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Unusually Options Activity

Unusual options activity alerts are alerts that appear across a professional scanner app. When a Wall Street firm makes a recommendation or sets a new price target, this can have an effect on the options market and market makers have to widen their spreads. For instance, you might see an option quote at 0.50 x .0.60, and that can immediately change to 0.40 x 0.70 whenever there is activity.

Before making any options trade, it’s a good idea to learn about the terminology.

Calls at the Ask: Bullish indication

Calls at the Bid: Bearish indication

Market Sweep: Sweepers that move quickly are tactical. They stay incognito, splitting orders across multiple exchanges concealing their true order and size.

It's important to remember the market sentiment and how that relates to the underlying asset. Another important clue is the current contract size traded versus the total daily volume. In addition, the trade count could show a potential change in the short-term direction.

Profitable traders focus on various strategies. They also focus on statistics. Terms like delta, premium, strike price, and extrinsic value. These are concepts options traders are most concerned about.

In addition, it is important to understand how in or out-of-the-money options affect price action.
Frank S.

Insider Buying Activity

Insider buying Activity

Insider buying is the purchase of shares in a corporation by a director, officer, or executive within the company. This is completely different from insider trading which is illegal.

How Insider Buying Works:

Insider buying or selling can have an immediate effect on the share price. If there has been a record of positive fundamental changes within the company, positive analyst ratings, and news activity, the result are a higher perceived valuation.
It is also important to remember the level of institutional ownership as hedge funds could drive prices even higher based on the activity. In addition, remember the consensus estimates. If there is positive news followed by insider buying, an opportunity may be on the horizon.
Frank S.

Earnings Estimate and Impact on Stocks

Earnings estimates are prepared by analysts who are working for investment firms. They often research past figures of sales growth along with industry trends.

A consensus estimate is calculated by taking the estimates from all the analysts who are currently following the stock. For Instance, let's take a hypothetical estimate for APPL stock. It could be reported by Reuters with an "Outperform" rating and include a price target. Barclays may also include a research report with their own price targets.

When the iPhone maker reports quarterly earrings, traders need to pay attention to the difference between the actual earnings versus the consensus. When the firm reports earnings that surpass expectations, it is called an earnings surprise.

Traders can follow an earnings calendar in addition to any news from the conference call. Earnings transcripts usually can be found on the company website. You may need to subscribe to a professional news service for any transcript resources.
Frank S.

Market Capitalization

Market capitalization is the total value of a company’s shares. Large caps generally have a market value of $10 billion.

Traders need to evaluate the best opportunities when defining their trading plan. Some traders prefer focusing exclusively on one strategy.

Stocks with a higher market cap may have a smaller net change than a mid-cap stock or small-cap stock. The tradeoff is usually in the form of lower volatility, greater analyst coverage, and a better sense of market maker activity.

In the ZeroPro trading platform, traders can use the Top List to filter stocks by volume and/or price. This provides the trader with an opportunity to scan for stocks with higher market caps. The rationale for the filter is it allows the trader to create a Top List scan with stocks that have higher liquidity and therefore the trader can buy or sell shares quickly and easily without affecting the share price.
Frank S.

How to Trade Analyst Ratings?

If you follow the stock market, you will need to have a basic understanding of how analyst ratings work and their effect on the share price.

Ratings measure the expected performances of a stock. Active traders often monitor ratings to try to predict future stock values. In the short term, traders look at the rating history, whether or not it was an upgrade or downgrade.

Next, traders will often check the company's news and outlook. Analysts usually revise ratings based on a fundamental shift in earnings, their own consensus estimates, or after a major announcement.

The ZeroPro platform allows traders to create multiple watchlists. In addition, each watchlist can be configured with divider rows. This allows traders to create a category for long and short-term strategies.

Select the stocks with the highest ratings and use your drawing tools to reference the target price. Take time to learn the terminology. For example, an "Underperform" rating means the stock is projected to underperform the analyst industry coverage. Sectors can also have ratings.

The most important component of analyzing analyst ratings is called intellectual factoring. This applies mostly in the short term. Sometimes there is a theme to conceptualize, the share price and index prices seem to follow a pattern, and other times you need to wait out the market until there is an identifiable trend or continuation pattern.
Frank S.

