Fun Fact #1
Did you know that American options and European options differ in that American options can be exercised anytime before the expiration date, whereas European options can only be exercised at the expiration date? This means European options are cheaper than American options because American options have more options (pun intended).
You can read about options here.
Fun Fact #2
Did you know that you can negotiate your commission price with your broker?
Wait WHAT, did I read that right!?
Yes you sure did, read “Commissions, Fees, and Brokers” to learn more.
Fun Fact #3
Did you know that a Roth IRA account allows you to trade tax free? This can be extremely helpful to short-term traders who are tired of paying short-term capital gains taxes.
Read “Roth and Traditional IRAs” for more info.
Fun Fact #4
Did you know that you can buy a stock, have the stock go down, and still make money?
This requires a simple options strategy called the “Covered Call.”
Fun Fact #5
Did you know that bulls (the animal) swing their heads up, whereas bears (also the animal) swipe their claws down?
That’s why being bullish means you think the price will move up, whereas being bearish means you think the price will move down.
Image Source: https://www.dreamstime.com
Fun Fact #6
Did you know that QQQ, SPY, DIA, and IWM options trade until 4:15 Eastern Time, which is 15 minutes after the market closes? The volume is considerably lighter, so the spread (difference between the bid and ask price) is usually significantly larger.
Fun Fact #7
Did you know that QQQ, SPY, and DIA options are taxed at the 60% long term tax rate, and 40% short term tax rate regardless of the time you hold those options for?
Fun Fact #8
Did you know that when a company declares a dividend, the stock price goes down by the same amount of the dividend? This is done to prevent arbitrage opportunities. An arbitrage opportunity is when you make money without taking any risk.
Usually the dividend being declared is a small amount, so the drop in the stock is not noticeable.
Fun Fact #9
Did you know that when you short sell a stock after the company pays a dividend, you owe that dividend money back to the owner of the shares you borrowed?
Why do you think that is?
Hint: Yesterday’s post/fun fact might help you answer that question.
Fun Fact #10
Did you know that the S&P500 actually consists of 505 stocks? It still has 500 companies though. I guess they could change the name to the S&P505, but that wouldn’t sound very cool. Also, I like round numbers (and so do you, probably).
Fun Fact #11
Did you know that dividends are taxed at a lower tax rate than normal capital gains? This is assuming you have held the stock for long enough. Otherwise you could just buy the stock on the expected dividend date, and pay less taxes for the gains.
Fun Fact #12
Did you know that the VIX uses the demand for options (both puts and calls) to calculate the expected volatility for the S&P500? That’s why the VIX can go up even if the market goes up.
Fun Fact #13
Did you know that Ronald Wayne had a 10% stake in Apple back in 1976? Oh great, who cares? Well, Ronald Wayne sold his 10% stake for $800 in 1976. Just imagine how much that 10% stake is worth today. For your reference, Apple is approaching a 1 trillion dollar market cap.
Fun Fact #14
You might have wondered: Hey Nathan, what does your username mean? Did you know that my username has an interesting story, and can also teach you an important lesson regarding life and trading?
Click here to read more.
Fun Fact #15
Did you know that in the Chinese stock market, the color green is used to represent when a stock goes down, and red is used when a stock goes up?
China is communist, so red is an attractive color (hence red is up). If you’ve been into a Chinese restaurant or celebrated Chinese New Year, everything they have is red. Chinese people also give out 红包 for the New Year, which is a red envelope of money to celebrate.
Green is a bad color in Chinese culture because there’s a saying “戴绿帽,” which translates to “putting on a green hat.” This saying means “to be cuckolded by one’s wife” which translates to: your wife cheats on you with another man (I hope I got the translation correct).
Also, just in case you are wondering how I know Chinese, I am actually half Chinese and half Caucasian. I’m fluent in both languages even though I spoke only Chinese until I was two. I was born in San Francisco, California and moved to Boulder, Colorado when I was eight. I am grateful to have such a loving family, including a two-minute older twin brother who I deeply admire. We all support each other, and push each other to achieve the un-achievable.
Wow, that got off topic really fast. Back to analysis of weekly and long term trends!