Recently we were thinking about movies with some kind of financial lesson. The financial side of making films has always intrigued us. Historically the Oscars have always been proof that the biggest budget doesn’t always give the best ROI. In 2010, the lowest grossing Oscar winning film in history – The Hurt Locker – beat out the highest grossing picture in history – Avatar.
Here’s my list of the top 10 movies ever made that have a financial lesson inside of them.
1. Boiler Room (2000) – A college dropout gets a job and enjoys fast success at a brokerage house selling phony stock. However, the job turns out not be as legit as it sounds. This film is mix of Wall Street and Glengarry Glen Ross thrown in. Although there’s no character here that can compare to Michael Douglas’ Gordon Gekko.
Lesson: Great morality lesson dealing with the desire to get rich quick, regardless of the consequences.
2. Wall Street (1987) – “Greed, for lack of a better word, is good”. This line by ruthless corporate raider, Gordon Gekko, summed up the business ethics of the 1980s, when greed, corruption and the predatory nature of the financial world was at its most conspicuous. The film charts the ascent of a young, ambitious stockbroker who’s taken under Gekko’s wing and struggles with whether it’s better to have money or integrity. Gekko is the embodiment of corporate malfeasance, but also portrayed as a business guru. His glamor and power probably inspired a lot of young men to enter investment banking over the last two decades. As Gekko said, “It’s all about bucks, kid. The rest is conversation.”
Lesson: Greed is good. What’s worth doing is worth doing for money. Lunch is for wimps. If you need a friend, buy a dog. So goes the wisdom of Gordon Gekko, ruthless investor, legendary financier – and the star of one of the best movies ever made about money. This film also provides a great backdrop to the landscape that led to the financial crisis of 2008.
3. Glengarry Glen Ross (1992) – Times are tough. This is the ultimate real estate high pressure sales environment film where making money is the bottom line. A desperate group of Chicago investment property real estate salesmen suffer in a down market, a sales contest is launched and anyone who fails loses his job.
Now that the property bubble has burst, some real estate offices may soon seem a little bit more “Glengarry”. There’s no room for losers, only ‘closers’ will get the good sales leads. Some regarded this film as a critique of the impact of Reaganomics.
Lesson: Too much pressure to succeed can boil over into tragedy with unforeseen consequences.
With the upcoming premiere of the film “Wall Street – Money Never Sleeps” it got me thinking about movies with some kind of financial lesson. The financial side of making filmshasalways intrigued me. This year’s Oscars were yet again proof that the biggest budget doesn’t always give the best ROI. In 2010, the lowest grossing Oscar winning film in history – The Hurt Locker – beat out the highest grossing picture in history – Avatar.
Here’s my list of the top 10 movies ever made that have a financial lesson inside of them.
4. Maxed Out. Hard times. Easy Credit. The Era of Predatory Lending (2006) – This documentary shows how the modern financial industry really works. It explores America’s love with credit and leveraged debt and tells us why the poor are getting poorer and the rich getting richer. When Hurricane Katrina ravaged America’s coast, it revealed that America was far from the world’s wealthiest nation. It also highlighted America’s crumbling beneath a staggering burden of individual and government debt. Maxed Out shows how predatory lending was out of control, including credit cards pumped to college kids who had no income. This is a great movie. It’ll make you feel different about your money.
Lesson: It delivers a great lesson on how to borrow and shows why you don’t want to live on credit. Credit is the devil. Do you know anyone who got into trouble because they didn’t borrow too much money? Maxed Out paints a picture of a national nightmare which is all too real for most of us – out of control spending and an irrational use of credit.
5. Enron: The Smartest Guys in the Room (2005) – Before Bernie Madoff, there were Ken Lay and Jeff Skilling who ran the Houston energy firm that was going to reinvent how energy was going to be done in America. Enron was highly profitable, had a great amount of cash flow and earnings and the stock price soared. Its executives cashed out options worth millions and told employees their best 401K option was Enron stock. Thousands lost all their retirement savings because they put all their bets on one company. Took Enron 16 yrs to from 10b assets to 65b assets, but it took them 24 days to go bankrupt. It won the Academy Award for best documentary.