Conference Calls

Usually, stocks run-up in anticipation of an earnings report or conference calls. As a trader, you want to look for the best companies to trade and beware of any company that shows up on your scanner with times 20 the average daily volume.

This type of trade requires a level of knowledge and It's important to have a thorough understanding of the companies you're trading. The more closely you follow a company, the more familiar you are with the company the less likely you are to make a decision based on inaccurate or partial information.

It's important to keep a watch on price, volume, time of day, and support/resistance levels. You might have to listen to several conference calls before you find the right opportunity.

Remember, there are three major venues that get incorporated into the price. This includes: management commentary, SEC filings, and conference calls. There are firms that have conference calls right after they announce earnings. Sometimes a conference call can be after a corporate event such as a merger or acquisition.
Frank S.

Earnings Guidance

Investors rely on forecasts issued by companies in the form of quarterly guidance and annual reports.

This provides investors information about the expectation of future results. The reports include estimates of revenues, expenses, margins, and earnings. The company may define their short-term and long-term goals.

Although companies are not required to provide earnings statements, a majority of companies provide guidance and management decisions.

Earnings guidance can affect the recommendation of analysts and decisions from potential investors.

An earnings call is a conference between the management, investors, media, and analysts. Companies often record the earnings call on their websites.

Although earnings guidance is a valuable reference, it should not be solely the source that investor bases their decisions on.
Frank S.

SEC Documents and Filings

SEC documents hold valuable information for professional traders and investors. There are many types of forms. For instance, form 10-K and form 8-K are important to investors as they may include comprehensive company news such as acquisitions of assets, valuation metrics, and share buybacks.

As an active investor, you may want to investigate the real story concerning the reports. The 10-K will include information about related topics such as detailed overviews, recent developments, and leadership changes.

The data from the SEC reports can be used to predict the price movement of a stock. Investors who are interested in the shift in fundamental information may believe the share price underestimates the earnings potential or there may be a good reason to sell.

Investors need to be aware of the filings as the prices can change dramatically when news is announced. It depends on the nature of the report. A dilutive secondary offering usually results in a drop in share price. Sometimes, the investors respond positively to the news if the proceeds from the sale will be used to pay debt, make an acquisition or invest in the company’s future.

In conclusion, SEC filings provide investors with the transparency they need to make prudent investment decisions and track important fundamental changes regarding bankruptcy, executive compensations, insider transactions, and public offerings.
Frank S.

Moving Average Convergence Divergence (MACD)

The MACD is a trend-following momentum indicator. When finding trends, traders may sometimes use the MACD to identify market tops and bottoms.

There are three main components. The oscillator, the signal line, and the histogram.

The MACD line is made up of the 12-period exponential moving average (EMA) minus the 26-period EMA. The signal line is the 9-period EMA of the MACD line. The histogram plots the difference between the MACD and the signal line.

The MACD is great for showing overbought and oversold conditions.

Frank S.

Bear Put Spread

Profitable when underlying is bearish.

The Advantage:
The net risk of the trade is reduced.

  1. Long Put (Higher Strike Price)
  2. Short Put (Lower Strike Price)

Underlying is the same
Expiration's are the same

Max Profit:

Potential profit is limited to the difference between the strike prices minus the net cost of the spread. The max profit is realized if the stock price is at or below the strike price of the short put.

Max Risk:
The maximum risk is the cost of spread including commissions.

Market Outlook:
The bear put spread option trading strategy is employed when the options trader thinks that the price of the underlying asset will go down moderately in the near term.
By Shorting the out-of-the-money put, the options trader reduces the cost of establishing the bearish position but forgoes the chance of making a large profit in the event the underlying asset price falls.
Frank S.

Why Are Basis Points Important to investors?

Higher interest rates attract foreign capital and cause the exchange rate to rise.

The currency exchange rate is one of the most important factors of a country's economic health.

The Basis points system is commonly used for calculating changes in interest rates, equity indices, and fixed-income security yields.

