the trading pitt second meeting

8/7/2019 The Trading Pitt Second Meeting

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S E P T E M B E R 2 7 T H , 2 0 1 0

THE TRADING PITT


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TOPICS

Short Positions

Hedging

Equities

Options

Futures

FX & Over the Counter

Support and Resistance Questions


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GETTING SHORT

Selling in the hope of a declining price

Stock Actually borrowing shares from someoneand then selling those on the open market.

This still entitles the original owner all dividends and the rightsof stock ownership. You have to pay them the dividendsand comes out of your Profit and Loss (PnL)

Covering your position Buying stock in the marketand then delivering those back to the originalowner.

Sell High, Buy Low


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OPTIONS

The most basic derivative.

A standard option contract enables you to control 100shares and expires at a set date.

Long Options Gives you the right to buy or sell 100shares but not the obligation.

Calls Buy to get exposure to long stock

Puts Buy to get exposure to short stock

Unlimited Upside, Limited Downside RIMM Nov 10 Calls at 50.00 cost 2.38

Breakeven is when the 52.38

Can be traded, do not need to be held to expiration.


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OPTION EXAMPLE

Breakeven 52.38Target $55.00Profit = $2.62

Profit Percentage =2.62/2.38 = 110%

Total Upfront 238.00Commission = $1

Time left: 7 weeks


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FUTURES

The primary way to access the commodity markets. Gold, Oil, Treasuries, Wheat, Interest Rates, currencies,

etc. Check out www.cmegroup.com for more information on the

different types of contracts.

Generally considered the most volatile A futures contract is an agreement to buy or sell a set

amount of a given commodity at a given date.

Not at a given price like options. Your PnL is determinedjust like stocks with your entry and exit prices.

Interested in Futures, check out the Series 3


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FX FOREIGN EXCHANGE

Buying one currency and simultaneously sellinganother Being Short

No different than buying stock Going Long RIMM

Stock and Short Cash You think in the future that RIMM stock will be worth more

than it is today.

Biggest market in the world, most fragmented.

The EUR/USD at 1.34 translates to it cost $1.34 topurchase one Euro.


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FX EXAMPLE

Buy 10,000 EUR/USD at 1.33 =Selling $13,300 and buying10,000 Euros

Sell 10,000 EUR/USD at 1.35 =Selling 10,000 Euros for 13,500

Net $200 profit


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HEDGING

Traditional finance teaches that by expecting acertain amount of reward you inherit a certain levelof risk.

This is because they assume asset prices are random.

So, the largest institutions want to hedge out asmuch risk as possible.

Large corporations often short futures because they

want to focus on their production. If selling price moves in up they still dont benefit

because they are short futures, but still hold theproduct.


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SUPPORT AND RESISTANCE

The concept of price memory and that marketparticipants want to break even.

A position trades against you and goes back to its

initial price. Buyers sell out their longs and shorts covers

Introduces the concept of levels and inflectionpoints where buyers and sellers meet

Volume is important Market Delta and Profile Charts


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SUPPORT BECOMES RESISTANCE


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RESISTANCE AND SUPPORT ZONES


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QUESTIONS?

Send us an email at [email protected] or meat [email protected]

Check out the website

http://www.pitt.edu/~sorc/trade/

Check out Wall Street Warriors:http://www.mojohd.com/mojoseries/wallstreetwarri

ors/

the trading pitt second meeting

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