chart screams potential for a lucrative trade. Trading Pattern HP ( NYSE:HPQ ) has formed a bullish flag on the 1D chart and it appears close to breaking out as the descending wedge is completely developed. Technical Indicators MFI is approaching oversold territory while MACD has a sharp positive slope above its signal line.
NYSE:HPQLong
by Shepherd_Investor
Options Blueprint Series: The Covered Call Strategy DecodedIntroduction In the ever-evolving world of financial markets, savvy investors and traders continuously seek strategies to optimize returns while managing risk. Among the plethora of strategies available, the covered call stands out for its simplicity and efficacy, especially when applied to a dynamic asset like Euro Futures. This article delves deep into the intricacies of the covered call strategy, using Euro Futures as the underlying asset. Through this exploration, we aim to equip you with the knowledge and tools necessary to navigate the complexities of the futures and options markets. By the end of this journey, you'll gain a comprehensive understanding of how to implement covered calls with Euro Futures, enhancing your trading arsenal with a strategy that balances potential returns against the inherent risks of the forex futures market. Understanding Euro Futures: The Beacon of Currency Markets Euro Futures on the Chicago Mercantile Exchange (CME) represent a contract for the future delivery of the Euro against the US dollar. These futures are pivotal for traders and investors looking to hedge against currency risk or to speculate on the fluctuations of the Euro's value relative to the dollar. Each Euro Futures contract is standardized, with each contract representing a specific amount of Euros. Trading Euro Futures offers a transparent, regulated market environment with deep liquidity, making it an attractive instrument for a broad spectrum of market participants. The futures are marked-to-market daily, and gains or losses are credited or debited from the trader's account, providing a clear view of financial exposure. Key Features of Euro Futures: Contract Size: Each contract represents 125,000 Euros. Tick Size: The minimum price fluctuation is $ 0.000050 per Euro, equating to $6.25 per contract. Trading Hours: Euro Futures markets are accessible nearly 24 hours a day, allowing traders from around the globe to react to market-moving news and events in real-time. Leverage: Futures trading involves leverage, allowing traders to control a large contract value with a relatively small amount of capital. However, while leverage can amplify gains, it also increases the potential for losses. Market Participants: Hedgers: Corporations and financial institutions may use Euro Futures to protect against adverse movements in the Euro's exchange rate, securing pricing or costs for future transactions. Speculators: Individual and institutional traders may speculate on the future direction of the Euro's value against the dollar, aiming to profit from price movements. Importance in the Financial Landscape: The Euro is the second most traded currency in the world, making Euro Futures a critical tool for managing currency exposure in the international financial markets. The contracts provide a gauge of market sentiment towards the Eurozone's economic outlook, influenced by factors such as interest rate differentials, political stability, and economic performance. The Basics of Covered Calls: Charting a Course The covered call is a conservative strategy where the trader owns the underlying asset — in this case, Euro Futures — and sells call options on that same asset to generate income from the option premiums. This strategy is particularly appealing in flat to moderately bullish market conditions because it allows the trader to earn an income from the premium, which can provide a cushion against a downturn in the market and potentially enhance returns in a stagnant or slightly bullish market. Key Concepts of Covered Calls: Ownership: The trader must own the Euro Futures contracts or be long on a futures position to write (sell) a covered call. Option Premium: The income received from selling the call option. This premium is the trader's to keep, regardless of the option's outcome. Strike Price: The price at which the underlying futures can be bought (call) by the option buyer. The trader selects a strike price that reflects their expectation of the market direction and their willingness to part with the futures if the option is exercised. Expiration Date: All options have an expiration date. The covered call strategy involves choosing an expiration date that balances the desire for premium income with the market outlook. Implementing the Strategy: Selection of Euro Futures Contracts: The first step is to have a long position in Euro Futures. This position is the "cover" in the covered call strategy. Selling the Call Option: The trader then sells a call option on the Euro Futures they own, receiving the option premium upfront. This option is sold with a specific strike price and expiration date in mind. Outcome Scenarios: If the Euro Futures price stays below the strike price at expiration, the call option will likely expire worthless, allowing the trader to keep the premium as income while still holding the futures position. If the Euro Futures price rises above the strike price, the call option may be exercised by the buyer, requiring the trader to sell the futures at the agreed strike price. This caps