Lessons: Have a financial plan, have a discipline. If you have a stock that looks too good to be true and it just keeps going up, up, up, it’s probably too good to be true. Diversify, Diversify, Diversify. Don’t put all your eggs into one basket.
6. Working Girl (1988) – Melanie Griffith plays Tess McGill. Endearing 80s film. Ultimately she takes a job as a secretary but she wants to rise in investment world. Wants to rise to power, combines her business degree from night school w/ her street smart acumen & pulls of a mega-merger. Total fantasy. Prince charming happy ending w/ Harrison Ford. “I have a head for business and a body for sex.”, says Melanie Griffith’s character. Go back to night school, go back & get a degree. Go get educated, you’ll get leverage. No one can take your education away from you.
Lessons: Your education, your smarts can’t be wiped out in a recession. Your earning power is rooted in your skills, in your education. Provides an entertaining reminder that if you have something to offer your co. & they don’t seem too interested, then take your skills elsewhere. If you are a super powerful earner at one job, you can make yourself a super powerful earner anywhere.
7. Treasure of the Sierra Madre. 1948. Classic western cautionary tale about how not to launch a venture. If you took everything that Howard Dobbs & Kutan did in this movie: “Get rich quickly without a credible business plan.” “Badges, we don’t need no stinking badges.” Don’t swing blindly, don’t come up w/ a get rich quick scheme, don’t do a pyramid scheme, don’t sell products from your house to your friends or recruit your friends.
Lesson: In life, as in baseball, you’re gonna strike out. You don’t want to strike out blindly while your pursuing a huge home run. You gotta know your business, know your partners, know where you are in all of this.
8. Mr. Blanding Builds His Dream House (1948) – Was remade into The Money Pit, starring Tom Hanks & Shelly Long. Owning a home ain’t cheap. It can turn into a massively expensive ordeal. Home is really a money pit. Owning a home comes w/ a lot of responsibility, gotta have credit, gotta have a down payment, pay your bills, maintain the home, gotta know the risks up front. It’s expensive. You gotta know the worse case scenarios, all the risks, the downside.
Lesson: Shows how the American dream of owning a home can go terribly wrong. Home ownership is not for everybody and shouldn’t be promoted as such by the government.
9. Confessions Of A Shopaholic (2009) – About a chic who’s struggling with a debilitating obsession with shopping and has 12 maxed out credit cards. She unintentionally lands a job as a financial journalist and falls for a wealthy entrepreneur. Don’t buy a $400 watch because it quickly depreciates to nothing. I will buy a $4,000 Rolex – nothing less than a Rolex — because it can still be sold 10 yrs after you buy it for what you paid for it. You use credit to buy things of value: an education, a car to get you to work, (I prefer to buy 2-yr old used cars because it loses half its value up front when you drive it off the lot, but you can still get 50-60,000 miles out of it.)
Lesson: Only use credit for things that have value. Pay cash for everything else.
10. Brewster’s Millions (1985) – The ultimate spending spree is something that most of us have daydreamt about at some time. A minor league baseball player, Montgomery Brewster, (Richard Pryor) has to waste $30m in 30s days in order to inherit $300m; however, he’s not allowed to tell anyone about the $300m deal.
Lesson: How corruptible too much money can be and how difficult it can be to use it responsibly.
As a keen investor, you will know that the stock market is constantly changing. In 2008, it was estimated that the size of the world stock market was $36.6 trillion. It is ever growing and expanding, but also dipping and rising in value all the time.
These days you can invest in almost anything, from gold and silver on Bullion Vault to Real Estate. If you’ve invested in stocks and shares then you are going to want to check the stock market on a regular basis. We have found just a couple of the best stock apps about so you can track and manage your stocks right from your iPad.
