MarkZ Disclaimer: Please consider everything on this call as my opinion. People who take notes do not catch everything and its best to watch the video so that you get everything in context. Be sure to consult a professional for any financial decisions
Mod: HELLO EVERYONE! TONIGHT'S PODCAST IS PRE-RECORDED! IT WILL BE A SHORT ONE!
MZ: This call is 100% recorded so if you expect me to answer questions….I won’t be seeing them…lol
MZ: I will be back to a normal schedule tomorrow.
MZ: Things continue to be pretty quiet. We do have some bond folks that are expecting updates this evening here in the states. Hopefully by tomorrow morning I will have more news.
MZ: Most of my sources are expecting things more like Wed. and Thurs. on the news front.
MZ: There is some news out of Zimbabwe just a few hours ago. Their Central Bank is close to releasing the gold backed digital tokens into retail for peer to peer, store to store, and individual use. They have announced that they are close. Which means they are probably already done with the tech. This is the way most of these nations operate.
MZ: This is a big one. Watch it.
MZ: Now into BRICS expansion. To make the west recognize the new world order and de-dollarization according to the UAE (United Arab Emirates) professor. He is very highly regarded.
MZ: BRICS expansion forces the west to recognize a change in the world order. They will be going to commodities just like we are expecting.
MZ: A article from Guru Watcher…..”BRICS to control 60%+ of the global oil reserves” Watch this one play out.
MZ: Also in the news “Argentina has a 18% devaluation of their currency” Just Boom and they flipped the switch. This is what a number of countries are facing if they do not asset back their currency. Argentina may be a “motivator” for Iraq,Vietnam and other countries to go ahead and pull their triggers…..in a positive way on their values
MZ: There are a lot of things going on in BRICS and currencies today. .
Many novice options traders are initially confused by the difference between the options on cash indices like SPX and the options traded on stocks and ETFs like AAPL or SPY.
After all, you can’t trade indices like SPX on the stock market. It’s just an index!
So let’s settle a few differences. Firstly, why are there even options on a cash index like SPX when you can simply trade options on the S&P 500 ETF, SPY?
An index like SPX or NDX are simply math calculations. They take each component’s weightings in the index and automatically calculate the index price based on the price changes in the underlying components.
You can’t trade shares of these, but you can trade options on them. And the way the options trade is slightly different from the traditional stock options you’re probably used to.
On the other hand, an ETF like SPY is an actual company which holds shares that reflect index components in a trust. So when you trade SPY, you’re trading a portion of the actual trust.
Trading shares or options on SPY are structurally no different than trading shares or options of AAPL or IBM.
Before we get into the individual differences between index and stock options, let’s first settle on what an option actually is.
What is an Option?
An option is a contract between a buyer and a seller of an asset. Options contracts could be created for just about anything. They’re popular in the real estate market, for example.
An option contract grants the contract buyer the right, but not the obligation, to purchase an asset at a specified price, and on or before a specified date.
For example, you and I might agree to an option contract on your house. I pay you $1,000 for the right to buy your house at the current market price of $200,000 for the next six months.
You get to keep the $1,000 (known as the “premium” in the options market), no matter what happens, but you can’t sell the house to anyone else until our agreement expires.
Options are pretty much that simple. Perhaps I don’t have the money to buy your house today, but I want to lock in today’s price, so I’d pay you an option premium to have the right to buy it for the next six months.
In the stock market, you can buy or sell (‘write’) options on any stock/ETF/future, regardless of whether you own it.
Now let’s move onto the differences between index and stock options.
List of Index Options
Here’s a list of the most popular index options available on US exchanges:
$NDX – NASDAQ 100 Index
$SPX – S&P 500 Index
$RUT – Russell 2000 Index
$DJX – Dow Jones Industrial Average 1/100 Index
$OEX – S&P 100 index
$VIX – S&P 500 Volatility Index
$XEO – S&P 100 (European) Index
Keep in mind that many brokers and charting platforms require you to prefix the ticker with the dollar sign ($), because these are ‘cash’ indices, while others just require the ticker.
Other cash-settled index options trade on US exchanges, but most of the others are thinly traded. The CBOE has a list of other index options they offer here.
Index Options Require More Capital
An index option like the SPX requires much more capital per contract than it’s ETF counterpart, SPY, because of SPX’s higher price, which is approximately ten times higher than the SPY.