the trader's upside potential but secures the premium as profit. Risk Profile Graphic for the Covered Call Strategy on Euro Futures: This graph illustrates the profit and loss potential of a covered call strategy applied to Euro Futures. The strategy involves holding a long position in Euro Futures while selling a call option at a specific strike price. If the Euro Futures price at expiration is below the strike price, the trader's loss is offset by the premium received from selling the call option. However, the profit potential is capped if Euro Futures rise above the strike price, as the trader may have to deliver the futures at the strike price, missing out on further gains. Implied Volatility and CVOL: A Navigator's Tool In the strategy of covered calls, understanding Implied Volatility (IV) is essential. IV reflects the market's expectation of a security's price fluctuation and significantly influences option premiums. For traders employing covered calls, especially with Euro Futures, high IV can mean higher premiums, offering better income potential or protection against the underlying asset's price movements. Since the Euro Futures is a CME product, examining CVOL could provide an advantage to the trader as CVOL is a comprehensive measure of 30-day expected volatility from tradable options on futures which can help to: Determining Premiums: By gauging current IV, traders can identify optimal premium levels for their call options. Deciding which Strategy to use: High IV periods might indicate advantageous times to implement covered calls, leveraging CVOL's insights for timing entry and exit points. Benefits and Risks of Covered Calls: Income Generation: The most apparent benefit of the covered call strategy is the ability to generate income through the premiums received from selling call options. Downside Protection: The premium received can offer some “protection” against a decline in the futures price, effectively lowering the break-even point. Profit Limitation: A significant risk of this strategy is that the trader's profit potential on the futures is capped. If the market rallies strongly beyond the strike price, the trader misses out on those additional gains, as they are obligated to sell the futures at the strike price. Initiating a Covered Call with Euro Futures: Setting Sail Implementing the covered call strategy with Euro Futures involves a blend of strategic foresight and meticulous planning. The objective is to enhance potential returns or protect against downside risk through the calculated sale of call options against a long Euro Futures position. Here's a step-by-step guide to navigate through the process: Step 1: Selection of Euro Futures Contracts Long Position Establishment: Begin by establishing a long position in Euro Futures. This position acts as your safety net, providing the necessary coverage for the call options you're about to sell. Margin: When going long Euro Futures, the Margin Requirement (suggested by CME on Feb-21 2024 is USD 2,100 per contract) Market Analysis: Conduct a thorough analysis of the Euro Futures market. Consider factors like historical volatility, economic indicators affecting the Eurozone, and any impending events that might influence the Euro's value against the dollar. The chart shows how careful key Support and Resistances have been selected in order to decide when to buy long Euro Futures as well as deciding the Call Strike Price to use. Other techniques can be employed depending on the trader’s plan and methods. Step 2: Selling the Call Option Strike Price Decision: Choose a strike price that aligns with your market outlook. A strike price above the current market price can offer potential for capital appreciation, plus the income from the premium. Since the Resistance is located around 1.10, selling the 1.10 Call could be an appropriate decision. Expiration Date Selection: The expiration date should reflect your market perspective and risk tolerance. Shorter-term options can provide more frequent income opportunities but require closer management. We will be using December 2024 in this educational idea. Premium: When selling a 1.10 Call using DEC24 expiration on Feb-21 2024, the premium collected would be between 0.02180 and 0.02280. The midpoint being 0.0223 and the contract size being USD 125,000, this means we would collect USD 2787.5 in premium, which would either add to the profit or subtract from risk. Step 3: Managing the Trade Monitoring Market Movements: Keep a vigilant eye on market trends and Euro Futures price movements. Be prepared to adjust your strategy in response to significant changes. Adjustment Strategies: If the market moves unfavorably, consider rolling out the option to a further expiration date or adjusting the strike price to manage risk effectively. Case Study: A Voyage on Euro Seas Let's illustrate this strategy with a hypothetical trader, Elena. Elena holds a long position in Euro Futures, expecting slight bullish momentum in the upcoming months. To capitalize on this and earn additional income, she sells call options with a strike price slightly above the current futures price, receiving an upfront premium. As the market progresses, two scenarios unfold: Bullish Outcome: The Euro strengthens, but not enough to reach the strike price. Elena retains her futures position, benefits from its appreciation, and keeps the premium from the call options. Bearish Downturn: The Euro weakens. The premium received provides a cushion