Get Considerable Debt Relief Using The Debt Snowball

The term “debt snowball” is used to describe effectively managing your debts by yourself regardless of the amount your currently owe using a debt management plan. No matter what your situation is, you can start doing something about your debt problem.

Most people have accrued their debts over a long period of time, the fact is it is not going to be cleared in a matter of weeks, the debt will take time to clear off – but it will be done. It is simply a matter of taking stock of your situation and being aware that a strategy must be implemented that you can realistically maintain.

Firstly, destroy your credit cards. To begin eliminating your debts, you must stop adding to them. Do your sums and find out how much you can afford to put towards your debts. What do you spend money on that can be cut back on without getting into further debt? Obviously, you will have your bare minimum with rent/mortgage payments, food and utility bills.

At this point in your life, luxuries need to be reduced. Do you have a membership for the gym, or other leisure centre. Get a work-out by going for a brisk walk every day. What about buying food and drinks when you are out? Buying food on the go can be extremely costly, it is easy to think about it as only a few dollars here and there but at the end of the month you could pay a large bill with the cash.

Ok, so you have cut back on unnecessary spending using your income for only the bare essentials. This should also allow you to pay the minimum payment on your debts per month. Take the residual cash and put it in a savings account or towards existing savings.

To put the debt snowball strategy into effect, you will need savings of at least $500 for one person. Now, these savings cannot be used for everyday bills, it is strictly for unforeseen costs only such as fixing a boiler, plumbing or your vehicle.

After you have successfully saved this amount (or already it have it) you can begin. Construct a list with every debt that you have, starting with the smallest sum and finishing with the largest, remember to include absolutely everything.

The next thing to do is put the money you were previously putting towards your savings and begin paying off the list. Because the first few entries on your list will be smaller sums, you will be able to get rid of a good few debts immediately. This will give you the encouragement that you need to carry on paying those debts.

It may be tempting to put your cash towards the debts with the most interest. Although theoretically, this would save you a little more, we are only talking a small amount and at this point we are looking to for motivation which will be achieved when you begin seeing your list diminish.

The whole point of the debt snowball, is to keep going bit by bit, constantly paying off your debts. It may be a slow process but everyday you will have paid off that little bit more making the end nearer in sight.

For optimum encouragement, you can treat yourself with a small luxury after a debt has been paid. If you have a family, you can put it towards a cheap and cheerful family outing or for you and your partner.

Once you are in full flow, you will notice a feeling of relaxation. People often do not realize what debt problems do to the body with the stress and anxiety it brings. You may not be going on expensive holidays or buying a new car at the moment, but the feeling of relief which comes with debt solutions gives far more happiness than retail therapy ever could.

The Review of Debt Cures They Don’t Want You To Know About’

You may have heard about the book “Debt Cures They Don’t Want You To Know About’. This book by Kevin Trudeau, follows his last book “Natural Cures They Don’t Want You To Know About” which was an expose of the medical drugs industry. It was believed that they, along with medical practitioners were omitting to inform the public that many of the medicines people “needed” could be swapped for natural treatments that would be just as effective. This placing people at the mercy of the medical drugs industry where money is made out of it.

This new book has a similar slant but this time exposing a possibility of the credit card industry and banks to be conspiring to drown the spending public in a sea of debt where they will profit from the massive sums of interest.

Nobody wants to believe that they are entirely to blame for their existing debt problem. This book opens up the concept that the finance industry are to blame for the current sweeping debts and that individuals could not help the situation.

As time goes by, it is very much the norm to be in debt. Anyone that does not own a credit card is “weird”. Credit cards are universally accepted making purchases anywhere in the word extremely easy and seemingly affordable. Borrowing money is a good thing isn’t it? We are all encouraged to take out a mortgage as soon as we can to get onto our first step of the property ladder.

Getting a mortgage is an investment, such an asset (usually) will only appreciate in price, therefore rendering it a profitable credit transaction. However, most of the items purchased with a credit card are small luxuries everyday with the odd car thrown in for good measure, hiking the balance up and up.

At first the credit card companies and other financial institutions are only too happy to increase your limit for you. They want to. Then you can go out and spend more and pay more interest on your ever increasing balance. However, when you can’t pay the astronomical monthly payments anymore, you are considered a risk and are blacklisted, ejected from the world of credit and your name becomes mud. According to Kevin Trudeau, this is the result of the conspiracy,

The book Debt Cures, homes in the point a bit but is encouraging for getting rid of those nasty debts or at the very least reducing them with a debt management plan.

