Are you confused as to the question of how to deal with your incentive stock options? Or are you worried about owing a large amount of tax on options that you have not even exercised and do not have the cash to pay for it? Well, luckily, if you manage your affairs well and take on board some simple advice, you will be able to avoid owing too much tax on your stock options, and also postpone paying it until you have the cash to do so. In most cases, if you have a large amount of money tied up in stock options, then you should probably get some professional advice. This article is only intended to give you an idea of the steps that can be taken when tax planning with stock options.

First of all, you do not have to pay any tax owed immediately, if you do exercise your stock options. This is the case so long as you do not sell the stock you receive. If you exercise an option to buy some shares, then so long as you do not sell that stock, you do not have to pay any tax at that time.

The second piece of good news is that you can end up only paying 15% tax on the options when you do sell. This will apply if you hold on to the stocks for long enough to qualify for a long-term capital gain.

So things are starting to sound a lot better on stock options taxation. By postponing the tax owed until you sell the shares, you can avoid the hardship of having a tax fall due without any money coming in to pay for it. It is similar to the cases in the past where people received valuable paintings or other works of art in a will, and then immediately had to sell the painting in order to pay the tax that was owed on the inheritance. Also, 15% is quite a low rate of tax and it should also be remembered that this is the highest rate that can be payable on a long-term capital gain.

For more information, consult a qualified financial advisor.

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Option trading is fast becoming one of the hypes of this generation. Option trading has been and still is being taught all over the world as the definitive investment instrument for entry to the fast track. Popular speakers like Robert Kiyosaki and Robert G Allen have fuelled this option trading hype in a very big way. The steadily rising number of option contracts that have been traded over the past years is evidence to the rising popularity of option trading.

While option trading is one of the most versatile investment vehicles that have ever been created, it does have fundamental limitations.

First of all, the number of optionable stocks in the markets is really quite limited. Only 2649 out of 7277 tradable securities in the US markets offer stock options. This represents only 36% of the universe of tradable securities. This percentage is even lesser in other markets in the world. This results in a fairly limited choice for investors to choose from.

Secondly, the liquidity of most stock options up for option trading is also pretty limited. In fact, only a handful of stocks have options with liquidity to handle a respectable fund size. The result of which is that it may be difficult for investors with bigger funds to participate as freely in option trading as they may in trading shares. In this respect, option trading may be more productive as a hedging instrument against a large portfolio of shares.

Thirdly, due to its liquidity and its leverage effects, option trading is fast becoming the favorite of small investors with only a very small fund to trade with. However, many of the complex spread strategies that are being taught by option trading speakers all over the world require an extremely high commission outlay that is much higher than if you trade stocks. These high commissions frequently eliminate any possible profits from these complex spread strategies.

With these in mind, I hope you will be able to make an even more informed decision when applying option trading as part of your overall investment strategy. If who you are learning from is just telling you all the pros and none of the cons, then it is time you change teacher to someone who teaches the truths.

Jason Ng is the President of Masters ‘O’ Equity Asset Management. He is a fund manager specialising in options trading and his Star Trading System has helped thousands. Please visit http://www.MastersoEquity.com.

Previously, I’ve noted similarities between the recent SPX and the 1994 SPX, which suggested a bottom at 1,197, and the April 2005 SPX, which suggested a bottom at 1,228. Last week, SPX fell to 1,219 and rallied strongly to close at 1,252 Friday. Currently, intermediate-term technical indicators suggest SPX may have reached or is close to an intermediate-term bottom and may begin a rally soon.

Below is a two-year daily chart of SPX (black line and right scale) and NYSI (blue line and left scale) with 50-day MAs of VIX NYMO and CPC above and below the price chart. The gray arrow indicates similarities between the current SPX and the Apr 2005 SPX. The indicators suggest there may be a final "wash-out" below 1,200 or a continuation of the volatile trading range e.g. between 1,220 and 1,260 next week. SPX may then begin an uptrend for at least several weeks.

However, fundamentally, SPX may be in a volatile range throughout the summer, rather than rally to new highs, because the general price level is high enough to carry on uncertainty about monetary policy. Consequently, SPX upside may be limited, e.g. 1,280 or 1,290, although all the intermediate-term technical indicators should turn bullish in June or July. Currently, the NYMO 50-day MA and daily NYSI have not turned bullish, although the CPC 50-day MA is at an all-time bullish high.

Free charts available at PeakTrader.com Forum Index Market Forecast section.