against the loss in her futures position's value, mitigating her overall risk. Risk Management: Navigating Through Storms Implementing covered calls doesn't eliminate risk but redistributes it. Effective risk management is crucial: Use of Stop-Loss Orders: These can limit potential losses on the futures position if the market moves against your expectations. Position Sizing: Ensure your position size in Euro Futures aligns with your overall risk management strategy, avoiding overexposure to a single trade. Diversification: Consider diversifying your strategies and holdings beyond just Euro Futures and covered calls to mitigate systemic risks. Conclusion: Docking at Safe Harbors The covered call strategy, when applied to Euro Futures, offers traders an efficient way to navigate the forex futures market. By generating income through premiums and potentially benefiting from futures price movements, traders can strategically position themselves in varying market conditions. However, the journey doesn't end here. Continuous learning, market analysis, and strategy adjustments are paramount to sailing successfully in the dynamic waters of futures trading. As with all trading strategies, the covered call approach requires a balance of knowledge, risk management, and practical experience to master. Embarking on this voyage with Euro Futures and covered calls can lead to rewarding destinations, provided you navigate with caution, preparation, and an eye towards the horizon of market opportunities and challenges. When charting futures, the data provided could be delayed. Traders working with the ticker symbols discussed in this idea may prefer to use CME Group real-time data plan on TradingView: www.tradingview.com This consideration is particularly important for shorter-term traders, whereas it may be less critical for those focused on longer-term trading strategies. General Disclaimer: The trade ideas presented herein are solely for illustrative purposes forming a part of a case study intended to demonstrate key principles in risk management within the context of the specific market scenarios discussed. These ideas are not to be interpreted as investment recommendations or financial advice. They do not endorse or promote any specific trading strategies, financial products, or services. The information provided is based on data believed to be reliable; however, its accuracy or completeness cannot be guaranteed. Trading in financial markets involves risks, including the potential loss of principal. Each individual should conduct their own research and consult with professional financial advisors before making any investment decisions. The author or publisher of this content bears no responsibility for any actions taken based on the information provided or for any resultant financial or other losses.
CME:6E1!Education
by traddictiv
2
Boeing: Descent to $130Overview Boeing ( NYSE:BA ) has had a rough several years due to the controversy surrounding its MAX series. Just recently, an incident occurred during a flight on the West Coast where a part of the fuselage blew off during an ascent and required a prompt emergency landing. Fortunately everyone onboard made it safely back to the airport. This follows years after the two fatal Boeing MAX crashes in 2018-2019. Technical Analysis This is a new one for me. The BA 1D chart doesn't reveal any obvious patterns and, if anything, was in the process of forming an ascending triangle which is bullish. In light of the breaking news I am fairly confident that the ascending triangle will become invalid then transform into a months long descending triangle. Utilizing Fibonacci retracement levels, I am expecting decent support around $130. Of course there will always be plenty of opportunity for scalping in-between now and then as the current share price is sitting around $249. Fundamental Analysis I will assess the balance sheet and provide a fundamental analysis sometime this weekend. However, I don't believe even a good balance sheet will alleviate the coming selling pressure. The markets are reactive to news and a healthy balance sheet would only mean certain recovery at a later time.
NYSE:BAShort
by Shepherd_Investor
5
PayPal to $76PayPal is signaling bullish reversal at a great value. After a two-year long hemorrhage in stock value, multiple indicators and patterns forecast a recovery. A descending wedge can be found on the 1D chart and as we are nearing the final squeeze of the wedge, an inverse head and shoulders has formed. Utilizing Fibonacci retracement levels supported by bullish trading patterns and indicators (OBV & MFI), the ascent to $76 appears both realistic and only the beginning of a long awaited rally. Should my projections prove accurate, I believe there will be one more opportunity to profit from put options as the right shoulder peaks around the $57-$59 range. NASDAQ:PYPL
NASDAQ:PYPLLong
by Shepherd_Investor
5