Included are excellent resources for free reports on reducing various kinds of debt problem and in varying situations.

Although there are many books on debt management available “Debt Cures” is unique in it’s ability to talk straight to the reader and is easy to comprehend, no financial jargon. It is a must have for those who feel swamped by debts with no way out. If you need a rescue boat from your current situation, this book might be your ticket to safe shores.

Value and Prices in Options Trading–Part II

If you have read Part I of this series, you will remember the example of a stock whose market price was $27 with a June 30 call option and premium of $2. This option was sold at a discounted premium because it was out of the money, but this lower price is traded for a much higher risk. Because the possible profits are diminished as the expiration date nears, risks are inherently higher, too.

This phenomena of premiums reducing as the expiration date nears is known as ‘decay’ in option trading. Many investors are successful in these trades because they are knowledgeable about calculating their proposed risks.

As seen in Part I, options in the money have intrinsic value, and the moreso that this is true, the more the price movement will likely mimic that of the market price. For example, assume the market price of the same option rises to $35 and the premium is now $3: $35 – ($30 + $3) = $2, and IV = $35 – $30 = $5.

Even though this doesn’t seem to be much of a gain, remember these will be multiplied by 100 (standard options are sold in lots of 100). So, $2 x 100 = $200 in profit.

These examples are all assuming an ‘American’ option that can be exercised at any time before the expiration date. ‘European’ options are always exercised on the date of expiration.

Remember that the investors selling these options don’t want to just part with their money – they’re in the business of making money, too. This type of scenario would likely be subject to arbitrage, or buying and selling in different markets to make quick profits due to these differences in price. Arbitrage has the effect of forcing prices to a point where investors will only break even.

This is why time value is such an important calculation when speculating. Using the difference between strike and market prices and the time left before the expiration date, the profitability of an option is estimated.

If you’re considering two different options, they likely have different strike prices; if they still mature on the same date, their time values will differ. Also, options may have identical strike prices, but different expiration dates – this also accounts for different time values. Premiums are always affected by the amount of these different values, too.

As an example, we can assume the market price stays the same, and the two different options’ strike prices are identical. Obviously, it must be the expiration date that’s different, and a chart showing the premium versus amount of time to maturity will be declining. These charts are often found in online options trading sites.

It’s also important to realize that options with out of the money strike prices will be priced at lower premiums as the date of expiration nears. This is due to the declining time value.

Always remember that the closer an option comes to expiration, its premium price will lower, but your risk also becomes higher. Using these basic concepts of value and price will help you with your online options trading practice, but more options trading education is needed to form your own trading strategies.

Value and Prices in Options Trading–Part I

Perhaps the biggest difference between trading stocks and options is the fact that options have an expiration date that any action must be exercised by, or lose your entire investment. Conversely, those who buy stock always have the option to hold and wait for an upturn in the market.

This expiration makes it much more important to determine an option’s value accurately, but several tools have been developed to do this for you. The most common methods for determining the value of an option include calculating intrinsic and time values.

Intrinsic value simply shows you by how much an option strike price is in the money. Always remember that the strike price is that at which the asset is bought or sold if you choose to exercise your option. ‘In the money’ means that this set price is lower or higher than the market price, depending upon whether you’re discussing a put or call option.

Call options trading can calculate the intrinsic value with the following formula:

IV = market price – strike price

Because options are purchased before the expiration date, the value of these options changes as the expiration date approaches. This change, over time, reduces the value of the option as an investment option.

For call options, one with only a few days left before the expiration date is usually calculated to have less value when compared to one that is three months away. When the expiration date is reached, the option is either in the money (profitable), or out of the money (loss is realized). ‘Time value’ is the amount that an option’s price is over and above the intrinsic value.

For example, formulas to determine intrinsic and time values of a put option are as follows:

IV = strike price – market price; TV = premium – IV

‘At the money’ options mean that the market price is equal to the strike price. ‘Out of the money’ options mean that the strike price is higher in a call and lower in a put than the market price. Either of these scenarios means that the option has no current intrinsic value, but only time value (because the IV can change with time as the market price changes).

As an example, let’s assume the market price of a stock is currently $27, and has a June 30 call. This ’30’ is not a date, but rather the strike price of an option. This option would be considered out of the money if the premium was $2, because $27 – ($30 + $2) = -$5.

With no value in this option, this doesn’t necessarily mean you wouldn’t invest in it. If the time period is still a few months out, there is still potential for profit if you believe the market price will change. This allows you to minimize risk of losing huge amounts of money by hedging your investment dollars.