For example, today’s SPY price is around $347, while today’s SPX price is around $3471.
Contracts for both tickers are denominated for 100-share lots, so you can expect SPX options to cost roughly ten times that of an equivalent SPY option.
Here’s an example of an SPX option chain:
And here’s an example of a SPY option chain:
As you can see, for each equivalent strike, SPX options cost roughly 10x more than SPY options.
Index Options Are Cash Settled
Index options are European-style options, which are mostly the same as the standard American-style options we’re used to trading on individual stocks like Apple or Amazon.
Still, they do have a few key differences. One of those is the settlement.
If I were to buy one call option on an individual stock like Apple and it expired in-the-money, the option would settle in shares. So at the close of expiration Friday, 100 shares of Apple would be credited to my account at my strike price.
Index options, on the other hand, are cash-settled. This means that instead of crediting shares to your account at settlement, your account would simply be credit for the option’s intrinsic value.
Suppose we bought a $330 SPY call option for $3.00, and the price of SPY was $340 at option expiration.
At settlement, our broker would automatically purchase 100 shares of SPY at $330, leaving us a profit of $10 per share. Our net profit after factoring in the cost of the option would be $7.00.
If we bought the equivalent SPX call option, at $3300.00, paid $30.00, and the price of SPX was $3400.00 at expiration. At settlement, our broker would credit us the intrinsic value of the option in cash.
Index Options Are Taxed Like Futures
The main reason that index options typically receive more volume than their ETF counterparts is due to their tax treatments. Under the IRS code, index options are designated as “1256 contracts,” which get special tax treatment. These unique tax treatments are as follows:
60/40 Tax Treatment
60% of your P&L is treated as long-term capital gains
40% of your P&L is treated as short-term capital gains
This treatment applies regardless of holding period, making futures and index options more tax-advantageous than their ETF counterparts.
Not subject to wash-sales (a big deal for day traders)
Your P&L is marked to market at the end of the year, regardless of whether you closed your position.
Let’s create an example to illustrate the benefit of the 60/40 rule for index options. You trade an Apple option and make $100 in gross profits with a one week holding period.
Then you trade an index option and make $100 in gross profits with a one week holding period.
For the stock option, the entire $100 is subject to the short-term capital gains tax. Of course, these tax rates vary dramatically based on your annual income. Let’s assume you’re in the top tax bracket and subject to the highest taxes to keep things simple.
Stock Option:
$100 profit
Subject to highest short-term capital gains tax: 37%
Total taxes owed: $37
Index Option:
$100 profit
Subject to highest long-term capital gains tax for 60% of profits: 20%
Long-term taxes owed: (100 * .6) * .2 = $12
Subject to highest short-term capital gains tax for 40% of profits: 37%
Short-term taxes owed: (100 * .4) * .37 = 14.80
Total taxes owed: $12.00 + $14.80 = $26.80
Add some zeroes to the end of those numbers and see how significant the savings are at scale.
Index Options Have Different Settlement Rules
Index options and stock options have significantly different settlement rules. Not knowing these differences can land you in a world of trouble.
Talking about the nuances of settlement is boring, but these are the types of things that you really only need to learn once and can potentially save you from a big headache if you’re an active options trader.
Index options settle differently from product to product and based on whether they’re regular or weekly options. Weekly index options can settle similarly to a normal stock, while regular index options have some differences.
The first difference is the day of expiration. If you’re used to trading stock options, Friday is typically expiration day, but index options typically settle on Thursday’s close.
The time of expiration is also different. Index options settle based on the first trade made on Friday morning.
So they technically settle on Friday morning, but for all practical purposes, they settle on Thursday, because you would never be able to trade them on Friday morning.
Stock options, on the other hand, expire on Fridays.
So, as a general rule: index options expire on Thursday’s close, stock options expire on Friday’s close.
Pros and Cons of Index Options
Pros:
Preferable tax treatment
More liquid markets
The small number of indices may be a benefit in that you have fewer things to focus on. The thousands of choices in the stock market can be intimidating and distracting.
Cash settlement makes things more simple.
Cons:
Fewer choices; there are thousands of optionable stocks, compared to a handful of optionable indices.
Generally require more capital to trade.