Part 1: Equity Derivatives - A Beginner's GuideWhat are derivatives? Basic interpretation : something which is based on another source. A derivative is a contract or product whose value derives from the value of the base asset. The base asset is called the underlying asset. i.e., Sugar prices will rise if sugarcane prices increase due to low production. It means sugarcane is the underlying asset of sugar because the value of sugar is associated with sugarcane. There is a broad range of underlying assets: Metals: lead, gold, silver, copper, zinc, nickel, tin, etc. Energy: coal, natural gas, etc. Agri commodities: corn, cotton, pulses, wheat, sugar, etc. Financial assets: Stocks, bonds, forex, etc. There are two types of derivatives: 1. Exchange-traded: A standardized derivative contract, listed and traded on an organized exchange. 2. Over-the-counter/off-exchange trading/pink sheet trading: A derivative product in which counterparties buy or sell a contract or product at a negotiated price without exchange Instruments of derivatives market: There are four instruments in the derivatives market: 1. Forward: Forward is a non-standard agreement or agreement between two parties that allows you to buy/sell the asset at the agreed price for a pre-decided date of the contract. Forwards are negotiated between two pirates, so the terms and conditions of the contract are customized. These are called over-the-counter(OTC). 2. Future: Future contracts are similar to forwarding contracts, but the deal is made through an organized and regulated exchange rather than negotiated between two counterparties. A futures contract is an exchange-traded forward contract. 3. Options: A derivative contract that gives the right but not the obligation, to buy or sell an underlying asset at a stated strike price on or before a specified date. Buyers of options- Pays the premium and buys the right Sellers of options - Receives the premium with the obligation to buy/sell underlying assets. 4. Swap: A swap is a derivative contract between two counterparties to exchange for the cash flows or liabilities from two different financial instruments. It is an introduction article. I will cover all these topics in detail. Swap helps participants manage risk associated with volatility risk interest rate, currency exchange rates, & commodity prices. Index: Index = Portfolio of securities An Index shows how investors experience the economy. Is it progressing or not? A Stock market index gathers data from a variety of companies of industries. The data forms an overall picture and helps investors compare market performance through past and current prices. Financial indices represent the price movement of bonds, shares, Treasury Bills, etc. Importance of Index: 1. An index is an indication of a specific sector or gross market. 2. It helps investors to pick the right stock 3. An index is a statistical indicator. It represents an overall change or part of a change in the economy. 4. In OTC & exchange-traded markets, It used as an underlying asset for derivatives trading 5. An index helps to measure for evaluation of portfolio performance. 6. Portfolio managers use indices as investment benchmarks. 7. Index illustrates investor sentiments. Types of index: There are four classifications for indices: Equal Weighted Index: Each company is given the same weightage in the composition of this index. Equal-weighted indexes are more diversified than market capitalization-weighted indexes. This index focuses on value investing. Free-float index: In finance, equity divides into different among various stakeholders like promoters, institutions, corporates, individuals, etc. A tradable stake for trading is called a free-float share. i.g, If XYZ company has issued 5 lakh shares with the face value of Rs 10, but of these, 2 lakh shares are owned by the promoter, then the free-float market capitalization is Rs 30 lakh. Free-float market capitalization: Free-floating shares * Price of shares Index: BSE SENSEX Market capitalization-weighted index: In this index, each stock is given weightage according to its market capitalization. High market cap = High weightage Low market cap = low weightage Market Cap= Current market price * total number of outstanding shares i. e, if XYZ company has 1,000,000 outstanding shares and a market price of 55 rs per share will have a market capitalization of 55,000,000. Index: Nifty 50 Price Weighted Index: High price = More weightage Low price = Low weightage Popular price-weighted index: Dow Jones industrial average & Nikkei 225 I will upload the second part soon. Show your love with likes and comments. Thank you :) Money_Dictators
Education
by Money_Dictators
4
MUX: a decentralized derivatives market aggregator📜 Overview The MUX Protocol Suite is a set of two components: 1. a decentralized leveraged trading protocol, offering zero price impact trading, up to 100x leverage, self-custody, aggregated liquidity; 2. a sub-protocol that automatically selects the most suitable liquidity route and minimizes the composite cost for traders while meeting the needs of opening positions. Currently MUX is deployed on Arbitrum , BNB Chain , Optimism , Avalanche and Fantom . In short, just as 1INch is to Uniswap , PancakeSwap , Curve , and other DEX, MUX is to GMX and GNS . 📈 Graphic analysis The price is in an impulsive wave 3. A possible entry would be after an ABC correction at $9.25. If the price breaks the last historic high and rises wildly, expect a throwback. The target on the 1.618 Fibonacci projection sits at $37.36, having a 167% upside potential. Comparing this asset with others of the same class of derivatives, perpetual or futures (putting BTC together just to have a reference), we can see that this year the MUX token performed the best. ⚠️ It is worth mentioning that it is a highly risky and speculative operation, with an asset that is under the radar. It still does not have trading on large exchanges, such as Binance and Coinbase for example. Do your own research and take your risks.
