FYI
Hello folks. Just so we all are on the same page here. SPZI lisenced the SWARM software for the futures and derivatives markets respectfully. I have seen much speculation on both boards about "stock tips" being sent to the phones of folks that subscribe for the service.
Well I can tell you without any hesitations that this will never happen. At least not in the near future anyway. Any "tips" that will go out to subscribers will most definately be with the futures and derivatives arena.
The average retail investor will never even look at these type of investments. It's hard enough for these folks to remember to buy low and sell high concept. When we get into derivatives the only limitations an investor has is his/her imagination.
I have discovered this with my very own trading in the options world for stocks. But this is a whole different ballgame where the major leaguers play ball. The liquidity in this market blows Wall Street away!
I offer this link just to wet your appetite:
www.cme.com/files/EQ004_Eminis.pdf
Swarm will not be buying a stock at one price and selling it at a higher price. It is going to create the product, make the market, decide the price and offer it to the world. This is basically what a derivative is.
The best way I can describe it is in the options world when we use a "Long Call Spread." Most times when buying an option we buy a contract at one price and sell it latter at hopefully a higher price. The price of the contract is driven by the PPS of the stock, just as the revenues of a company drives the PPS of the stock.
Well, to reduce risk some folks may buy a contract with one strike price and sell another contract with a higher strike price. Let's take a look at AAPL for an example.
The current PPS of AAPL is 183.45. The June contracts expire on June 20,2008. Let's also assume we think AAPL will hit $200 before those contract expire but will not make it higher than $220 by the same expiration. So we pull off the following trade:
Buy 1 AAPL June $200/CALL for $3.55
Sell 1 AAPL June $220/CALL for $0.85
My new derivative of AAPL is a contract that says AAPL will be over $200 but less than $220 by 6/20/08 and the cost of this contract is $2.70.
$200/Call - $220/Call = Derivative Price
$3.55 - $0.85 = $2.70
The sweet spot for this to pay it's maximum amount for the investment is if AAPL closes on 6/20/08 @ $219.00. Then you get to keep the premium you recevied for the contract you sold for a strike price of $220 and can also sell your other contract for the profits it's gained for being over $200!
A derivative is a way to lower your risked capital and still gain the advantage of a stock you feel bullish about. The best part is that we never buy the stock and have it hold up all our capital while waiting for the price movement.
This is a whole lot of info for one to grasp in one sitting. I would suggest everyone wanting to get a glimpse of what SWARM is about to do to read as much as they can about options and derivatives. It's going to blow your mind away with the power that is about to be unleashed!
Disclosure: I own shares of XXIS and SPZI
Boca_Bobby
Boca_Bobby
Mom said there would be days like this!