This app by Value Prime, is a powerful stock analysis app which provides thorough analysis for a huge variety of stocks. In addition, it also helps you to judge stocks by providing statistics based upon risk, valuation and financial strength. The app has an archive of 6,700 stocks, and for each stock you are given a detailed overview of its state. The app is able to tell you everything about the stock, from its valuation rating and financial strength to its risk score and its sharpe ratio. It has a user-friendly interface which is loaded with tons of features.
Produced by Toughturtle LLC, StockWatch allows you to easily track your stocks from your iPad. It differs from StockGuru because this app is purely designed to help you track stocks you already own, rather than helping you make decisions on other stocks. The app was noted in Apple’s iTunes Rewind as one of the best apps of 2010. You can create portfolios and even make watch-lists so you never miss a thing. In addition, there is a news feed integrated in the app so you will always be in the know.
June 20, 2010
If you’re fed up with Wall Street, you should start tuning in to U.S. Rep. Luis Gutierrez. the Chicago Democrat, most familiar for his views on immigration, has become an impassioned voice on the overhaul of the financial system that Congress promises to deliver by Independence Day.
Congress honors deadlines the way it honors spending limits, so the timing is an open question. But at least it has focused attention on Capitol Hill, and Gutierrez, as chairman of a subcommittee for the Barney Frank-led Financial Services Committee, has attained a lead role.
Gutierrez has taken to the blogs and the cable channels advocating for a $150 billion fund to cover future collapses of the big banks. the banks themselves would prepay the money, which would be used to make creditors whole when an institution fails, much the way the Federal Deposit Insurance Corp. takes out wayward banks.
Republicans argue that it’s another bailout, a way of institutionalizing “too big to fail.” They’ve encountered a determined debater in Gutierrez. In remarks issued June 9, Gutierrez said that “this is not a bailout fund. this is a dissolution fund. this is essentially the FDIC’s Deposit Insurance Fund writ-large.”
The fund is contained in the House’s version of the financial regulation bill. it contrasts with a Senate proposal that would create a $50 billion fund assessed against banks after there is a big collapse.
Citing a Congressional Budget Office review, Gutierrez said the Senate idea is likely to create a $20 billion liability for taxpayers because the FDIC would have to shell out money upfront by borrowing. His biggest obstacle in getting his mega-FDIC fund might be his friend in the White House. President Obama has said he’s against the $50 billion Senate plan, but to my knowledge he hasn’t signaled a position on the House version.
Gutierrez could be the fiery antidote for a too-cool Obama. Gutierrez also has spoken out for a new consumer protection agency and a rule that would ban investment banks from using customer assets to trade for their own profit.
ALL THE OPTIONS: the welcome that the Chicago Board Options Exchange received on the markets last week was warm but restrained. the shares of the new CBOE Holdings (CBOE) got a small pop from their offering price of $29, then generally were steady through the week, closing Friday at $31.15. There was no post-IPO buying frenzy.
Clearly, there’s a little trepidation about the stock. Options trading is highly competitive and based on price, except for licensing agreements for certain products, such as the CBOE’s lucrative deal for contracts based on Standard & Poor’s indexes. while it’s the largest options exchange in the country, the CBOE has seen its market share decline to 31 percent in 2009 from 45 percent in 2000.
But in 2000, CBOE was still comfortable under member-ownership and wasn’t reporting financial data. Its revenue has gone from $201 million in 2005 to $426.1 million last year. And there is one aspect of its IPO that has gotten scant attention.
Access to its trading systems, instead of being granted through membership, will now be leased separately. Analysts think this will create a $100 million-a-year revenue source within five years, even if options trading during that term grows only a little.
ABOUT THAT NAME: Now that the CBOE is playing on the public stage, it may be time to look at its awkward name. People have had difficulty with it for years. Take, for example, the CBOE’s own IPO ceremony on its trading floor Tuesday. it was full of important folks, some of whom got the name wrong in their remarks.