Long
by andre_007
GBP/USD -Flirting Resistance *W - Great British Pound seen on a more broader picture of Weekly Time-frame *W (tf) . Flirting with Trendline Resistance that rejected price action on 4 times of interactions previously. Fakeout occurance would be put to stop by 200EMA coming down as Resistance Ceiling for GBP/USD Breakout of Trendline + 200EMA re-testing them as Supports would give much more room for growth regarding GBP Below Supports - Daily Order-Block *D OB - Last Higher Low at 1.18$ - Weekly Order-Block *W OB TRADE SAFE ! *** Note that this is not Financial Advice ! Please do your own research and Consult your own Financial Advisor before partaking on any trading activity based soly upon this Idea.
by Mr_J__fx
4
Derivatives Trading: A Comprehensive GuideI. Introduction Derivatives trading is a vital aspect of modern finance that encompasses various financial instruments, including futures, options, swaps, and forward contracts. Derivatives are financial instruments whose values are derived from underlying assets such as commodities, equities, bonds, interest rates, or currencies. They provide a robust mechanism for hedging risk, speculating on future price movements, and gaining access to otherwise inaccessible markets or asset classes. II. The Concept of Derivatives A derivative is a financial contract between two or more parties based on an underlying asset. The derivative's price is determined by fluctuations in the underlying asset's price. They were initially created to allow businesses to hedge against price variations in commodities, but they have since expanded to include a vast array of financial instruments. There are four primary types of derivatives: 1. Futures Contracts: These are standardized contracts to buy or sell a particular asset at a predetermined price at a specific future date. Futures contracts are highly liquid, as they are traded on an exchange, and they cover a wide range of underlying assets, from commodities to financial instruments. The price of futures contracts incorporates the cost of carrying the underlying asset, which includes storage costs, financing costs, and convenience yields. 2. Options Contracts: These grant the holder the right, but not the obligation, to buy (call option) or sell (put option) an underlying asset at a predetermined price within a specific time frame. The price of an option (known as its premium) depends on several factors including the price of the underlying asset, the strike price, the time until expiration, the volatility of the underlying asset, and the risk-free interest rate. 3. Swap Contracts: These involve the exchange of one set of cash flows for another. For example, in an interest rate swap, parties might swap fixed interest rate payments for floating interest rate payments. The pricing of swaps involves determining the present value of the cash flows being exchanged. 4. Forward Contracts: These are non-standardized contracts between two parties to buy or sell an asset at a specified future time at a price agreed upon today. Forward contracts, like futures, involve an agreement to trade an asset in the future, but they are not standardized or traded on exchanges. The pricing of forward contracts is similar to that of futures and involves consideration of the cost of carrying the underlying asset. III. Trading Derivatives Trading in derivatives can occur either on an exchange or over-the-counter (OTC). Exchange-traded derivatives are standardized, regulated, and backed by a clearinghouse that mitigates counterparty risk. In contrast, OTC derivatives are privately negotiated, less regulated, and come with higher counterparty risk. IV. Hedging Risk One of the key functions of derivatives is to provide a hedge against price risk. By locking in a future price for an underlying asset, companies can protect themselves against adverse price movements that might affect their operational profitability. For instance, an airline company might use fuel futures to hedge against potential increases in oil prices, thereby securing their operating margins. V. Speculation and Arbitrage While hedging is a risk management strategy, many traders use derivatives for speculation, aiming to profit from future price changes in the underlying asset. Traders who anticipate a price increase in the underlying asset might buy futures or call options, while those who expect a price decrease might sell futures or buy put options. Arbitrageurs exploit price differences of the same asset in different markets or different pricing of two related assets, creating risk-free profit opportunities. Derivatives, with their leverage characteristic, can enhance these arbitrage opportunities. VI. Pricing of Derivatives The pricing of derivatives is complex and relies onvarious models. Two of the most popular models are the Black-Scholes model and the Binomial options pricing model. The Black-Scholes model , widely used for pricing options, takes into account the current price of the underlying asset, the option's strike price, the time until expiration, the risk-free interest rate, and the expected volatility of the underlying asset. It assumes that markets are efficient, and there are no transaction costs or taxes. However, the Black-Scholes model is less effective in handling