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Giving a reform boost to commodity markets, the government today approved the FCRA Bill that seeks to provide more powers to sectoral regulator Forward Markets Commission(FMC) and allow a new category of products.
“The Cabinet has approved the Forward Contract Regulation Act (Amendment) Bill. It will give more teeth to FMC. Farmers will also benefit,” Food Minister K V Thomas told PTI.
The Forward Contract Regulation Act (FCRA) Bill, considered vital for the development of futures trade, aims to provide financial autonomy to the regulator. FMC can become self-sufficient by collecting revenues in form of fees from exchanges after the passage of this Bill in parliament, Thomas said. The retirement age of FMC chairman and its members will go up to 65 years from 60 years, if parliament passes the Bill. The number of members in FMC has also been proposed to increase from four to nine. The Bill also seeks to facilitate entry of institutional investors and pave the way for introduction of a new category of products, like Options.
The bill seeks to increase penalty on defaulters to Rs 50 lakh from the existing Rs 25 lakh. At present, the country has five national and 16 regional commodity exchanges. Recently, FMC had given its approval to the Universal Commodity Exchange to operate as a national bourse. The cumulative turnover of the commodity exchanges is about Rs 80.30 lakh crore till September 15 of the current fiscal.
Following are the key amendments proposed in the Insurance Laws Bill 2008, chief among them being increasing the cap on foreign equity in insurance companies to 49% from 26% earlier.
Following are the key amendments proposed in the Insurance Laws Bill 2008.
1. Foreign equity cap is proposed to be kept at 49 per cent as provided in the Insurance Laws (Amendment) Bill, 2008 as against the 26 percent.
2. Foreign reinsurers will be permitted to open branches only for reinsurance business in India and cannot invest directly or indirectly outside India the funds of policyholder.
3. In order to encourage health insurance in India, the capital requirement for a health insurance company has been proposed at Rs 50 crore instead of Rs 100 crore for General Insurance companies.
4. The definition of ‘health insurance business’ has been revised so that health insurance policies would cover sickness benefits on account of domestic as well as international travel.
5. Regarding the obligatory underwriting of third party risk on Motor Vehicles, a separate Motor Vehicle Insurance and Compensation Legislation is being proposed by the Government.
6. The period during which a policy can be repudiated on any ground, including misstatement of facts etc. has been confined to three years from the commencement of the policy and no policy would be called in question on ground of misstatement after three years.
7. Public sector general insurance companies and GIC will be permitted to raise capital from the market to meet future capital requirements, provided that the government’s shareholding does not fall below 51 percent.
8. Appointment of agents is proposed to be done by insurance companies subject to the agents meeting the qualifications, passing of examinations etc. as specified by IRDA. While the licensing of agents be no longer with IRDA, the Authority is empowered to take action against agents.
9. To specify fine on intermediaries and insurance companies for misconduct of intermediaries and to make appropriate provision in the legislation to effectively deter multilevel marketing of insurance products in the interest of policyholders, and to curtail the practice of mis-selling.
10. In order to improve the functioning of surveyors and bring in greater transparency, certain modifications are made to provide for regulations on qualifications regarding appointment of surveyors and to strengthen the Institute of Indian Insurance Surveyors and Loss Assessors
11. The commission structure and the Code of conduct for agents is to be specified by regulations by the IRDA and accordingly, ceilings on commission in the Act have been done away with and the insurance companies along with the agents are made liable for any violation of the regulations and stiff penalties have been provided for mis-selling, rebating and marketing of products through multi level marketing schemes.
Traders lose money (Fear Stock Market) because of wrong thinking, misplaced emotions, and wanting to be right. We know fear and greed drive the market prices far more than fundamentals do. The emotions of fear and greed are the key reasons traders do the wrong things at times. Fear makes traders not take entries and miss trends, fear also cause traders to sell winners early scared of giving back paper profits only to miss out on big profits when they were right. Greed is the driver behind traders taking positions far too big and risky for their account size and then greed keeps traders holding losing positions wanting their losses back instead of just accepting their losses and looking for a better potential profit.
Here are four great examples of fear over ruling sound trading strategies.
The fear of being wrong: Traders fear being wrong so much they will hold a small loss until it becomes a huge loss. Even adding to the loss in the hopes of it coming back and getting to even. Don’t do this, holding on to a loser after it hits your predetermined stop loss is like being a reverse trend trader. Do not be afraid of being wrong small be afraid of being wrong in a BIG way by not cutting the loss.
The fear of losing money: New traders hate to lose money, they do not quite understand yet that they will lose 40%-60% of the time in the long term. We should come to expect the small losses and wait for the big wins patiently. Many times traders fear this so much that they have a hard time taking an entry out of fear of losing. If you can’t handle the losses as part of the business, you can’t trade.
The fear of missing out: The opposite of the fear of losing money is the fear of losing potential profits. This causes traders to watch a stock go up and up, miss the primary trend, then not being able to take it any more and get in late just in time for the trend to reverse and lose money. Trade at your systems proper entry point do not chase a stock because you are afraid to miss out on some profits.
