Welcome to Market Analyze

Definition:

 Inflation can be defined as a sustained or continuous rise in the general price level or, alternatively, as a sustained or continuous fall in the value of money.

or

Inflation is an increase in the quantity of money and credit. Its chief consequence is soaring prices. Therefore inflation—if we misuse the term to mean the rising prices themselves—is caused solely by printing more money. For this the government’s monetary policies are entirely responsible.

or

Inflation is the increase in the supply of money and credit. ”A substantial rise of prices caused by an undue expansion in paper money or bank credit.”

The word “inflation” originally applied solely to the quantity of money. It meant that the volume of money was inflated, blown up, overextended.

Reason for inflation:

The most frequent reason for printing more money is the existence of an unbalanced budget. Unbalanced budgets are caused by extravagant expenditures which the government is unwilling or unable to pay for by raising corresponding tax revenues. The excessive expenditures are mainly the result of government efforts to redistribute wealth and income—in short, to force the productive to support the unproductive. This erodes the working incentives of both the productive and the unproductive.

Definition1:

Regular dividend considered to have been earned by the stockholders, but not yet declared or payable. Accrued dividends are booked as a liability from the declaration date and remain as such until the dividend payment date.  

Definition2:

A dividend which has remained unpaid as of the date it fell due and which has accumulated over a period of time.

Definition3:

A liability listed on a company’s balance sheet, where it remains until the payment date is up and remuneration is due to the shareholders.

Definition4:

A regular dividend that is considered to be earned but not declared or payable.

Is the difference between the expected return of a security and the actual return. Used to describe the returns generated by a given security or portfolio over a period of time that is different from the expected rate of return.

AbnormalReturn = ActualReturn − NormalReturn

The expected rate of return is the estimated return based on an asset pricing model, using a long run historical average or multiple valuations.

For example

If a MSFT stock increased by 10% because of some news which affected the stock price, but the average market only increased by 6%, then the abnormal return was 4% (10% – 6% = 4%). If the market average performs better than the individual stock then the abnormal return will be negative i.e stock by 6% and average market by10%, then abnormal return will be -4.

The G-20 includes a group of finance ministers and central bank governors from 20 major economies which includes 19 of the world’s largest national economies, plus the European Union (EU).

G-20 countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, United Kingdom, United States and European Union.

We are seeing High volatility, sharp rallies, unexpected market direction, extremely fickle sentiments and high influence of all markets  tantrums in the past few months. Some analysts expect this market volatility will continue for year or so . 

The million dollar question now is, “How to make money?” It’s not an easy task in these markets. Market strategies have to be well thought out, those that worked in the past may not work this time. We would now look at 10 strategies that may be used in isolation or in combination to come out with a winning plan that will make money in this market.

Strategy 1:

A good way to judge if the stock is under valued is if it is quoting near its 52 week low. A stop loss at the 52 week low would be desirable to restrict downside risk.

Strategy 2:

If you are an active trader and open to taking short term positions. A thorough tracking of the price volume data will be worth your while before entering sectors and stocks where a significant rise in volumes is being accompanied by a positive price movement. These trading calls can sometimes make you earn a fast buck.

Strategy 3:

Sell out of money calls of stock that you hold Markets are likely to remain range bound for sometime. This strategy restricts the upside potential but generates good, consistent returns in a bear market.

Strategy 4:

This strategy helps to protect downside risk of portfolios when there is uncertainty about the future direction of the markets. This strategy can also generate profits if DOW falls rapidly and there is panic in the markets as we saw in October, November 2008.  Selling calls would help you in financing the cost of the puts.

Strategy 5:

Selling calls and puts which are deep out of money can provide you with a limited profit when sold near the expiry date. Only time value exists in these options but to earn limited profit you have to block money in the form of margins and though a rare chance but you could end with an unlimited loss.  This, needless to say, is not a very good strategy for risk averse investors.

Strategy 6:

For short term and active traders it may be better to trade in futures instead of buying stocks and holding in depository account. This is because one has to wait for delivery to come on T+2 so as to sell those stocks.

Eg. 
If somebody bought 100 shares of IBM on 10th April 2009, then he has to wait till 13th April 2009 to sell them back to the market, otherwise there exists a risk of auction in case of short delivery.

Strategy 7:

In this market Buy and hold strategy is not likely to work. It is better to book your profits as and when you earn. This is not the time to be greedy.

Strategy 8:

For risk averse investors it is better to trade in Options in order to minimise risk. Buy calls of stocks or DOW if you are bullish on some particular shares or the market as a whole in the short term. Conversely buy puts of stocks or DOW if you are bearish. Unlimited profits can be earned by incurring limited cost with no risk in this strategy.

Strategy 9: