Not filed your tax return yet? 5 reasons you may be in luck! (Content Princess – SEO)

Tax returns may frighten even the best of us when the deadline is near. But this year is the season to relax, keeping your worries at bay. There are reasons for submitting the returns late and still keeping the penalties away!

With the deadline for submitting IRS tax returns extended to April 18th, 2017 this year, you are in luck! It’s still not late to file your returns.

Do You Need To File Your Tax Return?

Before you panic over your taxes, be sure you need to submit the tax return. Under certain conditions, filing taxes is not necessary.

Consider your age as well, since being over or under 65 impacts your requirement to file.

Don’t file if you have no income. You also don’t need to file if your income falls below minimum brackets. If you’re single and under 65, you file if you earn over $10,350. If you file jointly, you file if you earn over $20,700.  

Dependents also can’t claim their exemptions regardless of age. When their earned income is more than the standard deduction for a single taxpayer ($6,300), they will still receive a return.

No Penalties

Not sending in your tax returns translates to penalties. You’ll be charged 5% of what you owe when you don’t submit by the due date of filing of the tax return. Being 60 days late will get you at least a $135 late filing fee.

If you don’t owe anything though, there aren’t any penalties for not filing. Being owed a refund also means that you won’t be charged a late filing fee.

Please Give An Extension!

Talk to the IRS right away if you haven’t filed but still need to. The time you have left might not be enough time, so ask for an extension.

An automatic six-month extension is given to anyone who asks when filing a federal tax return. This pushes the due date until October 16th. This way you can avoid penalties.

I Still Want My Refund!

Even if you haven’t needed to file taxes for the past three years, you can still get a refund. You can get the money you pay as a federal tax back.

For up to three years since your original due date, you can still get your refund. This means that if you haven’t filed yet, try next year or ask for your extension. 

Late Refunds

Not filing yet, won’t make a huge impact as you might think. You may even have a friend who submitted in January and is still waiting to get his refund.

The IRS can’t always give out refunds fast. Part of this has to do with form issues, like errors, incomplete forms, or further review.

Claims filed before February 15th for an Earned Income Tax Credit, or an Additional Child Tax Credit will also take longer. Form 8379 for Injured Spouse Allocation can take up to 14 weeks to process.

On average, however, 21 days is usually how long you’ll have to wait regardless of when you file your tax return.

Filing tax returns need not always be stressful, you might even get lucky sometimes!

Primary Keyword: Tax returns

LSI Keywords:

Variants: IRS tax returns, federal tax return,  submit the tax return,  file your tax return,  sending in your tax returns,  filing of the tax return

Antonyms and Synonyms: refunds, extension, penalties, taxes, file your taxes, returns, submit taxes, filing

Links:

https://www.irs.gov/refunds/tax-season-refund-frequently-asked-questions

https://www.efile.com/tax-day-deadlines/

https://turbotax.intuit.com/tax-tools/tax-tips/IRS-Tax-Return/Does-Everyone-Need-to-File-an-Income-Tax-Return-/INF14399.html

https://www.irs.gov/publications/p17/ch01.html

http://budgeting.thenest.com/need-file-tax-extension-dont-owe-26243.html

Facebooktwittergoogle_plusredditpinterestlinkedintumblrmailFacebooktwittergoogle_plusredditpinterestlinkedintumblrmail

The Advantages of Private Equity (Content Princess – SEO)

The benefits of private equity to your portfolio are varied and knowledge of these benefits is valuable to any investor.

Private equity comes with the potential for making discoveries of undervalued companies which would be very difficult to find in the public sphere due to the scrutiny that public companies are under. Public companies must publish details of their finances quarterly, allowing all investors to respond quickly to small changes in profits or losses.

While this leads to a very precise measurement of the valuation of the company, backed up by a multitude of personal valuations of share worth, this also makes it very difficult for individual investors benefit from the acquisition of undervalued assets. In private companies, the absence of the requirement for published financial data means that valuations are significantly more obscure, meaning that comprehensive research is rewarded when assessing the real value of a company.

By performing more extensive research on a company than competitors, individual potential shareholders can act on information which may not be available to competitors.

Public companies are under great pressure for shareholders to maintain profits, lest published financial data leads to a reduction in share value and the selling of assets by shareholders. This need for public companies to maintain short term profits underscores the advantage of private companies, who can afford to maintain a deficit in the short term if it means increased profits later.

This ability to maintain shareholder confidence despite lack of profits in the short term allows for significant opportunities to acquire assets which have been undervalued due to a short-term lack of profitability, even if long-term projections are strong.