early exercise of American options and dividends. The Binomial options pricing model is an alternative to the Black-Scholes model, especially useful for American options, which can be exercised before the expiration date. The model works by creating a binomial tree for possible price paths and assigning probabilities for each path. It then calculates the payoffs for each path and uses discounted backpropagation to derive the option price. The pricing of futures and forwards typically involves determining the cost of carrying the underlying asset to the contract's expiration date. This includes factors like storage costs for commodities, dividends for stocks, and interest costs for financial futures. The pricing of swaps depends on the present value of the expected future cash flows of the underlying assets. For interest rate swaps, the swap rate would be set so that the present value of fixed-rate payments equals the present value of expected floating-rate payments. VII. Counterparty Risk Derivatives trading involves counterparty risk - the risk that one party in the contract will default on their obligations. This risk is typically higher in OTC markets where private contracts are made without a central clearinghouse. To manage this risk, participants may use various methods such as collateral agreements, netting arrangements, and credit default swaps. VIII. Regulatory Considerations Regulation plays a crucial role in derivatives markets. Following the financial crisis of 2008, which was partly blamed on the unregulated OTC derivatives market, regulatory bodies worldwide tightened the rules governing derivatives trading. Regulations now require increased transparency, better risk management practices, and a greater use of centralized clearing to reduce systemic risk. Regulations like the Dodd-Frank Act in the US and the European Market Infrastructure Regulation (EMIR) in the EU are examples of regulatory efforts to enhance market stability, improve transparency and protect market participants. IX. The Role of Clearing Houses Clearinghouses play a vital role in derivatives trading. They act as the middleman for all exchange-traded and some OTC derivative trades. They ensure the smooth execution of trades, mitigate counterparty risk by guaranteeing the obligations of both parties in a trade, and enhance market transparency by reporting trading details. X. Recent Trends and Future Outlook In recent years, the use of derivatives in risk management and speculative trading has increased significantly. The growth of electronic trading platforms has democratized access to derivatives markets, and complex products have been designed to address specific risk management needs. Looking forward, the derivatives market is likely to be shaped by several trends. First, regulatory changes will continue to evolve, aimed at enhancing transparency, reducing systemic risk, and preventing market abuse. Second, technological advancements, particularly in AI and blockchain, have the potential to revolutionize how derivatives are traded and settled. Lastly, the growing recognition of environmental, social, and governance (ESG) factors is likely to lead to the development of new derivative products linked to ESG performance indicators. XI. Conclusion Derivatives trading plays a significant role in modern finance, providing mechanisms for risk management, speculation, and arbitrage. While it carries risks, such as counterparty default and market abuse, its benefits in terms of enhancing market efficiency, price discovery, and risk distribution are significant. As the financial markets continueto evolve, the importance and complexity of derivatives trading are likely to increase, driven by advances in technology, regulatory changes, and the changing needs of market participants. As such, a comprehensive understanding of derivatives and their trading mechanisms will continue to be a vital aspect of financial knowledge.
BITSTAMP:BTCUSDEducation
by BiggWigg
#GMX/USDT 8h (Binance Futures) Descending channel breakoutGMX just regained 50MA support and seems to be ready for a rally towards 200MA resistance, probably after a last dip. ⚡️⚡️ #GMX/USDT ⚡️⚡️ Exchanges: Binance Futures Signal Type: Regular (Long) Leverage: Isolated (3.0X) Amount: 6.4% Current Price: 49.74 Entry Targets: 1) 47.36 Take-Profit Targets: 1) 58.39 Stop Targets: 1) 39.99 Published By: @Zblaba TSX:GMX #GMXUSDT #Gambit #DEx Risk/Reward= 1:1.5 Expected Profit= +69.9% Possible Loss= -46.7% Estimated Gaintime= 2-3 weeks gmx.io
Long
by TradingOn
