How to make Money in the Stock Market.This blog looks at how you can make money trading and investing in Forex, Stocks Options and Futures.


Friday, 29 December 2006

And Now...The end is Near....How to use Currency ETFs in your investing and Trading

Well it could be a requiem for ol Blue Eyes, but I am referring to a couple of things, firstly 2006-isn''t it amazing as you get older how a year seems to get shorter and shorter.When I was younger a year seemed to last forever-nowadays a year feels like a long weekend !!

I am also referring to my view regarding the US Dollar, I feel 2007 will be the year where the fundamentals catch up on the dollar and we see a weakening, possibly with the Dollar Index making new lows.

This is of interest to me for two reasons, one -can we make money from this perception and two-being a UK based investor with a large portion of my investments in US $ how do I manage the currency risk, well there are a number of possible ways.Futures, Options, Certificates of Deposit and Multi Currency funds.My Pension fund is set up in such a way that I could utilise Futures and Options-these are highly leveraged and may not be for everyone but there is another option....Currency ETF's..

I have added below some background to these instruments but they trade on the NYSE just like shares so are easy to get in and out of and also are not leveraged like Futures and Options and are also not subject to Time decay like options.I am likely going to utilise some of these early in the New Year but this may serve as a primer and some background for those of you not so familiar with them.

Foreign Currency ETF Funds

ETFs (exchange traded funds) have made it easier for investors to to invest in all kinds things, usually with very low expense ratios. In December of 2005, Rydex launched their first CurrencyShares for Euros, trading under the symbol FXE (the FX stands for foreign exchange). Similar to the gold funds, Euros would be held in a trust at the JP Morgan Chase Bank in London, with each share purchased representing 100 Euros. With a slight twist, the currency would also be held in interest bearing accounts, meaning the funds expense ratio would be paid out of the interest, and any additional interest accrues to the share holders. So why would you want to invest in a Euro ETF? Well, if you think the value of the dollar is going to decline and the value of the Euro is going to increase, you buy some of these shares and they go up in value, and you can later sell them and have more dollars to spend. Pretty simple. Funds like these are a world away from the old school style of investing in foreign exchange futures. They give investors an easy way to diversify beyond stocks and bonds, to take financial positions for opportunities in the currency markets, and they do all this through easy access of a brokerage account. You can learn about the various Rydex funds at The the popularity of the Euro fund, Rydex also launched a number of other foreign currency investment funds:
  • CurrencyShares Australian Dollar Trust (06/2006) - FXA
  • Currency Shares British Pound Sterling Trust (06/2006) - FXB
  • Rydex CurrencyShares Canadian Dollar Trust (06/2006) - FXC
  • CurrencyShares Euro Trust (12/2005) - FXE
  • CurrencyShares Mexican Peso Trust (06/2006) - FXM
  • CurrencyShares Swedish Krona (06/2006) - FXS
  • CurrencyShares Swiss Franc (06/2006) - FXF

Best Wishes and Good Trading


Mkt Report and Activity 29th Dec 2006

Well the sluggish trading continued today with an early bout of selling reversing the Dow ended up at a new record intraday High of 12526.7.It was not able to close above Wednesday's intraday peak of 12,519. At the close the Dow lost 9.1 points, or 0.07 percent,the S&P 500 Index (SPX - 1,424.73) lost 2.11 points, or 0.15 percent, and the Nasdaq (COMP - 2,425.6) dropped back below its 10- lost 5.6 points, or 0.23 percent.

I made one trade today buying the Commodity Index (GSG) that I mentioned yesterday, the index is around its lows but may not yet have bottomed so I bought half a position and may leg in to the other half if we get a bit more of a pullback.

Action for the rest of the week is likely to remain choppy within narrow ranges, but again watch for any possible big swings tomorrow as big players position themselves at year end.

If I do not post again this year then I hope you all have a wonderful time celebrating the New Year whatever your plans.

Best Wishes & Good Trading


Wednesday, 27 December 2006

Mkt Update-2007 View

US mkts moved slightly higher on thin volume-The Dow Jones Industrial Average (DJIA – 12,407.6) added 64 points, or 0.52 percent, as it bounced off support at its 20-day moving average The S&P 500 Index (SPX – 1,416.9) jumped 0.44 percent, bounding off its 20-day trendline. However, the broad-market barometer remains below its 10-day trendline. Meanwhile, the tech-laden Nasdaq Composite (COMP – 2,413.5) increased 0.51 percent, but remains below both its short-term trendlines.

Nothing really much is happening and it is unlikely to in the short term-Friday may show some wild swings as there is some manouvering for Yr end-I am still big next year on Commodities and Energy.I have attached some commentary giving some background to this rational.

In 2007 I think crude oil will move upwards again and above $70-$75 a barrel there is a strong possibility it could consolidate most of the year north of $80.Natural gas, still in a downtrend since the beginning of the years highs, will also perk up and start to trend higher. I believe that exposure to commodities especially energy is the place to be. I am considering the iShares GSCI Commodity-Indexed Trust (NYSE-GSG) for 2007. GSG now trades right at its 52-week low, down 17.4% in 2006 and off around 22% from its high if I am right in my expectations then this could be a great medium term hold.
The GSCI currently holds 69.2% in energy futures, 13.1% in agricultural commodities 10.8% in base metals, 4.6% in livestock and 2.3% in precious metals.If you are looking for an index that has good diversified exposure to the commodity sector then this may be one worth researching.

Best Wishes and Good Trading


Tuesday, 26 December 2006

Long Term LEAPS

Well firstly I hope everyone had a great Christmas, I have been reviewing some longer term plays for my Account.I am starting to increase the useage of LEAPS to play these sort of situations.For those of you not familiar with LEAPS then please go to this link.

Basically they are long dated options plays-which allow me to control stocks for a lot less margin than buying them outright, the fact that they are long dated means the time decay is not such a big factor but I can still participate in the upside.

I have placed 3 positions today they are as follows :


Microsoft is incredibly cheap right now and generates massive cash flow, I think that in the near term it is a good buy up to $30 and I am buying the Jan 2009 25 Calls

JOE-St Joe

St Joe owns massive tranches of Florida and despite the potential issues in the Housing Market I feel that the Mkt Cap of St Joes is massively undervaluing the value of the land that it owns and as such is a great long term bet , when people wake up to this fact then I think we will see a good re rating of the price of the company.
Again I am buying the Jan 09 45 Calls

WMT-Wal MArt

Wal Mart seems to either generate tremendous hatred or dedicated followers, personally I am only interested in looking at companies that I believe will generate a great return for my portfolio
Wal Mart is breaking in to the massive markets in China and India with some well placed strategic acquisitions and partnerships, when you consider the potential in these mkts I think this will prove to be an excellent move in the medium to long term and I ma buying the Jan 09 40 calls.

I am aware that not everyone is familiar with options or LEAPS and if people want a bit more insight I will be happy to pass on a bit more insight into their use.Alternatively you can just stick with buying stocks as the fundamentals are the same.

As ever these are not recommendations but an insight in to what I am doing , please make sure you do your own research and evaluate any positions based on your own situation.