The fear of leaving money on the table: When your trailing stop is hit get out of the trade. If your rules tell you to get out after a parabolic run up and stall then exit. You must be disciplined on taking money off the table while it is there. Being greedy for that last few dollars when your system says to sell could lead to major losses of paper profits. Let your winners run but when the runner gets to tired to continue: bank your profits
In a sense, it is difficult to imagine the stock marketgoing up on bad economic news, but that’s the way it is. The stock market and Wall Street compose a system that only serves itself and its participants. I’d never fight the Federal Reserve in terms of investment strategy, but the stock market betting on a third round of quantitative easing (QE3) illustrates the real problems that the U.S. economy and the eurozone are facing. It is an age of austerity, and there’s very little economic growth to be had.
There are lots of near-term beneficiaries of the current hype; gold and silver stocks are soaring, and it’s a well-deserved turnaround in the precious metals sector. The near-term action in the stock market is good, but it’s even better for gold stocks. The U.S. dollar is under pressure, but that’s what the Federal Reserve wants: increasing money supply, artificially low interest rates, and a weaker U.S. dollar. It’s all in the name of economic growth; but at the end of the day, the business cycle still wants to play itself out and the subprime mortgage-induced bubble is still a force to be reckoned with. Economic growth, as we used to know it, is now a thing of the past.
Intel Corporation (NASDAQ/INTC) is a benchmark stock that I follow regularly, and the company’s third-quarter revenue warning was significant. The company cut its third-quarter revenue expectation to $12.9–$13.5 billion, down materially from the previous range of $13.8–$14.8 billion. The company cited weak economic growth in the U.S. economy and the eurozone, which has consumers holding onto their wallets, for the cut. Tellingly, the company withdrew all other quarterly and full-year expectations. This is definitely not good for both Intel and the stock market.
So while the stock market may still be ticking higher and the Federal Reserve will likely appease Wall Street, the underlying economic data is still weak, and this is why I feel that the stock market will soon top itself out. (See “The Fed Can’t Help the U.S. Economy Anymore.”)
It is likely that 2013 will be a very difficult year; economic growth over the rate of inflation is highly unlikely.
Corporations have pulled out all the stops to keep their earnings afloat, and they’ve done a good job of it over the last couple of years. But with little in the way of economic growth in the U.S., no economic growth in Europe, and declining economic growth in Asia, American corporations are about to feel a blow to revenues. Intel is the perfect example. Earnings in the third quarter can still beat consensus, but that’s only because these expectations have already come way down. The most important number this upcoming earnings season is revenue and we could be in for a nasty surprise.
I want to be bullish going into 2013, but it’s difficult, given minimal economic growth. I had a more positive outlook just a little while ago, but Intel’s news is like a canary in the coal mine. Stock market investors need to be extremely cautious going forward. I repeat my view that a conservative investment stance is warranted, and there’s no reason for long-term investors to be buyers in this market.
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Stock options are not lottery tickets, chips in a casino, or a path to easy street. They are tools for the transference of risk from one person to the other. When trading options you must understand where the risk lies in your specific option play and what the odds are of you winning. The Black-Scholes option pricing model does an excellent job of pricing in known variables of time and volatility into options. Implied volatility does not predict direction of the movement it predicts the amount of movement. The edge lies in three places #1 following the chart and trading in the direction of the trend #2 managing your risk on every trade allowing your wins to be bigger than your losses in the long term, and #3 having the discipline to follow your trading plan. Option trading is no different than any other kind of trading, just more leverage and speed of percentage movement.
The first question to ask in any option trade is how much of my capital could I lose in the worst case scenario not how much can I make.
Long options are tools that can be used to create asymmetric trades with a built in downside and unlimited upside.
Short options should only be sold when the probabilities are deeply in your favor that they will expire worthless, also a small hedge can pay for itself in the long run.
Understand that in long options you have to overcome the time priced into the premium to be profitable even if you are right on the direction of the move.
Long weekly deep-in-the-money options can be used like stock with much less out lay of capital.
The reason that deeper in the money options have so little time and volatility priced in is becasue you are ensuring someones profits in that stock. That is where the risk is:intrinsic value, and that risk is on the buyer.
When you buy out-of-the-money options understand that you must be right about direction, time period of move, and amount of move to make money. Also understand this is already priced in.
When trading a high volatility event that price move will be priced into the option, after the event the option price will remove that volatility value and the option value will collapse. You can only make money through those events with options if the increase in intrinsic value increases enough to replace the vega value that comes out.
Only trade in options with high volume so you do not lose a large amount of money on the bid/ask spread when entering and exiting trades.
When used correctly options can be tools for managing risk, used incorrectly they can blow up your account. I suggest never risking more than 1% of your trading capital on any one option trade.
As India seeks to control high inflation, RBI Governor D Subbarao has said a little sacrifice in growth is “inevitable” amid efforts to bring down prices to acceptable levels.
Subbarao said criticism is often directed towards the central bank that even though it has raised interest rates and runs a tight monetary policy, inflation is still “high and persistent” and growth has been hurt.
The RBI’s response to the criticism is that “some sacrifice of growth in inevitable, a necessary price we have to pay to bring down inflation. But that sacrifice of growth is only in the short term.