Basis Points are used to avoid uncertainty between the difference in interests rates and/or other numbers expressed as a percentage.

For instance, in the United States, interests rates are determined by the Federal Open Market Committee (FOMC). Instead of interpreting the data as either 1.5% (0.25 + 1.25) or %1.75 (1.25 + 0.25), the increase is referred to as or (50pbs or 175bps) respectively.

Basis Points to Percentage Conversion Chart

Basis PointsPercentage

Frank S.

What is a Reverse Stock Split?

A reverse stock split has no inherent effect on the company’s value or market capitalization. This is usually a move to prevent a stock from delisted or is to improve the company's appeal to institutional investors.

Stock splits can happen for any number of reasons. One reason is to increase the share price of the underlying assets or to reduce the float or outstanding shares in the market. After the reverse split, there are fewer shares outstanding and the per-share price is higher as opposed to a stock split, which is reducing the share price and increasing the number of shares outstanding.

An example, in a 1-for-8 reverse stock split, every eight existing shares of stock get merged into a single share that costs eight times as much money to buy on the stock market.
Frank S.

Bitcoin Hash Rate: Investing in Cryptocurrency

A higher hash rate means that blockchain is more secure. It also means that new money is being expended for better and more reliable equipment. This will also increase the difficulty of the next algorithm adjustment.

The question investors may ask is if an event has already been priced in by the market. Some traders believe that there is a strong correlation with cryptocurrency price drops and spikes as miners enter and leave the market.

Applying hash rate as an indicator can be useful however since it is based on nonempirical analysis (theories and concepts) new data may have an immediate or lagging effect on the market price. It depends if the price falls below a certain point and how fast miners react.

The long-term hash rate is important as is halvings. More miners mean fewer earnings and they need higher prices to be profitable to sell. If miners do not sell there is less supply. This helps the rising price if demand goes up.
Frank S.

The Fed Rate Decision and Effect on Markets

The Federal Open Market Committee (FOMC) typically meets eight times per year. The meetings are always secret, with minutes released three weeks after each session.

The FOMC meeting is usually the most important date on any traders' calendar. The effect of the policy can move global financial markets and include Forex, Indices, and Bonds.

Traders try to predict where monetary policy is headed in each Fed meeting and is usually accompanied by abnormal volatility if there is an unexpected change in rates from the previous session.
Frank S.

Earnings: How to Trade

Earnings announcements contain important information for investors, including operational details. Fund managers use the data to make decisions about the future for their client's accounts. The information can cause a substantial change in share price when made public. Although there are many components to an earnings report, typically traders focus on earnings sentiment vs. consensus.

Earnings season begins one or two weeks after the last month of each quarter (December, March, June, September). If you are interested in trading earnings based on quarterly results, you will need to follow the top names and when they report because there can be a correlation to other events.

Big banks officially kick off the first week of earnings season. Technology and Big pharma report in the second week and retail closing the final weeks. Traders can keep track of earnings by using an online database, subscribing to emails and newsletters, or listening to earnings calls.

If you think that there will be a dramatic move in the share price when the company reports earnings, you can prepare an options strategy. Be prepared to master a few fundamental concepts before risking capital. Options trading may be riskier than trading the share price alone.
Frank S.

Why CPI Matters to Traders?

As the main economic indicator of inflation, Consumer Price Index plays an important role in a central bank’s monetary policy decisions.

CPI figures affect the central banks' decisions on interest rates. It is a broad measure within the economy in relation to the cost of goods and services. If the rate of change is significant, it may cause a disruption in the global supply chain. The report can also affect other indexes as well as cryptocurrency and FX markets.

An increasing CPI would encourage the central bank to raise interest rates. The data is released on a monthly basis and like any other inflationary indicator, it is a lagging indicator in the sense that it is a change in a past period.
Frank S.

How to Calculate Bitcoin Satoshi Unit Value?

Cryptocurrency is an alternative investment relative to traditional stock and bonds. As with any investment, it's important to understand the basic terms involved when  building your portfolio.

In order to calculate the Satoshi Value of a Bitcoin transaction, take the current USD coin price and divide it by the Bitcoin price.