Less potential to find inefficiently priced options
Final Thoughts
Index options offer traders and investors the opportunity to easily speculate or hedge their positions in a liquid market with preferential tax treatment.
They’re not for everyone, however, as their vast buying power requirements lockout smaller traders.
To summarize:
Index options have different expiration dates.
Index options are cash-settled, rather than physically settled.
Wall Street wrapped up the last week with mixed performances. The Dow Jones industrial Average inched up 0.3% while the other two benchmarks fell. The S&P 500 Index slid 0.3% — its second consecutive week of decline — while the Nasdaq Composite Index dropped 0.7%.
The decline came on the back of a series of negative news on the U.S. credit rating downgrade and multiple bank downgrades. The inflation data also added to the woes.
Fitch Ratings downgraded the U.S. credit rating to AA+ from AAA, citing “expected fiscal deterioration over the next three years,” an erosion of governance and a growing general debt burden. This led to a strong sell-off in the stocks and a surge in yields. Meanwhile, ratings agency Moody's downgraded the credit ratings of several small to mid-sized U.S. banks and warned that it may downgrade some of the nation's biggest lenders too, citing a looming mild recession, higher interest rates and increased funding costs.
Inflation in the United States rose for the first time in July after 12 straight months of decline. The Consumer Price Index rose 3.2% year over year, up from an annual increase of 3% in June, which was the lowest rate in over two years (read: Inflation Moderates in July: ETFs to Gain).
The underperformance in the tech-heavy Nasdaq Index was due to concerns that interest rates could rise further. As the tech sector relies on easy borrowing for superior growth and its value depends heavily on future earnings, a rise in rates lowers the present value of companies’ future earnings, sparking fears of overvaluation.
While most of the sector lost last week, few eked out gains. In particular, the pharma and energy sectors were the biggest winners last week. Pharma stocks were driven by Eli Lilly’s (LLY) significant surge in stock prices in over two decades following the release of an impressive second-quarter 2023 earnings report and an optimistic outlook. Meanwhile, the energy sector rose on an oil price surge. A tightening oil market fueled by surging crude demand and supply reductions by major OPEC+ players — Saudi Arabia and Russia — are driving oil price higher (read: Oil Price at 2023 High: Make Profits With Leveraged ETFs).
We have highlighted one ETF from different sectors that were in green last week. These include Sprott Junior Uranium Miners ETF (URNJ- Free Report) , iShares U.S. Pharmaceuticals ETF (IHE- Free Report) and Invesco Dynamic Energy Exploration & Production ETF (PXE- Free Report) .
ETFs That Gained
We have profiled the above-mentioned ETFs in detail below:
Sprott Junior Uranium Miners ETF is the only pure-play ETF focused on small uranium miners, selected for their potential for significant revenue and asset growth. It tracks the Nasdaq Sprott Junior Uranium Miners Index, which is designed to track the performance of mid-, small- and micro-cap companies in uranium-mining related businesses. Sprott Junior Uranium Miners ETF holds 29 stocks in its basket and charges 80 bps in annual fees.
Sprott Junior Uranium Miners ETF has accumulated $39.9 million in its asset base and trades in average daily volume of 59,000 shares.
iShares U.S. Pharmaceuticals ETF (IHE- Free Report) – Up 5.6%
iShares U.S. Pharmaceuticals ETF provides exposure to 39 U.S. companies that manufacture prescription or over-the-counter drugs or vaccines by tracking the Dow Jones U.S. Select Pharmaceuticals Index (read: Eli Lilly Soars on Blockbuster Q2 Earnings: ETFs to Tap).
iShares U.S. Pharmaceuticals ETF has $388.9 million in AUM and charges 40 bps in fees and expense. Volume is light as it exchanges about 6,000 shares a day. The fund carries a Zacks ETF Rank #3 (Hold) with a High risk outlook.
Invesco Dynamic Energy Exploration & Production ETF (PXE- Free Report) – Up 3.8%
Invesco Dynamic Energy Exploration & Production ETF follows the Dynamic Energy Exploration & Production Intellidex Index, which thoroughly evaluates companies involved in the exploration and production of natural resources used to produce energy based on a variety of investment merit criteria, including price momentum, earnings momentum, quality, management action and value.
Holding 31 stocks in its basket, Invesco Dynamic Energy Exploration & Production ETF has amassed $167.8 million in its asset base and charges 63 bps in annual fees. It trades in a volume of 51,000 shares and has a Zacks ETF Rank #3.