NIFTY |BANKNIFTY|NIFTY ANALYSIS | BANK NIFTY ANALYSIS FOR FRIDAYNIFTY |BANKNIFTY|NIFTY ANALYSIS | BANKNIFTYANALYSIS FOR FRIDAY | nifty analysis for tomorrow | #niftypredictions | nifty live trading |Nifty50 BANKNIFTY:- If Banknifty sustain the level of 44000 and spend time and break 44150, then 44250-44300-44350. If Banknifty break down 44000 spend time below it and break 43950 then 43950-43850-43750. NIFTY:- If Nifty sustain the level of 18650 and spend time and break 18700 then 18750-18000 If Nifty break down of 18650 spend time and break down 18600, then Nifty 18575-18550-18500. This video is for educational purpose and my personal view . We are NOT SEBI registered Advisor, we only give the level on our practical trading experience. Kindly take the trade according to your risk and reward position and consulting your advisor. #stockmarkets #nifty #MarketPrediction #nifty50 #niftyfifty #nfityoutlookfornextweek #bankniftyoutlookfornext week #niftyoutlook #bankniftyoutlook #niftyforecast #bankniftyforecast #niftyshareprice #bankniftyshareprice #tommorrowniftyprediction #tommorrobankniftypredicton #niftytargettommrrow #bankniftytargettommrrow #9th june nifty #9th june banknifty #9th june marketanalysis #bankniftylive #banknifty #bankniftyoptions #bankniftystrategies #bankniftyfuture #bankniftyoptionstrategy #bankniftycalls #bankniftyintraday #bankniftylivetrading #bankniftyweeklyexpiry #bankniftycrash #bankniftytomorrow #bankniftypredictions #bankniftychart #bankniftytips #bankniftypremium #bankniftyoptions #bankniftyfuture #bankniftytomorrowprediction #bankniftyoption #niftyweeklyexpiry #bankniftyweeklyexpiry #nse #bse #stockmarketindia #niftyzerotohero #bankniftyzerotohero #traders #trader #sensex #Derivatives #derivatives #vijayanjum #index #niftyce #niftype #bankniftype #bankniftyce #zerotohero
NSE:BANKNIFTY
by vijayanjum
$GMX/USDT 12h (#Bybit) Rising wedge breakdown and retestGMX (f.k.a. Gambit) lost 100EMA support and got rejected after pulling back to it, bearish continuation would make sense. ⚡️⚡️ #GMX/USDT ⚡️⚡️ Exchanges: Binance Futures, ByBit USDT Signal Type: Regular (Short) Leverage: Isolated (4.2X) Amount: 5.0% Current Price: 72.890 Entry Zone: 74.345 - 77.445 Take-Profit Targets: 1) 67.335 2) 60.890 3) 54.450 Stop Targets: 1) 83.055 Published By: @Zblaba TSX:GMX #GMXUSDT #Gambit #Derivatives #DEx gmx.io
Short
by TradingOn
The Fed Just Broke SomethingThe chart above shows the CBOE Equity Put Call Ratio (CPCS) . Last week the put-call ratio broke its all-time record high, surpassing the levels seen during the Global Financial Crisis and the March 2020 market crash by almost twice as much. In this post, I will explain my thoughts about what's going on. I welcome others to also give their thoughts in the comments below. Let's begin with the basics of the put-call ratio. The put-call ratio is simply a measure of the relative amount of trading in put options versus call options. Typically the put-call ratio rises during periods of extreme fear in the market, when volatility is also high. Historically, the put-call ratio has been used as a contrarian indicator, meaning that when it is very high it signals that too many market participants are bearish and when it is very low it signals that too many market participants are bullish. Typically anything above 1 is considered too bearish. A put-call ratio above 1 has historically marked significant stock market bottoms. However, something very strange has been happening recently. The put-call ratio has been exploding to such extreme levels that some people are now saying the indicator is broken. Last week, the put-call ratio reached an insanely high level (2.4). Yet, on the day this record spike happened, the VIX was in the low 20s, which is only modestly elevated, (see the chart below). As the chart above shows, a VIX in the low 20s is only slightly above normal. The put-call ratio was so extreme last week that one would have expected the VIX to be off-the-charts. In the chart below, I've calculated the general area (marked by a flag) of where we would have expected the VIX to be if the put-call ratio accurately corresponded to such an extreme put-call ratio. Some market analysts and many people on social media are attributing the unprecedented spike to 0DTE , or Zero Days To Expiration, options trading. Zero Days To Expiration refers to options that are traded on the same day (or within 24 hours) that they expire. This speculative form of trading has proliferated over the past year. Those who cite 0DTE as the reason for a malfunctioning put-call ratio argue that its utility as a contrarian indicator has become confounded at best, or noisy and meaningless at worst. The below chart shows the proliferation of Zero Days To Expiration options trading. When compared alongside the put-call ratio, we can visually garner a potentially high correlation. Some market analysts have stated that the proliferation of 0DTE options trading has become so disruptive that not only has it broken the role that the put-call ratio plays as a contrarian indicator, but it has broken the essential role that the VIX plays in measuring volatility. The VIX, which is calculated based on only S&P 500 options expiring 23 to 37 days into the future, may not be properly capturing the true panicked nature of market participants who are mostly trading options with much less time until expiration. Yet, questions remain, even when considering the rising prevalence of 0DTE options trading. Specifically, why is 0DTE causing puts trading, in particular, to increase so dramatically? The answer is likely that 0DTE option trading is not the only cause of the exploding put-call ratio. Some informed market participants have argued that the Fed's extreme monetary tightening is largely to blame, though their reasoning is not as obvious as it may seem. Although it's likely true that the Fed's tightening is likely driving up fear and causing market participants to load up on puts. The more informed explanation involves an arbitrage strategy that seeks to take advantage