Tim Golomb, managing director in Chicago for Nasdaq, called it the “Chicago Boards Options Exchange.” Mayor Daley called it the “Chicago Board Option Exchange.” U.S. Rep. Danny Davis congratulated “the CBO.” Gov. Quinn got it right.
But I can’t cast stones here. Plenty of newspaper accounts put an extraneous “of” in the name. Financial markets do their part to trip unwary reporters. There’s an ICE, as in Intercontinental Exchange, and an ISE, as in International Securities Exchange.
OOPS! In last week’s column, I used an outdated description of Diebold (DBD), which is a manufacturer of ATMs.
It may have something to do with algorithmic trading that reacted to an announcement of Diebold’s $25 million settlement of accounting fraud charges. But it was rather old news, as the amount had been agreed to in principle a year ago.
On Wednesday, shares of Washington Post (WPO) became the first to trip the new circuit breaker rules that stop trading for five minutes when prices swing more than 10 percent during the previous five minutes. WPO shares are costly–they closed Friday at $457.90. on Wednesday, they briefly doubled, and the NYSE Arca exchange canceled three trades at $919 a share.
CLOSING QUOTE: “What happened in April and May is precisely what investors should be looking for: crisis! Crisis routinely brings about better pricing.”
– Stephen Mack, president, Mack Investment Securities
If you’re comfortable with trading equities, and you’re ready to diversify your portfolio, it might be time to consider stock options trading.
What is Stock Options Trading?
Rather than buying or selling shares of a company directly, which is what equity trading is all about, stock options trading is about buying the right to buy or sell an underlying company’s shares, but not actually having the requirement to follow through.
You may already be familiar with the basic theory of stock options if you’ve ever worked for a company that had an employee stock option plan.
Under that plan, an employee is granted the right to buy a particular number of company shares, at a pre-arranged price, prior to some future date when the option expires. the employee, of course, has no requirement to buy those shares.
If the price of the company’s shares exceeded the option price during the option period, the employee would probably exercise their right to buy. If, however, the company’s stock price fell below the option price, the employee would probably let the contract expire with exercising it.
That all makes perfect financial sense, right? well, that’s essentially what options trading is all about, except it gets a bit more detailed.
A trader who wanted the right, but not the obligation, to purchase a set number of shares of a company’s stock, at a pre-arranged price, before a specific date, would buy a “Put” contract.
Now this is where option trading differs from the employee stock option plan. Suppose, instead, the trader wanted to buy the right to sell a set number of shares of a company’s stock, at a pre-arranged price, before a specific date?
The trader would purchase a “Call” contract giving him the right, but not the obligation, to sell shares of the target stock at the pre-negotiated price on or before the contract expiration date.
Why is Trading Stock Option Potentially Very Profitable
Trading Stock Option requires just a fraction of the money required to purchase shares outright, and you can walk away from the contract without exercising your rights. this makes it an excellent way to achieve a practically unlimited upside, while precisely controlling your downside should the market move against you.
Of course, there are option trading strategies and rules you need to be aware of. Option trading is a bit more complicated than equity trading, but it can return amazing profits once you know how it all works.
Option trading can be very risky but can also be more safe and profitable compared to stock trading. Option trading strategies can be made in a variety of ways so the risk factor will differ and allow you to make more profitable decisions in your trading. with this type of diversification, using option trading strategies as your core trading vehicle can be safer and much more profitable than trading strictly stocks. this article will explain which type of options to use as the main strategy in your trading portfolio.
Now when it comes to options, the strategies are endless. You could trade calls and puts, naked options, covered calls, spreads and so on. Many traders use some, all or a few of these strategies. Depending on what you want to accomplish in your portfolio, there no wrong tactic. However, option spreads can make a great strategy, which can deliver safe profits on a monthly basis.
