Multiple-leg options strategies will involve multiple commissions. Spread trading must be done in a margin account. Covered calls provide downside protection only to the extent of the premium received and limit upside potential to the strike price plus premium received. Writing uncovered options involves potentially unlimited risk. Options carry a high level of risk and are not suitable for all investors. Certain requirements must be met to trade options through any broker-dealer. Please read the options disclosure document titled Characteristics and Risks of Standardized Options via this link: http://www.optionsclearing.com/about/publications/publication-listing.jsp
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This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed by MyWealthyOptions as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. The indices mentioned are unmanaged and cannot be directly invested into. Past performance does not guarantee future results.
Fundamental Analysis Risk
Fundamental analysis, when used in isolation, has a number of risks:
- There are an infinite number of factors that can affect the earnings of a company, and its stock price, over time. These can include economic, political and social factors, in addition to the various company statistics.
- When using this method with mutual funds, the funds are composed of many companies and not all of them will be undervalued
- The data used may be at least six months out of date.
- It is difficult to give appropriate weightings to the factors.
- In the early 1970s and 1980s price/earnings multiples of 80 or 90 were considered acceptable by some for ‘blue chip’ stocks in the United States.
- In the 1980s in the United States some biotechnology stocks sold at ’50 time’s sales’. The companies had no earnings and paid no dividend. The new yardstick to value these became ‘products in the pipeline’. By the late 1980s most had lost three-quarters of their stock price.
- It assumes that the analyst is competent.
- A fundamental analyst assumes that other fundamental analysts will form the same view about the company and buy the stock, thus restoring its value and returning the trader or investor a capital gain. In practice, an undervalued company’s stock price can stay at approximately the same level (or decline) for years.
- It ignores the influence of random events such as oil spills, product defects being exposed, and acts of God and so on.
- It assumes that there is no monopolistic power over markets.
- Even when fundamental analysis reveals an undervalued company, or a stock with high growth prospects, it does not tell us anything about the timing of the purchase of the stock. In other words, we may have discovered a grossly undervalued stock whose price has been falling for some time, and may well continue falling.
Technical Analysis risk
- Technical analysis is derived from the study of market participant behavior and its efficacy is a matter of controversy.
- Methods vary greatly and can be highly subjective; different technical analysts can sometimes make contradictory predictions from the same data.
- Models and rules can incur sufficiently high transaction costs.
VXX is an exchange-traded note (“ETN”) based on The S&P 500 VIX Short-Term Futures™ Index, which is designed to provide access to equity market volatility through CBOE Volatility Index® (“VIX®”) futures. Specifically, the S&P 500 VIX Short-Term Futures™ Index offers exposure to a daily rolling long position in the first and second month of VIX futures contracts and reflects the implied volatility of the S&P 500® Index one month later. The index futures roll continuously throughout each month from the first month of the VIX futures contract into the second month of the contract.
Generally, the underlying security for one VXX option contract is 100 shares of the iPath S&P 500® VIX® Short-Term Futures Index ETN. Trading in Options on ETNs will ordinarily cease at the close on the business day (usually a Friday) preceding the expiration date and expire on the Saturday immediately following the third Friday of the expiration month. Options on ETNs generally may be exercised on any business day before the expiration date (American Style). Exercise notices properly tendered on any business day will result in delivery of ETN shares on the third business day following exercise.
iShares Barclays 20+ Year Treasury Bond Fund Exchange Traded Fund
iShares Barclays 20+ Year Treasury Bond Fund Exchange Traded Fund (“ETF”) seeks investment results that correspond generally to the price and yield performance of the Barclays Capital U.S. 20+ Year Treasury Bond Index. The Index measures the performance of public obligations of the United States Treasury that have a remaining maturity of 20 or more years. The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. The Fund’s investment advisor is BlackRock Fund Advisors.
Generally, the underlying security for one TLT option contract is 100 shares of the iShares Barclays 20+Year Treasury Bond Fund ETF. Trading in Options on ETFs and HOLDRs will ordinarily cease at the close on the business day (usually a Friday) preceding the expiration date and expire on the Saturday immediately following the third Friday of the expiration month. Options on ETFs and HOLDRs generally may be exercised on any business day before the expiration date (American Style). Exercise notices properly tendered on any business day will result in delivery of ETF or HOLDRs shares on the third business day following exercise.
The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks from a broad range of industries. The component stocks are weighted according to the total market value of their outstanding shares. The impact of a component’s price change is proportional to the issue’s total market value, which is the share price times the number of shares outstanding. These are summed for all 500 stocks and divided by a predetermined base value. The base value for the S&P 500 Index is adjusted to reflect changes in capitalization resulting from mergers, acquisitions, stock rights, substitutions, etc.
SPX options generally may be exercised only on the last business day before expiration (European Style) and expire on the Saturday following the third Friday of the expiration month. Trading in SPX options will ordinarily cease on the business day (usually a Thursday) preceding the day on which the exercise-settlement value is calculated. Exercise will result in delivery of cash on the business day following expiration. The exercise-settlement value, SET, is calculated using the opening sales price in the primary market of each component security on the last business day (usually a Friday) before the expiration date. The exercise-settlement amount is equal to the difference between the exercise-settlement value and the exercise price of the option, multiplied by $100.