Coin Price (USD) / Bitcoin (USD) = Satoshi unit Value
Frank S.

Introduction to Ethereum and Smart Contracts

Ethereum is a decentralized, open-source blockchain with smart contract functionality that was developed by co-founder Vitalik Buterin, a mathematically gifted computer programmer.

Ethereum is run by thousands of volunteers around the globe who knows nodes. The nodes are software running on P2P networks. First, all nodes compete to solve a hash function then work together (consensus) to update the ledger. This environment creates an ultra-secure platform for financial transactions.

Ethereum wants to be a World Computer that would decentralize the internet.

The idea is that no institution or company will have control over your information (credit card information, purchase history, etc.). Smart Contracts are simply programs stored on the Blockchain and can be set to automate workflow and execute certain functions once a pre-defined agreement from all the participants on a Blockchain.

The execution fee you pay is called Gas and is priced in Ether. Gas measures how much action or set of steps it takes to perform. The more calculations an operation requires, the more Gas it will need.

Ethereum uses the Proof-of-Stake algorithm and is a method of keeping integrity in a blockchain, ensuring users of a cryptocurrency can’t mint coins they didn’t earn.
Frank S.

Should You Reinvest Dividends ?

Dividends are earnings a company gives back to its shareholders. Dividends can be paid out in cash or automatically reinvested through an investment plan. These two forms can provide investors with a unique strategy.

If the investor decides to reinvest the cash, the investment plan will make the correct calculation, and the investor ends up with more shares in their portfolio. The downside to automatic reinvestment is that the security can be overbought or due for a correction. Therefore, the weighting factor can be to either accept the cash and strategically reinvest it with a tax consequence or use the dividend to buy additional shares, which will generate additional income.
Frank S.

Financial Derivatives and Market Structure

A derivative is a contractual agreement between two parties to buy/sell an underlying asset at a specific future date for a special price that is pre-decided on the date of the contract. The National Stock Exchange of India, B3, and the CME Group, followed by NASDAQ, trade the most contracts in the derivatives markets. The gross market value of OTC derivatives increased by 33% in the first half of 2020; gross credit exposure saw the most significant rise since 2009

(BIS: Gross Market Value Of OTC Derivatives Surges, 2022)

There are many banks, corporations, and hedge funds that use derivatives to hedge risk and exploit opportunities. Without them, the financial markets would not work. The potential feedback effect when buying and selling underlying assets on the spot market to hedge the derivatives can have a stabilizing impact on markets, or they can cause mayhem. It depends if there is a sudden unwinding of derivatives positions.

Several well-known hedge funds have imploded as their derivatives positions declined dramatically in value, forcing them to sell Securities.

One particular hedge fund in the late 90s that collapsed was long-term Capital Management (LTCM).

Ultimately, a loan fund, comprised of a consortium of Wall Street banks, was created to bail out LTCM in September 1998, enabling it to liquidate in an orderly manner.

(SSR): Short Sale Restriction Explained

The short-sale rule or SSR is also known as the alternative uptick rule or SEC rule 201.

The SSR restricts short sales on a stock that has declined in price by 10 percent or more from the previous day’s close. Once triggered, the SSR stays in effect until the end of the following trading day.

The rule applies to all equity securities whether traded on an exchange or over the counter. You can’t sell at the bid on a short-sale order with the stock under SSR rule. You have to put in your short-sale order at a price higher than the bid' Sometimes the SSR is referred to as the short-sale restriction.
Frank S.

How to Calculate Bitcoin Dollar Value?

Cryptocurrency is an alternative investment relative to traditional stock and bonds. As with any investment, it's important to understand the basic terms involved when building your portfolio.

In order to calculate the total USD dollar value of a Bitcoin transaction, take the Satoshi price and multiply it by the current price of Bitcoin.

Ex: Satoshi Price  x Current BTC Price = Total Dollar Value
Frank S.

What are Smart Contracts?

Smart contracts were introduced in 1994 by an American computer scientist named Nick Szabo, who described them as a set of promises. Recently, the technology has gained popularity with the introduction of Ethereum.

