Uncovered Options Trading System

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Technical or Fundamental Analysis


There are two types of the analysis used by institutional and individual traders. Both fundamental and technical analysis serve the same purpose to help to define possible future stock trend, yet, at the same time they are completely different in the way they analyze stocks. Both fundamental and technical analyses are important and depending on the trading style one or another could be applied. Before answering on the question which one to use, let us define a few main points about these types of stock analysis.



In the core of Fundamental Analysis lies collecting of all possible information about a public company. As a rule this is quote a big volume of info which includes earning reports, company spending reports, finding out about future company's products, gathering information about the industry in which the company operates, etc. In many cases several years of information should be collected and analyzed to evaluate the stocks of the company and make an assumption about health of the analyzed stocks. In many cases the result of fundamental analysis has to answer if the company stock is overpriced (current stock price is above the price that should be based on the company assets, good will, earnings, debt and other factors) or the company stock is underpriced (current stock is traded below the price that should be based on the company assets, good will, earnings, debt and other factors). Other important question that could be answered by fundamental analysis is about prospective of the company and what is potential of the company to grow. Fundamental analysis is quite complicated, expensive and time consuming, yet, sometimes this is the only way to find out the current situation about the company and if it is worth to invest in the company's stocks.

Technical analysis on the other hand is easier to learn, easier to use, could be less time consuming and less expensive. Technical analysis looks at past performance of an analyzed stock in order to find logical patterns that could be applied to the current situation on the market and reveal possible future stock trend. As a rule this type of the analysis is based on the analysis of the volume and price charts, data, developing various technical indicators which. In the age of the computerization many of the traders are choosing this type of the analysis mainly because of the availability and fast results.

By comparing technical and fundamental analysis there is no straight answer which one of them is better. However taking into account different traders we may say that:

In summary as you may see that fundamental analysis is useless when it comes to speculators who make short lived trades and it becomes more attractive to long-term traders. On the other hand technical analysis is very popular among short- and mid-term traders. Even long-term traders use some technical indicators especially when it comes to technical analysis applied to the indexes and exchanges.

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DISCLAIMER: THIS INFORMATION IS INTENDED FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE ANY FINANCIAL ADVICE. RISK IS INVOLVED IN ALL STYLES OF MONEY MANAGEMENT. Uncovered options trading involves greater risk than stock trading. You absolutely must make your own decisions before acting on any information obtained from this Website.

The return results represented on the web site are based on the premium received for the selling options short and do not reflect margin. It is recommended to contact your broker about margin requirements on uncovered options trading before using any information on this web site. Use our "Trade Calculator" to recalculate our past performance in relation to the margin requirements, brokerage commissions and other trading related expenses. Past performance is not indicative of future results.

Risk Statement:

Naked options trading is very risky - many people lose money trading them. It is recommended contacting your broker or investment professional to find out about trading risk and margin requirements before getting involved into trading uncovered options.

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