The Parliamentary Economy hosts the governor of the central bank to discuss controlling the exchange rate of the dollar
08-13-2023
The Parliamentary Economy hosts the governor of the central bank to discuss controlling the exchange rate of the dollarToday, Sunday, the Parliamentary Committee on Economy, Industry and Trade, chaired by Representative Ahmed Salim Al-Kinani and in the presence of the members, announced hosting the Governor of the Central Bank, Mr. Ali Al-Alaq, to discuss the bank’s procedures to address the rise of the dollar and the mechanism for controlling the exchange rate against the Iraqi dinar.
The media office of the head of the Parliamentary Committee, Representative Ahmed Salim Al-Kinani, stated in a statement that the committee also discussed with the governor of the Central Bank the issue of the financial reserve and the electronic platform for foreign transfers.
The committee affirmed, according to the statement, that it stands with the government side and the Central Bank in the mechanisms taken to deal with the exchange rate, indicating that there are international standards that the Central Bank operates in that it cannot bypass and work hard for the stability of the exchange rate and control of outlets and currency speculators and illegal trade.
dijlah.tv
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Al-Fateh: The Iraqi delegation delivered important messages to Washington regarding their fate in Iraq
8-13-2023
Al-Fateh - The Iraqi delegation delivered important messages to Washington regarding their fate in IraqInformation / Baghdad..
On Sunday, the leader of the Al-Fateh Alliance, Hamid al-Musawi, confirmed the success of the Iraqi delegation in delivering important messages during its visit to Washington, noting that the delegation informed the American side of the need to leave Iraq.
Al-Musawi said in a statement to Al-Maalouma, “All political forces and resistance factions support the sovereignty of Iraq and demand the government to end the expulsion of any foreign forces from Iraq.”
He added, “The Iraqi delegation informed America that Iraq is still adhering to the demand for the removal of every military soldier.”
He pointed out that “America turned to the decision to end its military presence in Iraq, and it insists on the protection of advisers and experts by the international coalition at a time when the Iraqi government opposes those decisions.”
The former military advisor, Safaa Al-Aasam, revealed, in a statement to Al-Maalouma, that the Iraqi delegation refused to open any dialogue with Washington regarding requests to dissolve the popular crowd, indicating that the delegation paved the way for an important visit of Prime Minister Muhammad Shia Al-Sudani to America.
USD to VEF Forecast, Dollar to Fuerte Currency Exchange Rate Prediction
"Should I invest in USD to VEF Currency Pair?" "Should I trade USD/VEF pair today?" According to our Forecast System,USD to VEF Forex pair is an awesome long-term (1-year) investment*. "United States Dollar / Venezuelan BolÃvar Fuerte"exchange rate predictionsare updated every 5 minutes with latest Forex (Foreign Exchange) rates by smart technical market analysis.Q&Aabout USD to VEF Fx forecast.
At Walletinvestor.com we predict future values with technical analysis for wide selection of Forex currency pairs like USD/VEF. If you are looking for Forex pairs with good return, USDVEF can be a profitable investment option. USD/VEF rate equal to 3141610 at 2023-08-14 (today's range: 3129889 - 3141611). Based on our forecasts, a long-term increase is expected, the Forex rate prognosis for 2028-08-12 is 102337721459. With a 5-year investment, the revenue is expected to be around +3257392.86%. Your current $100 investment may be up to $3257492.86 in 2028.
As of 2023 August 14, Monday current rate of USD/VEF is 100000.00 and our data indicates that the currency rate has been in a downtrend for the past 1 year (or since its inception).
United States Dollar / Venezuelan BolÃvar Fuerte has been showing a declining tendency so we believe that similar market segments were not very popular in the given period.
Our site uses a custom algorithm based on Deep Learning that helps our users to decide if USD/VEF could be a good portfolio addition for the future. These predictions take several variables into account such as volume changes, rate changes, market cycles.
Future currency rate of the currencies is predicted at 107604629503.56(107604529.504% ) after a year according to our prediction system.
This means that if you invested $100 now, your current investment may be worth $107604629.504 on 2024 August 14, Wednesday.
This means that this pair is suited as a new addition to your portfolio as trading bullish markets is always a lot easier.