Smart contracts are open-source self-executing code on top of a blockchain that is fast and autonomous i.e. without human intervention. Although the term smart contract sounds somewhat intimidating, in some instances, smart contracts are like a written text contract or set of instructions. Since very few users can write code or understand programing language, the fundamental conceptualization of smart contracts is undervalued.

What makes the technology valuable is the ability of programmers, lawyers, and tech company developers to implement a strategy where information (contracts or agreements) can be utilized in a system that displays the information in a transparent and meaningful way.
Frank S.

What is Centralized and Decentralized?

A blockchain can be either centralized or decentralized. Centralized refers to the concentration of management and decision-making power at the top of the organization hierarchy. Decentralization is at the heart of blockchain technology. The system is unlikely to fail since the data cannot be controlled or overridden. Furthermore, the data is transparent, meaning anyone who has access (privileged) can view statistics and revenues.

An entrepreneur may need to develop an application on a private blockchain network. This will use decrease mutual costs and resources required to settle assets. A privately deployed blockchain might use a different consensus calculation typically does not need an incentivizing mechanism to motivate the participant to join.
Frank S.

What is a Cryptocurrency Exchange?

A Cryptocurrency Exchange or digital currency (DCE) is a business that allows customers to trade digital currencies for other assets such as conventional fiat money.

It’s estimated that there are over 500 exchanges to date, but this can change at any time. There are various exchanges, some are centralized, and others are decentralized. Keeping your digital assets safe should be a priority. The best exchanges have and most reliable security and provide traders with the resources they need to protect their digital assets.
Frank S.

What is Historical Variance?

In Modern Day Portfolio theory, historical variance represents a range of data values and minimizes any observation that lies outside of a normal range of averages. If you take a series of data values (daily, monthly, or yearly sample sets) and calculate the variance, essentially, you are taking the average return for your time period and determining how much those returns deviate from the mean. The variance score can be used to determine risk for an index or asset. Traders can use Excel to calculate variance.
Frank S.

What is Value-at-Risk (VAR)?

Volatility is a statistical measure of the dispersion of returns for a given security or market index. It is a relationship between portfolio returns and risk. The idea behind VAR is that it answers the question, "what is my worst-case scenario?" or "How much could I lose in a really bad month?" The three components are: a time period, a confidence level, and a loss amount, and calculated against historical returns or an expected average return. The bottom line is that traders can compare normal distribution data (usually represented by a single number, e.g., 1.5, 2, 2.5) – standard deviation, to the actual daily returns of a stock or index that represents the maximum loss expected on a given investment over a given period of time. Because VAR is calculated on individual stocks on indexes, it is more difficult to calculate on a given portfolio.
Frank S.

What is a Delta Hedge?

A delta hedge is a trading strategy that uses options or ETF shorting strategies to protect your portfolio from risks. If you believe that the market will decline, you can design a strategy in such a way that gains in one spectrum of the account will be offset by any losses related to long-term portfolio holdings.
Delta is defined as the change in the value of an option relative to the change in movement in the market. It allows traders to hedge the risk of constant price fluctuations in a portfolio.
Frank S.

How to Calculate Win Rate?

Win Rate is a ratio traders use to determine profitability. Your wins divided by your losses can be a good indicator of overall success. If you make five trades and win on three trades during a market session, your daily win rate is three of five trades or 60%. 
The Win Rate ratio can be expressed as winning trades / losing trades. 
Frank S.

What is R-Value and R-Multiples ?

R-Value is the initial risk based on your stop loss. R-Multiples is the amount profited (or lost) expressed as a multiple of the trader's initial risk capital.  
The concept is based on reward-to-risk analysis. When you get -1R return essentially, the stop loss was carried out with respect to your trading strategy. You can only lose the amount of R-Value defined prior to entering the trade. When you get 3R return, you make 3 times the initial risk. 
Traders want their losses to have R-multiples of (0 and -1). The following expression can be used to calculate the reward/risk ratio. 
R-Multiple = (Expected Exit Price - Entry Price) / (Entry Price - Stop Loss)
Frank S.