of those who are loading up on puts. An academic paper entitled, Put Option Exercise and Short Stock Interest Arbitrage , explains this strategy. The strategy takes advantage of those holding deep in-the-money puts with no time value remaining and which ought to be exercised such that the cash can earn interest. Above is a screenshot of the academic paper, which I cannot distribute because of copyright restrictions. I can only show the abstract which is publicly available. For educational purposes, I will cite a small excerpt from the article to explain exactly how the strategy works: The game involves capturing short open interest. The game, dubbed “short stock interest arbitrage,” involves simultaneously buying and selling a large (relative to existing open interest), but equal, number of deep ITM puts and then immediately exercising the long puts. Since exercises are randomly assigned to open short positions, the arbitragers systematically capture the dominant share of the total short open interest and thereby earn the dominant share of the forfeit interest. Now that the Federal Reserve has dramatically hiked interest rates, this strategy is much more lucrative than in the past since the interest that can be earned by arbitragers is much higher. Furthermore, the stock market's decline in 2022 caused more puts to become in the money thereby expanding the volume of puts traded by arbitrageurs. Since this strategy is non-directional, meaning the strategy involves simultaneously buying and selling an equal number of puts, its net effect is theoretically zero. Thus, this strategy's proliferation may be causing the put-call ratio to malfunction. Despite these reasons, other market participants have speculated that the extremely high put-call ratio is due to large institutions and other informed market players loading up on large hedges because they believe a major market crash is coming. While this is largely speculative, there is some evidence that informed institutions are becoming increasingly concerned about a liquidity crisis due to the Federal Reserve's tightening. Last month, the Bank for International Settlements (BIS) recently issued an unusual warning about the potential for a liquidity crisis in the global FX swaps and forwards market. Link to the BIS article: www.bis.org The BIS, which is often thought of as the central bank for central banks, explained that dollar payment obligations in the FX swaps and forwards market are generally not recorded on balance sheets and that the risks associated with these debts could be understated by tens of trillions of dollars. In effect, the Federal Reserve's rapid rate hikes have caused the U.S. dollar to rapidly become more valuable relative to other currencies, creating risks in the FX swaps and forwards market that were not fully anticipated. In some regards, the actual causes of the breakdown of the put-call ratio are not as relevant as the mere fact that it has broken down. According to Exter's Pyramid (shown below), during periods of extreme instability of asset classes lower down on the inverted pyramid, everything higher up becomes some degree more unstable. The meteoric rise in Treasury yields has made everything above shakier, especially derivatives. Rapidly rising Treasury yields are destabilizing the highly-leveraged derivatives market in unanticipated ways.   Now that U.S. Treasurys suddenly yield much more, this means that capital will tend to flow lower down the pyramid into them. Leaving riskier assets higher up vulnerable to collapse. Despite all of this, some market participants continue to believe that the put-call ratio is still a reliable contrarian indicator. These market participants argue that whenever fear is high, people always say "this time is different" when in fact it is not. They believe that not only is the put-call ratio indicator still working but it is indicating a high chance for a major short squeeze. Only time will tell what will become of the current situation. Yet, one thing is for certain. Despite the highest put-call ratio on record last week, the rules of good trading and good investing remain the same. No matter the fear, volatility or crisis that may transpire, if one adheres to these principles, one will be successful. Sources Barraclough, Kathryn and Whaley, Robert E., Put Option Exercise and Short Stock Interest Arbitrage (May 17, 2013). Journal of Investment Management (JOIM), First Quarter 2013, Available at SSRN: ssrn.com
Editors' picks
C
by SpyMasterTrades
80
$BTCDOM/USDT 2D (#BinanceFutures) Big falling wedge breakoutBitcoin Dominance Index seems about to reverse, ahead of the Ethereum Merge it's an opportunity to hedge against big Altcoins. ⚡️⚡️ #BTCDOM/USDT ⚡️⚡️ Exchanges: Binance Futures Signal Type: Regular (Long) Leverage: Isolated (2X) Amount: 11.8% Current Price: 1197.3 Entry Zone: 1192.8 - 1144.0 Take-Profit Targets: 1) 1168.4 2) 1380.2 3) 1469.0 Stop Targets: 1) 1069.7 Published By: @Zblaba Risk/Reward= 1:1.25 | 1:2.15 | 1:3.05 Expected Profit= +21.08% | +36.26% | +51.46% Possible Loss= -16.90% Fib. Retracement= 0.382 | 0.559 | 0.702 Margin Leverage= 2x Estimated Gain-time= 3-4 months Tags: #BTCDOMUSDT #BTCD #BitcoinDominance #Index #Futures #Derivatives #Dominance Component Info: www.binance.com
Long
by TradingOn