This is where your talents as a speculative investor come in to play. Use several online options trading tools that can automatically calculate and track the changing intrinsic and time values of a particular option, giving you the options trading education needed to make a valid trade.

Using ‘The Greeks’ in Options Trading–Part II

If you read Part I, you are slightly familiar with using the Greeks as indicators when trading options, and how delta and theta can be used. Here, we’ll take a look at gamma and vega.

Gamma is calculated via complicated mathematics, but is based on a simple idea. It reflects the rate of change of delta, compared to the changes in price of the underlying asset. This tool helps to estimate the price of an option and how far it’s in or out of the money.

Gamma is small when an option is far in or out of the money. At its maximum, it indicates the option price has approached ‘at-the-money’ levels.

Vega reflects the option’s price and its sensitivity to changes in volatility. This is essentially the degree of which and how frequently the price of the asset changes. Sharp decreases or increase in price are considered high volatility.

There are also several kinds of volatility, including implied volatility. This is arrived at by considering the exercise price, rate of return, expiration date and premium price. Your online options trading software may also offer historical volatility measurements.

These calculations are very complex, but as an investor you only need to understand the basic underlying ideas. Increased volatility will give you a clue to increased risk, because this measurement reflects the amount of uncertainty and your possible gain or loss on the option.

When prices change slowly, you’ll have more time to react properly. Very little is lost or gained when price changes are very small. Large changes in price in a short amount of time means your option is highly volatile and you have a risk of losing everything.

This is where vega comes in to play. Vega can be used to assess the current volatility and use this information to make your next move. When the asset experiences increased volatility, the price of the option will tend to increase. However, different options will react differently and have individual vega measurements.

Even though all of the Greeks are extremely helpful in trying to manage risk and make educated options trading decisions, these calculations should be only considered to be tools in your practice as an investor. They do not indicate a sure-fire win if certain measurements occur, but rather serve as an indicator that the likelihood of winning in this circumstance is more likely.

Several online options trading software programs will automatically calculate and provide these measurements as needed with a standard membership package. Make sure you understand the option trading process thoroughly before beginning to trade in order to reduce your risk, and start as small as possible.

Practicing several mock trades before using actual money will help you to determine the usefulness and your understanding of the Greeks when assessing options and their associated risks. Also seek out online forums, books and any other resources available to gain a deeper understanding of option trading. Much of it may seem confusing at first, but over time you’ll find it will become easier.

Using ‘The Greeks’ in Options Trading–Part I

Modern mathematics practices praise the ancient Greeks for inventing elementary calculations still used today. However, modern mathematic tools have helped to assess risk and calculate prices and profits for the many new investors embarking on the world of options trading. These tools include delta, theta, gamma and vega, commonly referred to as ‘The Greeks’.

Luckily, we don’t need to understand all of the underlying calculations to use these tools and further use the basic concepts needed to measure risk and maximize profits.

Factors that affect the price of an option in the market are quantified as The Greeks in the world of options trading. These factors may include the asset’s market price, the strike price, the expiration date, and current volatility and short-term interest rates. Common sense may tell you how these indicators and values may affect the value of an option you’re considering trading.

Let’s first consider the strike price. This is the specified price that the asset, which may be a stock, bond or real property, must be traded at if the option is ‘exercised’.

For example, if Microsoft was priced at $28 per share and the option was a June 32 call (this 32 is the strike price, not a date typo), this option would be referred to as ‘out-of-the-money’ since the market share price is lower than the strike price.

Depending upon how big this difference between the two is, the price of the option will be affected to some degree. ‘Delta’ is a measurement of this difference.

Using complicated calculations that employ ratios comparing the change in the asset price and the change in the option price, delta is calculated and expressed. If delta is 0.7, this means that with every $1 rise in Microsoft, the option would be expected to rise $0.70.

Any online option trading software should calculate and provide all the Greek calculations for you, as well as the price of the option and expiration date. As the option reaches its expiration date, delta tends to increase, especially for options that are near to in-the-money. Volatility also contributes to changes in delta, and should also be expressed on your trading software tools.

The ‘time decay’ of an option is measured by theta; this means that it measures risk and value when considering the time left before arriving at the expiration date and the likelihood that that the market share price will rise or fall, whichever is desired.

If the example June 32 call had a premium of $3 and theta was expressed as 0.5, this tells you that the value of the option will likely drop 50 cents per day prior to expiration. As this expiration comes nearer, the premium of the option is also expected to decline at a faster rate.