What is Open Interest and Why Does It Matter

Open interest (OI) is not the same as volume. With volume, both entries and exits cause the volume to increase. Open interest shows how many contracts are currently outstanding (open) and have not been closed out. 

Ex: Seller sells one contract to the buyer. The buyer is long the contract, and the seller is said to be short on the same contract. In this case, open interest increases by one. Open interest decreases when buyers (or holders) and sellers (or writers) close out more positions than were opened that day. 

How is it calculated

Add all of the contracts that are associated with opening trades. Then, subtract all of the contracts that are associated with closing trades. Note: Open interest is a lagging indicator and is not updated during the trading session. The OCC post the information at the end of day.

Open interest measures activity and can vary from the call side to the put side, and from strike to strike. Options with high OI reflect greater liquidity for that contract. A decline in open interest during a trend may indicate a reversal.
Frank S.

What is the difference between AMEX and NYSE?

The American Stock Exchange (AMEX) used to be a larger competitor of the New York Stock Exchange (NYSE) until acquired by NYSE Euronext in 2008. Smaller companies tend to list on the AMEX when they cannot meet the NYSE’s strict listing and reporting requirements.  Today, the NYSE, NYSE MKT, and NYSE Amex Options are owned by the Intercontinental Exchange (ICE).

Frank S.

What is the difference between OTC and Pink Sheets?

OTC and Pink Sheets are securities that do not trade on the Nasdaq or NYSE. They are usually higher risk, low liquidity companies that have failed to meet listing requirements. Both are considered unlisted securities and are traded through an interdealer network. OTC is required to register with the Securities and Exchange Commission and FINRA however, Pink Sheets do not require registration and do not always have to file regular reports.
Frank S.

What is a Range Order?

Range refers to the difference between a stock's low and high price for a particular trading period.  A Range order (generally known as a Stop-Limit order) is an order to buy or sell at a specified limit price or better when the given stop price is reached by the market price.
Bill W.

What is a Bond?

A bond is a fixed income instrument that represents a loan made by an investor to a borrower (typically corporate, governmental or municipal). ... Bonds are used by companies, municipalities, states, and sovereign governments to finance projects and operations. Owners of bonds are debtholders, or creditors, of the issuer.
Bill W.

What is a Candlestick Chart?

Candlestick charts originated in Japan over 100 years before the West developed the bar and point-and-figure charts.  A candlestick chart is a style of financial chart used to describe price movements of a security, derivative, or currency. Each "candlestick" typically shows one day, thus a one-month chart may show the 20 trading days as 20 candlesticks.
Bill W.

What is Inflation?

Inflation is the rate at which the value of a currency is falling and consequently the general level of prices for goods and services is rising.
Bill W.

What is the S&P 500?

The S&P 500 is a stock market index that measures the stock performance of 500 large companies listed on stock exchanges in the United States. It is one of the major equity indices. The S&P is a float-weighted index, meaning company market capitalizations are adjusted by the number of shares available for public trading
Bill W.

What is a Bear Market?

A bear market is when the market experiences prolonged price declines. It typically describes a condition in which equity prices fall 20% or more from recent highs amid widespread pessimism and negative investor sentiment. You can make profit in a bear market by shorting stocks that you think will decline in price.
Bill W.

What is a Diversified Portfolio?

A diversified portfolio has a mix of asset types and investment vehicles in an attempt to try to limit exposure to any single type of asset. This is a risk management strategy that mixes a wide variety of investments within a portfolio. Diversifying your portfolio can decrease your risk since these assets react differently to economic events.
Bill W.

What is Fundamental Analysis?

This is the process of analyzing a company's intrinsic (real) value by examining related economic and financial factors. When performing fundamental analysis, you will be examining the state of the economy, the sector of the business, and the financial statements published by the company.

The ultimate goal is to arrive at a number (fair value) that an investor can compare with a security's current price to see whether the security is undervalued or overvalued.


Take away: If the fair market value is higher than the market price, the stock is deemed to be undervalued and a buy recommendation is given.
Bill W.

What are Time and Sales?

