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The largest trading market in the world is the Forex market. With Daily average trades of around $2 trillion, it is equal to three times the total trades of the stock exchange and the mercantile exchange combined. This market is huge and anyone can take advantage of it.

The cost of a call and the cost of a put are almost directly related. If you have a $40 stock, a $40 call and a $40 put will be almost exactly the same price most of the time. If there is a difference, the possibility of an arbitrage usually exists meaning that there is a 0 risk strategy (minus commissions) to get something for nothing. This is true whether it’s a collar or another strategy. I don’t completely understand the full process that allows for that to happen, but a complex series of trades usually makes it possible. So if the price of a call and put are going to be the same that means generally the higher priced calls are due to greater risk. Some reasons may be historical volatility, as that plays a roll, but the implied volatility, that is, how much people expect or are betting on the stock to move, becomes important.

A covered call strategy is great, as it can allow you to get your income back, and put it to work elsewhere quickly. In addition, time value is certain, and covered calls will allow you to collect this value while speculators betting on a stock rising beyond the option price plus what they paid for the option will have to pay this amount to you no matter what. Even if the stock does go beyond this point, you don’t incur a loss; instead, you miss out on potential gains. This can cause a covered call strategy to be more stable. You ultimately want the stock to expire at the money as this will allow you to collect the full premium, and still own the stock. Anything above this and your gains of your stock will cover the loss of the call and your gain will ultimately be the same. However, if it goes higher, you will have to repurchase your shares at a higher price, although selling another call against them will result in a higher premium.

Covered call strategies have advantages and disadvantages. A covered call is essentially giving up a stocks potential for capital gains and exchanging it for income… As you probably can imagine, value investors and contrarian investors, or those who bet on a stock that they believe has underappreciated in value and is on the way down or moving sideways will generally be able to see some value in this. Income investors will love the extra yield.

As a stock trader, you should ask, is the trader in you? if you like stocks and bonds and the exciting life of a financial trader, then it very well may be. The first thing to test this hypothesis out is the stock market. This is an area where you can see if you have what it takes to make it in the crazy fast world of high finance. The typical image of the floor of the Mercantile Exchange being filled with a bunch of guys that couldn’t land jobs anywhere else is very outdated and sad. Instead stock traders are increasingly becoming some of the most sophisticated investors on earth. The ability to pick a winner in the stock market is what it all boils down to.

There are some people who can buy a stock with the intention of holding it for years and years. If this is you, you look at a lower stock price as an opportunity to get it cheaper, or on sale. While this may work for some, people often times under estimate the risk of supposed blue chip companies losing very significant amounts. See GM, AIG, Ford, Merrill Lynch, Lehman Brothers or Citibank as a few examples.

A trading system is a methodology of trading. An investor who uses one system and follows a specific set of guidelines when making a decision, follows system trading, and will usually never deviate. A trading system is only one method of trading, and usual requires no thinking. It is possible to have one system that is governed by multiple system.

For anyone who has been invested in the markets over the past two years, it should come as no surprise to discover that market volatility, as measured by the Chicago Board Options Exchange, has risen from the range 16 to nearly 80, the highest level ever recorded.