Theta will always reflect these changes, and once an option is purchased, the Greek indicators should be closely watched. As with any investment, it is suggested to study and be completely prepared for the volatile changes experienced when trading options.

Managing Your Risk in Options Trading

Every type of investment carries some level of risk, but there are also several types of risks to consider. Managing your risks in options trading can both maximize your net profits and lower your level of losses.

Price uncertainty and volatility is the primary risk in any market investment, since we never know whether a price is going to rise or fall, and by how much. Much like bonds and futures, options carry one additional risk that they will eventually expire.

If action isn’t taken by that date, your entire investment is lost. However, this may at times be the best option if the price drops considerably after buying the option and you risk losing much more than just your initial investment.

You must always account for the uncertainty in the size of the price movement and account for volatility. Volatility means that any investment may drastically change at any moment, for better or worse. This is how both your profits and losses are incurred.

As an options trading participant, you must realize that options are actually a form of risk management. Because you are able to leverage your dollars and control part of an asset without outlaying a ridiculous sum of money to simply buy shares of stock, you are risking less.

This leverage is the most helpful way to alleviate and manage risk. Let’s assume that you want to buy 100 shares of a stock that is currently priced at $400 a share. This amounts to a $40,000 investment, and most of us just can’t swing this type of cash around.

However, you can purchase options for the same stock, without owning them, for just a few dollars per share. Options are typically bought and sold in standard lots of 100, so a $20 option premium would cost you $2000. Now, you can hold the investment for an allotted period of time and control it without ever actually owning the stock.

This type of risk management allows you to keep most of your cash and manage the amount of principal you are risking. Perhaps you could afford the $40,000 investment in the stock shares, but can you afford to lose it all?

Although it’s not common, it is always quite possible when accounting for the affect of volatility on the daily market. Conversely, the $2,000 in options can still provide profit opportunities based on changes in the stock price without risking so much capital.

Before investing in stock options, you first need to consider every risk factor involved. Several options trading software programs will do this for you, without you needing to conduct complicated mathematical calculations. The Greeks, delta, theta, vega, volatility and others, are helpful in quantifying this risk to determine if you can actually afford it in said transaction.

It may also be helpful to peruse online option trading sites and forums to discover how other novice investors are learning the ropes of risk management. Ask a ton of questions and verify the information you’re finding before employing any of these risk management strategies.

Balancing Profit and Risk in Options Trading

No investment that is profitable comes without some level of risk. Without risk, there’s no chance of profit. This is why investors use several tools and strategies to try to maximize the potential profits and minimize risk when speculating about future options prices. Here, we’ll discuss some of the options trading strategies employed to do just this.

Long calls are the simplest trade in options, and are best for beginners to start with in the world of options trading. These calls give the right to buy the underlying asset at a specified price (also called the ‘strike price’). The cost of this option is called the ‘premium.’

When a strike price falls below the market price, an option is said to be ‘in the money’, and when it’s above, it’s referred to as ‘out of the money’. No matter what the market price is at the time of an option’s purchase, the investor is guessing the price will rise above his cost prior to the contract’s expiration date.

Profit potential with long calls is infinite, as the market price of a stock or bond can rise indefinitely; the amount of which determines the amount of profit an option trade makes.

However, there are some risks involved. Prices rise and fall in cyclical patterns, so falling is always a possibility – even with the best research and speculation in place. The good news with options is that they cost a fraction of the actual market cost of the asset, so losses can be controlled.

Options trading uses leverage, or the ability to control more than you actually own, with a much smaller investment. Option contracts are typically priced at about 5%of the underlying market price, meaning the leverage is 20:1. However, the option must be liquid to be advantageous. Ensure that the open interest, or total outstanding contracts, is no less than 100 – the higher this number is, the better.

Puts are contracts to sell an asset at a set price before the date of expiration. These are utilized in times when an investor speculates the price of an asset will fall, as they sometimes do.

This option is much like selling stock short, and involves borrowing the shares and selling them immediately. The difference is your profit, unless the price rises; then, you owe your broker.

Long puts allow you to speculate the market price will fall below the strike price. Risk is capped at the amount paid for the put option contract – however, profits are also capped since the price can’t fall below zero.

Other tips that will help you in options trading is to find options with underlying assets that are liquid and showing daily trading volume of over 500,000. You’ll also need to allow enough time between the purchase date and expiration date to accurately assess the market trend and price. Though options near the expiration date are much less expensive, the risk is much higher that they either won’t change at all or will decline in value.