Time and Sales is a detailed list of trading activity for a specific security. Prior to the modern, electronic market, time and sales were printed out on the “ticker tape”. Time and sales are a real-time display of the stock’s price, volume, the exchange the security is traded on, date and time and direction the stock is moving for each trade.  
Craig S.

What is Level 2?

Level 2 is a term for market data which includes the bid and ask prices for a security. It shows you various orders on the order book including the National Best Bid/Offer (NBBO). Level 2 also shows you the cumulative size of each bid/offer at each price increment. When orders are placed, they go into the Level 2. The quote will show the number of shares wanted or offered at specific prices.

Other information that can be found in the Level 2 is the amount the stock is up or down on the day as well as the percentage the stock moved for the day. The highs and lows of a stock, the total daily volume and VWAP can also be found on the Level 2.
Craig S.

What is Short Selling?

Short selling is an investment or trading strategy that speculates on the decline in a stock or other securities price. It is an advanced strategy that should only be undertaken by experienced traders and investors. Short sellers are betting that the stock they sell will drop in price. If the stock does drop after selling, the short seller buys it back at a lower price and returns it to the lender. The difference between the sell price and the buy price is the profit.
Adam T.

What is a Pattern Day Trader?

A pattern day trader (PDT) is a regulatory designation for those traders or investors that execute four or more day trades during five business days’ time using a margin account. FINRA has established a PDT rule that requires that pattern day traders have a minimum of $25,000 in their brokerage accounts in a combination of cash and certain securities as a way of reducing risk. If the cash equity in the account drops below this $25,000 threshold, the pattern day trader can no longer complete any day trades until the account is back up above that point. This is known as the Pattern Day Trader Rule or the PDT Rule.
Adam T.

What is a Stop-Limit Order?

Stop-limit orders are similar to stop-loss orders, but as their name states, there is a limit on the price at which they will execute. There are then two prices specified in a stop-limit order: the stop price, which will convert the order to a sell order, and the limit price. Instead of the order becoming a market order to sell, the sell order becomes a limit order that will only execute at the limit price or better.
Adam T.

What is the difference between a market and limit order?

A market order will guarantee an execution of the order but does not guarantee the execution price. At times, it will not be surprising to get an execution price that is different from the market (current bid- current ask), especially if it is a fast market for that particular stock.

A limit order will guarantee an execution price or better, but it does not guarantee the execution of the order. For example: If you place an order to buy 200 shares of XYZ at $5.00 limit for the day, your order will not be executed until the stock trades at $5.00 or lower. Or If you place an order to sell 200 shares of XYZ at $5.00 limit for the day, your order will not be executed until the stock trades at $5.00 or higher.

Moe S.

What Is Margin?

Margin is the money borrowed from a brokerage firm to purchase an investment. It is the difference between the total value of securities held in an investor's account and the loan amount from the broker. Buying on margin is the act of borrowing money to buy securities. The practice includes buying an asset where the buyer pays only a percentage of the asset's value and borrows the rest from the bank or broker. The
broker acts as a lender and the securities in the investor's account act as collateral.

Bill W.

Methods to Deposit Funds into a Brokerage account

Listed below are 3 options in which you can deposit funds into a brokerage account. 

  1. Wire transfers- Funds are moved from one bank to another within one business day and the funds can even be available for use on the same day received.   Fees are paid to the bank to process the transfer, international transfers can cost more than a transfer within the US and can take extra day or two to be received.  


  1. ACH Transactions- Banks and clearing houses process transactions in batches and typically take two to three business days to be completed.  ACH transactions  may incur a small fee to complete the transaction.


  1. Money Transfer Services-  Money Transfer Services are not wire transfers, but do provide you with an electronic way to send funds.  Money Transfer Services transfers funds to an associated bank which in return transfers the funds to the beneficiary.  It can take anywhere from two to seven days to completed the transaction.  Some common money transfer services are:  TransferWise.com, CurrencyCloud.com and Revolut.com.


 Here’s how the three options stack up:

  Wire Transfers ACH Transfers Money Transfer Services
 Speed Same day 1-2 business days 2-7 business days

Most banks and credit unions,

but sometimes only for business accounts

 Most banks and credit unions Over 1,400 banks and credit unions
 International TransfersYes Yes Yes



Marcy B.