Here is a list of option spreads to use in your portfolio.
Put or call (Debit ) Spreads – Works well when you know the direction of the stock. since you are buying this spread you want the stock volatility to be low in order to get the inexpensive option prices.
Iron Condors (Sell) – this type of spread will usually be the backbone of the option strategy. when the stock market volatility is stable, this strategy can be very profitable. The downside is it does not work well in volatile markets or on inexpensive options.
Vertical (Credit) Spreads – Basically one leg of the iron condor. Use during moderate volatility.
Calendar (Debit) Spreads – since you are buying, use during low volatility.
Diagonal (Credit) Spreads – great for mild long-term trends
However, as is in all options these options due have risk as well and you should consult with your broker and paper trade until you have a thorough understanding. The other nice part about these spread options is you only need to have knowledge of simple trend analysis of the market and on your selected stocks.
Many of you who use “Think or Swim” (TOS) as an online broker are familiar with the free Options seminars hosted by TOS affiliate “OptionPlanet”. Yet how many of you have attended one of these Trading Options seminars rather than just think about it?
On Saturday August 15th, 2009 I made sure to see first hand what these were all about and whether or not they truly taught you the process of learning how to trade options. I attend the Options for Traders presentation. The seminar itself is a 7 hour ordeal, from 9:00 AM to 4:00 PM.
Joe Mazzola, a man in his early thirties, presented the seminar. Mr. Mazzola who has been trading options for twelve years, ever since he was twenty-one, also runs “SwimCoach”. Another TOS tool focused on teaching investors complex option strategies and answering live position related questions, for a small monthly fee of $50. With a bachelor degree in Economics and an MBA in finance Mr. Mazzola takes a more fundamental approach when entering option positions, rather than a technical one.
The class began with an overview of the current market situation, specifically the S&P 500. In Mr. Mazzola’s opinion the S&P 500 is a little overbought for the time being considering the comparatively weak economic data and easy to beat earning targets. He proceeded to explain to the folks who are inclined to believe in a coming inflation to follow the CPI (Consumer Price Index) and PPI (Producer Price Index) as they are direct rejections of inflation. We then began to get into the meat of options trading. We skipped the explanation of calls and puts and dove right into the world of vertical spreads. Stressing the benefits of limited losses and limited gains, Mr. Mazzola went on to explain that buying options was inferior to selling them, “This is because you want to benefit from “time decay” he explained. He recommended trading highly liquid securities, minimum volume of 400-500 and 1 million a day for options and stock respectively. This is because the bid/ask spreads are often tighter and you are more likely to be able to get a fill in-between the two. Another word of advice was to sell the spreads 30-45 days prior to expiration, due to an accelerating time decay, and to buy them back 4-10 days prior to expiration, in order to avoid an expirations weak disaster.
Probability of success was another key theme. Although TOS provides a tool for calculating the percentage of an option expiring at least .01 in the money successfully, he explained another simple equation which would merit results for selling positions successfully. Max loss divided by the difference between the two strikes. “When selling options you want a percentage between 55%-75% of success, no more no less. This is because the greater the percentage the smaller the payout or vice versa” he said. Example: -1 @ 12 Strike = +$.60 +1@ 13 Strike = -$.25 Credit = .35 Max loss = .65 Probability of Success is = (.65)/(1.00) or 65%.
Next options strategy was, The Iron Condor. This is a strategy that benefits from range based trading and sideways movement. He explained that an Iron Condor was nothing more than selling a put spread as well as a call spread to create a range in-between to profit from. He stressed the fact that this strategy should not be used on volatile stocks such as AAPL, but on sideways ones such as WMT. We went through different scenarios for using this method and how to adjust it, if it begins to go wrong.
Overall I found the seminar to be decent and give you a good solid base on the processes involved in trading options. I would recommend it to new options traders who are not yet familiar with the TOS desktop platform, nor complex options strategies.