Arthur Albert Eckart is the founder and owner of PeakTrader. Arthur has worked for commercial banks, e.g. Wells Fargo, Banc One, and First Commerce Technologies, during the 1980s and 1990s. He has also worked for Janus Funds from 1999-00. Arthur Eckart has a BA & MA in Economics from the University of Colorado. He has worked on options portfolio optimization since 1998.

Mr Eckart has developed a comprehensive trading methodology using economics, portfolio optimization, and technical analysis to maximize return and minimize risk at the same time and over time. This methodology has resulted in excellent returns with low risk over the past four years.

Dow Theory’s author, Charles Dow, theorized a relationship existed between the Dow-Jones Industrial and Transportation Averages that could be used to forecast business cycles.

In the early 20th century, the Dow Jones Industrials consisted primarily of thirty blue chip manufacturing companies called "smoke stacks". The twenty Transportations consisted primarily of railroads. The "rails" delivered raw materials to the "smoke stacks".

The business cycle was characterized by phases identified as prosperity, recession, depression, and recovery.

By noting the relative price action between the industrials and the transportations, it was believed that an astute investor could determine when the economy was shifting from one phase to another and act accordingly.

Regardless of how useful Dow Theory may have been then, can the same be said now, given all the component changes that have taken place within those averages? I think not.

Today the "smoke stacks" have been replaced by the "service" economy. Instead of steels, chemicals, mining companies, etc., we have software, fast food, amusement parks, insurance, financials, credit cards, etc., etc., etc.

The rails have been replaced mostly by airlines which, most decidedly, do not deliver raw materials to heavy manufacturers.

Can we still say the same relationship between the industrials and transportations exists?

If "chartists" are confused when one average refuses to confirm the other, this could be the reason.

Because No One Cares More About Your Money Than You

dynamic-stock-market-strategies.com

Good trading,
Don Heggen

The Break-even-or-better strategy is designed to either (1) show a profit for the year or, (2) at least, show no loss.

How:
A portfolio invested in 1 year Treasury bills, purchased at a discount and maturing at face value provides the cash, through the interest earned, to purchase (hopefully) attractively priced options.

Results:
Best case: If an investor is good at picking the right options on the right stocks that rise or fall a good distance during the life of the options, the profits can be significant. And the investor gets to reinvest the interest.

Worst case: The interest earned on the maturing Treasury bills offset the option losses (break-even).

Advantages:
Leverage and truncated risk (no margin calls; no short squeezes). No fuss, no muss.

Heads you win, tails you break even.

Sort of like visiting a casino that pays off if you win or returns your bets if you lose. Not bad.

Caveat:
In an inflationary era, simply holding the same number of dollars over any period of time constitutes a real loss of capital. Capital value hinges on purchasing power and, as purchasing power erodes, so does capital.

That being said, I’m sure, at the end of some years, there are more than a few investors that wouldn’t mind being in a break-even or better position. Know what I mean?

As an alternative, growth stocks, rather than options on those stocks, financed from the interest earned from the Treasury bills in your portfolio, replaces wasting assets with permanent assets.

Results: Win, lose or draw, the stocks are yours for better or for worse, for as long as you both shall live.

Seriously though, if you’re a good enough stock-picker, you should enjoy capital appreciation through growth, increased income from dividends, and your rolling-over maturing T-bills will be throwing off a constant source of fresh cash with which to buy more stocks.

On the other hand, should your stocks go bust, your Treasury bill interest will provide the cash for you to try again. Again, not bad.

Because No One Cares More About Your Money Than You

http://dynamic-stock-market-strategies.com

Good trading,
Don Heggen

If you happen to watch a business show or business news on TV, you’d probably hear words or phrases like “stock market,” ‘trading,” “stocks” or “stock market trading.” What are these things and what is their significance? To answer your questions, here’s an overview on what stock market trading is.

Definition

In simple terms, stock market trading is the voluntary buying and selling or exchange of company stocks and their derivatives. Stocks refer to the capital raised by a corporation by means of issuing and sharing shares. These are traded in a stock market just as commodities like coffee, sugar, wheat and rice are traded in a commodity market. The physical or virtual (as trading may take place online) marketplace for trading shares on the other hand is called stock exchange.

Trading Process

Stock market trading takes place as one sells his stocks and as the other buys them. Usually buyers and sellers of stocks meet in stock exchanges and there they agree on the price of the stocks. The actual stock market trading happens on a trading floor—the one usually shown on TV when news on stock market trading are reported. Here investors raise their arms, throwing signals to each other. That auction-like picture of a stock market trading is the traditional way stocks are traded. It’s called “open outcry” since the traders cry out their bids.