SMA (Special Memorandum Account)

An easy way to think about SMA is, it represents a line of credit. It's an investment account where excess margin that's generated from a client's margin account is deposited; this has the effect of increasing the Buying Power for a client. Let's say that a stock in a client's margin account appreciates in value and creates excess margin. If the excess is held in the account and that position creates a capital loss later on, the client could lose their gain entirely. The SMA balance will increase with cash deposits, hold interest and dividend payments from long positions and the proceeds from closing out securities positions. You can also use funds in your SMA to purchase more securities.
Bill W.

What is a Range Order?

A "Range Order" lets the trader enter two orders at once. If long a stock, the range order would entail a Sell Stop order below the market (end the pain) and a Sell order (enjoy the gain) above the market. If short a stock, the range order would entail a Buy Stop order above the market (end the pain) and a Buy order (enjoy the gain) below the market.
Moe S.

What is Reg - T?

In a nutshell, the Federal Reserve Board created this rule to protect investors against amplified loss. Its goal was to regulate Cash accounts and the amount of credit brokerages can lend to investors for the purchase of securities. Currently, investors may borrow up to 50% of the purchase price of securities held overnight while the remainder must be paid for with cash.
Bill W.

What is a margin call?

For traders and investors, your margin account balance has to stay above a certain level known as a maintenance margin. If your account dips below this level, you will get a margin call, which means that your broker will be annoying you with e-mails and phone calls to bring your account up to or above the maintenance margin level.
Bill W.

What is a publicly traded company?

Very simple. A company is considered a publicly traded company if it has raised money by selling its own stock to the general public in the form of an initial public offering (IPO). Once its' stock is sold to the general public, it can be resold infinitely from one investor to another. For this reason, stock exchanges were created to facilitate this process of continuous buying and selling.
Bill W.

Why do some people call brokerage firms a broker/dealers?

As the name implies, a brokerage firm can act as both broker and dealer. If your broker decides to trade for you, then he is a broker. If your broker trades for itself, then it is a dealer. Easy Right!
Bill W.

Bulls and Bears

Bull and the Bear are terms used to refer to investors perspective outlook of the market. A bullish outlook is an outlook that is optimistic (stock prices rising), while a bearish outlook means pessimistic (stock prices dropping). A bullish market refers to a scenario where the economy is experiencing growth, typically defined as a time period where prices are steadily increasing. Being bullish means you are optimistic that prices will go higher from where they currently are, while being bearish is the opposite; you think prices will trade lower from where they currently are. Bullish traders will look to take long positions by either buying stocks, call options or any other financial instrument that will appreciate as prices go up. Bearish traders are looking to take short positions where they will profit if the market or stock goes down from its current price. An old Wall Street saying that should be remembered is "Bulls make money, Bears make money, but Pigs get slaughtered".
John G.

What is a daily loss limit?

TradeZero offers risk tools which enables a daily loss limit to your trading account. This tool can prevent you from making you from breaking your trading rules and by pass your daily losses.
Moe S.

What is an exchange traded fund (ETF)?

They are always mentioned in the business news. An exchange traded fund (ETF) is a basket of securities that can be traded throughout the day like a regular common stock. Often times, they are used to track certain industries and/or sectors. For example, a technology ETF would be comprised of different technology stocks inside the fund and is best used to track the technology sector. Why would anyone buy a technology ETF or any type of ETF? A person can be lazy and doesn't want to do the research on individual stocks. Also, it is more cost effective to buy a single ETF comprised of 10 different technology stocks, than to buy them individually.
Randy B.

On taking profits and limiting exposure

One of the biggest problems in Day Trading is the inability to know when to take your losses and get out of a position. When someone shorts a stock and is looking for a profit of $1-2 you must also have a reasonable expectation on what you are willing to lose. To many times I see clients let their short positions ride well beyond where they should have gotten out. One way to avoid blowing up your account with a bad position is to use the TradeZero range orders. By doing this you can set up your profit price as well as your loss limits and avoid that one trade that blows up your account.
Randy B.