Investor Education Books series by TradingEducation.com
by Jim Wyckoff
Foreword by Darrell Jobman
US Retail: $19.95
One of the best ways to learn about the markets and trading is to have a mentor, an experienced person who knows the ropes thoroughly and is willing to pass along his or her knowledge to you personally. As a reporter for a wire service on every major exchange floor at one time or another, Jim Wyckoff had access to some of the best and brightest people in the business – not just one mentor but many mentors.
In this chapter we introduce the main, and first, concepts that one has to grasp in order to
build, evaluate, purchase and sell financial structured products. Structured finance denotes
the art (and science) of designing financial products to satisfy the different needs of investors
and borrowers as closely as possible. In this sense, it represents a specific technique and
operation of the financial intermediation business. In fact, the traditional banking activity,
Jon strongly believes that before you can ever be successful in options trading, you must comprehend the concept of volatility. This is the very heart of understanding which options are worth purchasing and which are worth selling. In "How I Trade Options" Jon Najarian reveals how and why volatility should be the dominant factor in your trading decisions. According to Jon, "this is the single greatest misunderstanding among options traders. This concept alone could be the difference between your success or failure."...
Jon strongly believes that before you can ever be successful in options trading, you must comprehend the concept of volatility. This is the very heart of understanding which options are worth purchasing and which are worth selling.
In "How I Trade Options" Jon Najarian reveals how and why volatility should be the dominant factor in your trading decisions. According to Jon, "this is the single greatest misunderstanding among options traders. This concept alone could be the difference between your success or failure." ...
the absence of further guidance on the relative importance of the two argu-
ments, our prior about the relative smartness of institutional versus individual
money f lows remains neutral.With regard to the direction ofmoney f lows, there
are at least two reasons to believe that investors’ fund sells have a weaker as-
sociation with future performance than their fund buys. First, the disposition
effect discussed in Odean (1998) suggests that sell decisions are generally not
This proposal forms part of a wider legislative package dedicated to rebuilding consumer trust
in financial markets. The package has two other parts. The first is an extensive overhaul of the
Insurance Mediation Directive 2002/92/EC to ensure that customers benefit from a high level
of protection when buying insurance products. The final part of the package aims at
improving transparency in the investment market for retail investors (a proposal for a
Regulation on key information documents for investment products). ...
The impact assessment concludes that a 'strict liability' standard obliging depositaries to return
instruments lost in custody irrespective of fault or negligence is both conducive to ensuring a
high level of investor protection and to achieving a uniform standard across the EU.
The private bond market remains much smaller than that for the government. The
outstanding issuance of corporate bonds has risen to almost 10 percent of GDP in 2011, but
the market is still very concentrated in short duration rates, with a limited investor base and
less diversified issuers. This suggests that the private fixed income market is not a significant
long-term financing source for non-financial corporations.
Indexation: Around 90 percent of private bonds are linked to the DI rate, resulting in little
incentive for active trading.
“Structured products” are one of the fastest growing areas in the financial
services industry, and may already be over half of the notional size of the
hedge fund industry (AUM plus leverage). These products, constructed by
investment banks, are extremely complex using synthetic option replication
techniques, and offering a variety of guarantees in returns. They are sold to
retail, private banking and institutional clients. Hedge funds help reduce
volatility risk for investment banks in supplying these products. ...
The economic and financial crisis that arose in summer
2007 led to a significant increase in perceptions of risk
in the economy, resulting in a sizeable rise in risk and
liquidity premia on credit markets. Given the nature of
the crisis, the financial sector was particularly affected,
with respect to its financing via both the money market
and the bond market, which may have had an impact
on the retail interest rates offered by banks to busi-
nesses and households.
Most retail investors buy corporate bonds through a public offer.
A company that makes a public offer will issue a prospectus and
investors apply directly to buy bonds. Many investors find out
about these offers through newspaper advertisements.
The prospectus for an offer of corporate bonds generally specifies
a minimum investment parcel (or bundle of bonds). People who
invest in corporate bonds when they are first issued pay the face
value of the bond (usually $100 each).
Voted by the European Parliament in November 2010, the AIFM Directive covers all alternative sectors such as hedge funds, real estate and private equity, as well as traditional sectors where the fund products are not registered as UCITS.1
AIF products are generally reserved for professional investors, but may also be marketed to retail investors. Today, investors access alternative investment products primarily through national private placement channels; for European investors and products, the AIFM marketing regime will replace these.
Thus, an overwhelming majority of the funds
garnered from the urban non-retail segment
are short-term investments. Further, this is
not a short-term trend as it has been noticed
over a period of a few years. Therefore, if
the industry wants to change the age profile
of the funds it has at its disposal, it needs to
seriously look at the other investors i.e. retail
investors and high net-worth individuals
(HNIs) in the urban and semi-urban areas.
This will also help fulfil the objectives of
The withdrawal of the entry-load, which
constituted a good part of the commissions
passed on to the distributors, was one of the
other factors leading to a sudden change in
the distribution space.
Generally, it is more expensive for a
distributor to reach out to a retail investor
than to a corporate investor. While an
average retail investor folio has about
35,000 INR of assets, an average corporate
investor folio has 59 lakh INR of assets.
Investor base: about 70 percent of private bonds were purchased by banks in 2011. Their
participation has increased further recently partly because they have faced constraints in
expanding consumer loans given increased risk and higher cost in the sector, and therefore
have sought alternative higher-yield investment instruments.
Liquidity in the secondary
market is very limited as many banks tend to hold private bonds until maturity. Retail
investors’ participation remains low (see Figure 11). ...
The economic value of a
community is generally measured through such things
as residential real estate prices, taxing capacity, the
quality of public amenities, the value of nearby retail
services and the quality of human capital.
Assets grow and depreciate in value based on
individual and social actions, including the willingness
or ability of individuals, households, businesses
and governments to invest in and develop them.
Economically distressed communities have declining
asset values relative to more competitive places.
A study from 1979-1989 indicated that REITs performance is positively affected by
the flow of information in the market. The demand for such information is largely
attributable to institutional investors monitoring their investments (Chan, et al, 2003).
Overall, institutional investor involvement in REITs market is essential and the
lukewarm response from institutional investors may have contributed to the slow
development of the Malaysian LPT market.
Expansion of cultivated area seems unlikely to slow. Population growth,
rising incomes, and urbanization will continue to drive demand growth for
some food products, especially oilseed and livestock, and related demands for
feed and industrial products. A conservative estimate is that, in developing
countries, 6 million ha of additional land will be brought into production
each year to 2030. Two-thirds of this expansion will be in Sub-Saharan Africa
and Latin America, where potential farmland is most plentiful.
Fundamental Indexing™ (“FI”) is one of the most successful new investment
products to be launched during the 2000s. In a little over two years it has attracted over
$10 billion in portfolio investments. The product has been successful both in its appeal to
institutional investors and in its ability to gather assets from retail investors in the
burgeoning ETF market place. FI has been a marketing sensation. Moreover the actual
performance of the FI portfolio has been excellent.
At the time of the survey, twenty nine sites were identified as offering
online trading in Australia and surveyed over a three day period. The
websites were reviewed against a range of disclosure related criteria,
including best practice benchmarks and standards.
The survey determined that, on the whole, the online trading industry in
Australia is an effective and efficient e-commerce industry. It has provided
retail investors with a cheap, efficient and convenient process of buying and
selling securities in Australia.