Basic Concepts Required in Option Trading Strategies

Many simple strategies exist in basic stock option trading, but there are some general concepts you’ll need to understand in order to continue your options trading education.

If you don’t know what a call or put is, it’s time you learned. Investing in a call option does not obligate you, but gives you the right to buy at a pre-determined price. Conversely, puts give you the right to sell at a specified price. You’ll have the ability to buy or sell options, and when selling you transfer this right to the buyer of the option.

Long calls are the most basic types of calls. As an example, a stock market price may be $30, and have April 15 options that expire on the third Friday of April. The strike price is a pre-determined $15 that essentially means that if exercised, the option must be bought at $15.

Short, or naked calls, apply to situations where the seller of the option does not own the asset he must sell if he exercises his option. On the selling side of the transaction, this position is said to be ‘short’.

When market prices decrease, short calls profit by the amount of the premium. When this price increases and reaches a level above the strike price by an amount greater than the premium paid, the short position loses.

A long put is used when investors believe the future market price of the underlying asset will drop before the expiration date. Profits are pocketed when prices fall below the strike price by an amount greater than the premium. When prices increase or don’t fall enough, the put contract is typically allowed to expire at a loss.

For those who think future prices will rise, a common options trading strategy is selling the right to sell at a pre-set level. When the underlying asset’s market price increases, a short position buyer will profit the amount of the premium. When the price dips below the strike price by at least the amount of this premium, the investor loses.

These four basic positions are utilized in several different strategies in a variety of combinations. When trading options, these strategies may be employed to strictly make a profit, or try to manage risk with hedging.

Hedging basically means that an options trading investor takes two positions that typically move in opposite directions; this method results in lower profits, but will help to protect against huge losses and maintain profits that are realized.

‘Bull spreads’ and ‘bear spreads’ are used to achieve this goal. Bull spreads use the long calls we discussed above with lower strike prices, and combine these with short calls at higher strike prices, and a short put with a higher strike price. Bear spreads use a short call at a low strike price, long call with a high strike price, or a short put with a low strike price and long put with a high strike price.

Your online options trading software will help you to learn about these strategies using examples and supposed parameters and assumptions.

Using the Spread as a Commodity Trading Strategy

Commodity trading can be extremely profitable or quite the opposite, depending upon the types of trading strategies employed. The highly volatile commodity markets require investors to carefully determine the best buying habits and speculations in order to profit from this type of investment.

Strategies are typically implemented in any investor’s or commodity broker’s daily trade habits in order to minimize risk or use them as a hedge. However, along with minimizing risk comes the possibility of lowered profits. The spread is one of the best ways to hedge risk and still realize profits as a popular investment strategy in commodities trading.

Usually, commodities trading requires you to buy or sell a futures contract, and you may simply employ the strategy of ‘going long’ or ‘going short’ in this process.

‘Going long’ means that you are purchasing a futures contract, speculating that the price of your chosen commodity will rise prior to the expiration date. These contracts are bought and sold just like stocks and options.

‘Going short’ means just the opposite. Here, you will sell a futures contract to another investor, expecting the price will fall prior to the expiration date. This strategy requires a little more explanation, though – how do you sell these contracts when you don’t own them in the first place?

The answer lies with your commodity broker or online commodity trading account. Going short requires you to borrow the contract and buy one later to make up any shortfall (rise in price). Let’s look at a specific example:

In April, you sell a contract for August corn at $5 per bushel, and the contract is written for a minimum amount of units – typically 5,000 bushels for grains. If the price falls in July to $3 per bushel, you’ve just profited $10,000 before paying the required commissions.

Commodity trading strategies usually involve selling various types and lengths of contracts for the goods, and the simplest type is the ‘spread’. Here, we’ll discuss an easy-to-understand example:

In April, the price for a June contract for corn is $6 per bushel and the same contract for August is $6.50. If you predict the ‘spread’, or price difference between the two, will change prior to the June expiration date more than 50 cents, you may profit this difference by selling the June contract and purchasing the August contract. This commodity trade is going short on June and long on August.

So, how do you profit from this type of spread trade? Let’s assume in May the June contract price rises to $6.10 and the August contract rises to $7. If you settle both contracts, you lose 10 cents a bushel on the June contract and gain 90 cents on the August contract. Though you lost on the June contract, you still made a net profit of 80 cents per bushel, which equals $4,000 for a standard unit of 5,000 bushels in this example.

Hedging your investments by going long and short at the same time can lower potential profits, but also reduce your possible losses over time.

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