Originally engineered in 2002, Accumulators, also known as knock out discount accumulator contracts, consist of a year of daily up-and-out long call options and twice the amount of a year of daily up-and-out short put options. Strategically placing the up-and-out call and puts forms a strike barrier below and a knockout barrier above the underlying’s price at contract formulation. Fok et al (2012) recognize that knockout percentage, discount percentage, market trend, and price variability generate the most critical effects on profit and loss. Therefore, to quantify how profitability vigorously changes, these metrics are manipulated in the study. The knockout percentage indicates the spatial distance the knockout barrier is in comparison to the underlying’s price. When the price of the equity is greater …show more content…
In each case, regardless actual or simulated data, when the contract knocked out early, profit ended positive. While in scenarios where the accumulator continued through duration, profit was continually negative. Using actual data, a 4.5% knockout yielded a positive profit, however, a 10% knockout returned a large negative loss. Fok et al (2012) went further to enhance their study by comparing various knockout percentages (2-7%) and discount percentages (4-15%). They found that lower knockout percentages and higher discount percentages yielded the highest cumulative profits. Market trend severely affects knockout percentage, discount percentage and standard deviation showing that accumulators offer a reasonable investment for investors in a neutral or upward, yet when the market trend is downward, accumulator contracts become substantially more dangerous. Concluding findings show that accumulator contracts are an unfair investment due to their limited upside profit potential and unlimited downside loss potential (Fok et al,
Much like the test market Contribution margins were also high for Strike Roach Ender. Aerosol and fogger Strike had a contribution margin exceeding 50% as seen in Table E.
In 1919, Charles “Get Rich Quick” Ponzi began redeeming coupons obtained overseas for between 100 to 300 percent profit. The investors in his plan were promised 40 percent profit on their investment within 3 months (Hagan, 2011). Word quickly spread about the money-making opportunity and Ponzi found himself with more investors than he could handle. He paid the early investors with money obtained from later investors, creating a situation that simply couldn’t be sustained.
The primary goal of this paper is to assess the impact of microcap stock promotion campaigns on stock volume and price. This study uses a sample of 81 stock touting emails sent by promotion companies to potential investors in 2009. Each promotion is matched with its corresponding touted stock, and the daily volumes and prices for each stock are analyzed for a period following the promotion. Using this empirical data, this research shows a significant (and in many cases drastic) increase in both stock volumes and prices on the day of and days following a promotion. In the long term however, volumes returns to normal (pre-promotion volume), and prices decrease to levels lower than their pre-promotion prices. The evidence is presented under the section labeled “Findings”. In-depth explanation on how the study is conducted as well as additional information related to the data can be found in the section “Data Description/Method”.
Bill Miller’s success in consistently beating what is thought to be an efficient market is unusual and many wondered what could explain Miller’s performance.
From June 24th to July 29th, the NextEra stock showed the fourth highest percent increase of price in my portfolio. At NextEra’s beginning price of $123.80, I bought 12 shares, totaling to be a $1485.60 investment for my portfolio. Through the five weeks, NextEra only had two weeks of a loss in profit, with the largest loss due to a drop in price of $2.35 (1.81%), correlating to a total value loss of $28.20. On the other hand, NextEra had three weeks of a gain in profit, with the largest gain due to an increase in price of $5.91 (4.77%), correlating to a total value gain of $70.92. At the end of five weeks, the ending price of NextEra was $128.26, correlating to a total value of $1539.12. This calculates out to be a price increase of $4.46 (3.60%), or a profit of
The stock market is a volatile, unforgiving battleground where fortunes can be made and lost within minutes. The first major stock exchange in the United States, The New York Stock Exchange (NYSE), dates back to 1792 when it acquired its first securities. Since then, the stock sarket has reached an astronomical size, with a market volume of over twenty trillion dollars. This success is not without its setbacks, though. The stock market crashes of 1929 and 2008 have single-handedly led to the worst economic recessions America has ever seen. Considering the sharp ramifications of a market crash, it is important to understand why
In this section, we’re interested in the potential problem and difficulty people could encounter in adopting the stub-trading strategy.
Bullwhip Effect has received attention from experts for almost two decades. Various ways have been found before to reduce the Bullwhip effect theoretically and practically as well. From the introduction of Bullwhip, it’s been extended to new level. Various forms have been noticed like Financial Bullwhip effect, Green Bullwhip effect etc. (Xun Wang1, 2016)
investor makes a loss and the higher the S T, the lower is the profit.
Saluzzi. "Introduction to Broken Markets: How High Frequency Trading and Predatory Practices on Wall Street Are Destroying Investor Confidence and Your Portfolio." Broken Markets: How High Frequency Trading and Predatory Practices on Wall Street Are Destroying Investor Confidence and Your Portfolio. N.p.: FT, 2012. N. pag. Financial Times Press. FT Press, 6 Aug. 2012. Web. 06 Feb. 2015.
A very risky strategy, requiring trader to have a high risk tolerance. Trader would buy a stock when it is failing and sell it when it starts to rise. This might sound very easy, but there are numerous times where the stocks never, or take a long-period of time to
People always confuse that what’s the difference between gambling and investing. In this cartoon, Bob should set out in responding to Joe 's question by laying down this difference between gambling and Investing especially in the context of the stock exchange market. To begin with, investing in this market and gambling are two different things regardless of their similar outcome that seems to converge at making either gains or losses. Investing in the stock market involves a web of integrated legally accepted channels that are at the backstage of a decision made by a client of a mutual fund, investment bank or any other relevant institute. The potential factors that dictate the decision can give people the right of legitimacy to invest in the stock market.
It was going to be a sure fire way to make some quick money. In the late 1990’s, high technology and internet stocks were experiencing tremendous gains and a new way of trading stock was being developed. Online trading was in its ...
Amaranth made huge bets on the market moving in one direction, the direction of their leveraged bets. Although the fund’s investors would have significant returns if the trades went as planned, this strategy cannot effectively minimize risk. Also, futures contracts that Amaranth engaged in have higher risk than equities because of the leverage given to futures traders. Amaranth was therefore exposed to high level of risks, which will be discussed in the later section. The Amaranth debacle was mainly due to the insufficient risk management steps taken and the incorrect bets on the
Accrual accounting is an accounting method that recognizes economic events regardless of when cash transactions occur in order to measure the performance and position of a company. The general idea is that economic events are matching revenues to expenses to recognize which is the matching principle at the time in which the transaction occurs rather than when payment is made (or received). This method allows combining the current cash inflows or outflows with future expected cash inflows or outflows to give a more accurate picture of a company's current financial condition. Accrual accounting is considered to be the standard accounting practice for most companies with the exception of very small operations. This method provides a more