Key Players in Stock Market Trading

Stock market trading participants vary from persons selling small individual stock investments to institutions trading collective investments, hedge funds, pension funds, mutual funds, etc. Big investors can be banks, insurance companies and other huge companies.

Importance of Stock Market Trading

Stock market trading is required to foster economic growth. It does this by helping companies raise capital or by helping them handle their financial problems. Stock market trading helps ensure that the capital is saved and is invested in most profitable business. Moreover, stock market facilitates the transfer of payments between traders.

Online Stock Market Trading

With the emergence and popularity of the Internet, almost everything can now be done conveniently online. You can go shopping online, join conferences online, read news online and communicate with business partners wherever you are. Even stock market trading can now be done virtually and this has made entering into a business much easier for anyone interested. Aside from conducting stock market trading over the Internet, you can also conveniently check status of your investments online.

The benefits of online stock market trading are just endless. Aside from the above mentioned, choosing where to invest is also much easier online. You can find virtually all kinds of stocks over the Internet; however, it would be best to invest in stocks with moving prices to ensure profitability in the long run.

Disadvantages of Stock Market Trading

One of the greatest drawbacks of stock market trading, whether online or not, is its lower leverage compared to other forms of trading like Forex trading. Also, you cannot easily short sell stocks as it takes time for stock prices to go up. This means that increasing your profit may also take time.

Dave Poon is an accomplished writer who specializes in the latest in business and finances. For more information regarding Stock Market Trading, please drop by at http://business.answerwisely.com

State treasuries serve as the banks of the state; they also manage the money of the state, and therefore serve a vital role in their overall economic success. Universal among the states of Alabama, Kentucky, Illinois, New York and Michigan is the role of the treasurer and their attitudes on university education. Each department functions to invest state funds in order to maximize profit, thereby increasing their revenue so that the public can be better assisted. Each state has an unclaimed property fund to help lost items reach their owners, and each state has a savings program implemented to assist parents in saving for their children’s education. Below is a short description of some of the more interesting programs and information about each state:

Alabama State Treasury

* Prepaid Affordable College Tuition Program(PACT):This investing plan helps families by allowing them to purchase a contract to prepay 135 semester hours of college tuition at any college or university around the country
* The Security for Alabama Funds Enhancement (SAFE): This program involves banks in securing their own funds by requiring them to pledge collateral to the Treasury Department for a collateral pool

Kentucky State Treasury

* The Treasurer position was among the first created by the state constitution in 1792; they are elected every four years and act as the chief elected fiscal officer
* KEES program: This is a lottery program set up to raise money to send graduating high school seniors to college
* Kentucky Teachers’ Retirement System: Oversees the pensions and savings of teachers

Illinois State Treasury

* Agriculture and Alternative Agriculture Loan Program: Offered to farmers or agriculture specialists who produce alternative products such as grapes, strawberries, or hydroponically grown food. Also for those who are in the Christmas Tree growing, fish farming or wine-making business
* Bank At School: This program helps elementary school children learn the basics of money management by partnering a local bank with a school to run an in-school bank.

New York State Treasury

* Linked Deposit Program: This program was started to encourage small businesses in the state to invest. Banks offer a 2-3% lower interest rate on loans
* International Fuel Tax Agreement project: this plan simplifies how commercial motor carriers report their fuel use taxes. With this plan they can buy one license that can be used throughout IFTA jurisdictions.

Michigan State Treasury

* Taxable Tobacco Settlement Asset-Backed Bonds: the proceeds from the sale of these bonds is used to buy tobacco receipts and proceeds are deposited in the 21st Century Jobs Trust Fund to create more high-tech jobs.
* Michigan Municipal Bond Authority (MMBA) : Established in 1985 to give schools and other areas of government a different financing source to use for certain projects

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It can be a good idea to use a stockbroker for an active management of your stocks or mutual fund portfolio. It can be vital if you want a steady growth. It may also be unnecessary as a passive management alternative often is available for long term investing.

However, many prefer to use and pay for the services of a broker because they feel more comfortable making decisions about their finances with the interactive guidance of a licensed advisor.

Using a stockbroker for financial guidance one must be aware of the fact that they do get paid on a commission. This can be a reason for them to trade more often as more trades make them more commission. The stockbroker is also paid on the result they can achieve.

Furthermore a conflict of interest arises when a stockbroker offers his/her services as a financial planner, because their revenue is generated as a direct result of your investment in the stock or mutual fund that they broker to you.

Your ROI, return on investment, may not be as great, and the advice they give you might not be in your best interest. However, some mutual funds and stocks can only be purchased through a broker. In such cases their services are required to purchase the financial instrument in question.

If you use the services of your bank there are some facts to consider. When you talk about the options you have to invest your money, they will certainly recommend the funds they control themselves.

In some countries you can for example invest in a portfolio with shares and have a guarantee to at least get your initial investment back in 2, 3 or 4 years. Sounds great to many and when they say yes to invest, the bank charge 110%. In that way the bank make a profit and secure the costs from start. Do the bank take a risk? No, they cover themselves with other types of investments that function as an insurance.

So now your portfolio starts off with a backlog of 10%. Often the investment will recover and take back most of the initial loss and the guarantee makes many invest as they feel comfortable and secure when they invest in this way.

Back to the question about what kind of investments the bank recommend. Do they recommend other banks portfolios? I don´t think so. If you go to a car dealer that sell Ford, do they recommend you to buy a Lexus? Certainly not.

A stockbroker working in a bank is not neutral, their job is to make you invest in the shares they make the biggest profit for them. If you make a profit too, that is fine but not their prime priority.

There are the authorities though to help the customer out. And there are rules and regulations about the way stockbrokers can and shall work. Depending on in which country you are investing the rules can vary. In some countries stockbrokers can have his own portfolio and the company where he works can also have an portfolio of shares.

This makes an eventual conflict arise whenever something special happens. There are numerous customers that suspect that they have been recommended shares in companies that will face problems and where the stockbroker wants to sell his own shares before the market drops. To prove these cases are almost impossible and to win them very rare. The number of transactions are also so big that it is almost impossible to trace and see a pattern. There might be just a few that went the wrong way.

Stockbrokers in general are behaving in a professional way and realise that their business will benefit most if the outcome for their customers are great. As a customer you are advised to check the results that a stockbroker have produced, trace their records. Do not look at the advertisements, the truth about the results are not there.

On the internet you can now use the statistics by independent companies that range stockbrokers, funds, shares etc. Here you can find facts – vital facts for the outcome of your future incomes from investing.

Keith George always writes about valuable news & reviews. A related resource is Stockbrokers More information can be found at Economy.

If you are forced to evacuate from a major category hurricane, which is approaching a shoreline near you, perhaps you should consider that you will want to call your broker and have definite points at which the stocks you own will be sold if they go down or if they go up. Consider if you will that you may be out of touch from your broker and your stocks or mutual funds for a while.

If you are an online trader you may not have immediate Internet access for a long period of time. Without the ability to check on your portfolio or manage your mutual funds or make a trade with your stocks it might be better if you were in cash and out of the market during this time period on the most risky parts of your portfolio.

If that is not possible you need to make arrangements with your broker in order to ride things out in more ways than one. Hurricanes do affect the stock market and can affect your mutual funds in an adverse way.

Consider if you will that oil prices could go up significantly if the Gulf Coast of the United States of America is hit again with the major hurricane of large category like it was during the 2005 Atlantic tropical hurricane season. Depending on the diversity of your stock portfolio this could be a significant problem for you and you have a chance of losing a lot of money if you do not plan ahead. Please consider all thisse in 2006.

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Before you start trading, you absolutely have to know what stocks you want to buy and hold for a while, which is called going long or holding a long stock position. You likewise have to know at what point holding that stock is no longer worthwhile. Similarly, you need to know at what price you want to enter or trade into a position and at what price you want to exit or trade out of a position. You may be surprised to find out that you can even profit by selling a stock without ever owning it, in a process called shorting.

You can even make money buying and selling options on stocks to simulate long or short stock positions. Buying an option known as call enables you to stimulate a long stock position, in much the same way that buying an option known as put enables you to simulate a short stock position. You make money on calls when the option related stock rises in price, and you make money on a put when the option related stock falls in price.

When placing orders for puts and calls, you are never guaranteed to make money, even when you are right about the direction a stock will take. The values of options are affected by how volatile stock prices are in relationship to the overall direction (up or down) in which they are headed.

Managing your trades so that you don’t lose a bunch of money is critical. Although one can’t guarantee that you will never lose money, experts can provide you with useful strategies for minimizing your losses and getting out before your stock portfolio takes a huge hit. The key is knowing when to hold them and when to fold them. You must think of your trading as a business and the stocks that you hold as its inventory.

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