Of the 27 million companies in the United States, less than 1% are public companies. However, many opportunities for building diverse and profitable portfolios exist in the private sector. Investing in the private sector allows investors to compliment the activities of public sector companies, generating increased profits through supply line facilitation, synergistic co-operation or addressing market gaps which would be too unwieldy for the more restricted public companies to capitalise on. Also, investment in private equity is a means by which risk can be avoided.

The reduced level of scrutiny which private companies are under means that they can make decisions much more quickly than a public company can. This brings numerous benefits for several reasons. These include the fact that global marketplaces change often, with competitors attempting to be the first to respond to changes. Companies must be able to respond quickly to these changes in the market to stay competitive.

By removing the obstacle of being subject to the scrutiny of a greater number of shareholders, private companies can respond to changes in demand more quickly than a public company can, benefiting both consumers and shareholders.

Reduced levels of scrutiny mean that private companies are much easier to influence when it comes to the decision-making process. Public companies are managed by boards of directors who may or may not take into consideration the views of individual shareholders. On the other hand, Private companies usually display a greater likelihood for shareholders to influence the direction of the company, allowing you more freedom to make your perspectives and contributions known.

There are likely to be many other advantages to private equity not mentioned above, including the ability to support causes which have personal significance to the investor.

Keywords

benefits of private equity, Private equity, undervalued companies, public companies, undervalued assets, shareholders, shareholder confidence, acquire assets, diverse and profitable portfolios, private sector, public sector companies, private companies

Facebooktwittergoogle_plusredditpinterestlinkedintumblrmailFacebooktwittergoogle_plusredditpinterestlinkedintumblrmail

Watch Your Funds Grow (Content Princess – SEO)

In today’s world of a strong financial market, many are questioning if wealth is added to a portfolio by investing higher rates of private equity funds. Many investors and CFP’s are looking to these private equity funds as an additive to portfolio and in the past much care has been taken to preserve the mutual fund mix as opposed to these funds. The size of the mutual fund market always made it the most attractive portfolio base. There are some groups such as the Pensioners Fund that restrict a number of private equity funds to less than 10% of the mix in the portfolio. But perhaps in the current environment, the reliability of these funds has proven that private equity assets are a good fit into a profitable portfolio.

There are many investment strategies used with private equity funds in portfolio management. One strategy that is most effective is a hybrid strategy which allows for about a 25% private equity allocation and the remaining 75% comprised of mature funds investment. This combination assurance is a hedge against any area of non-performance while assuring the private equity strong returns. For many CFP’S this hybrid combination is safe, conservative and functions well for most portfolios.

There are some that prefer a higher rate of private equity funds. The high entry barriers have to be overcome to have a higher rate of private equity funds in the portfolio. The investment threshold for the private equity fund has been raised to $10 million which makes it substantially more attractive to the investor and so they are opting for higher rates of private equity and mutual funds ration.

The private equity managers are looking to help the investors such as the 401K and the IRA accounts into a greater proportion in the assets class of private equity funds. When the investor wishes for greater private equity options, they are looking at the goal of either going for long-term growth rate or wanting a high yield in the portfolio. The answer to this is usually brought to a private equity multi manager. Firms that use high rates of private equity have a group of funds that they are most likely to recommend. The managers explore the value of many companies to determine their viability and growth potential so that these managers are the most prepared to point out the pluses and the minuses of the various private equity firms for portfolio inclusion. Again depending on the end result desired by the investor, different private equity firms may be recommended.

There may be an extra fee for including certain private equity firms in a portfolio depending on how much research is involved into the company before it is recommended as stable assets. Some firms do not pass this fee to their clients but consider a due diligence service.  Everyone knows that the research only offers a suggestion, but it is an informed guess as are so many other suggestions in the world of finance. The financial climate does appear attractive to include private equity funds at a rate that is comfortable for the investor about their investment goals.

 

Keywords: private equity funds, private equity,

Facebooktwittergoogle_plusredditpinterestlinkedintumblrmailFacebooktwittergoogle_plusredditpinterestlinkedintumblrmail

Why Lenders May Look At Your Social Media Profile To Assess Your Creditworthiness(Content Princess – SEO)

Lending money is an extremely risky business. Globally around 50% of borrowers default on their loans. Finding ways to screen out candidates who are unlikely to repay loans is the most important aspect of a lender’s job.

With the improvement in science and technology, it is becoming easier for lenders to make the assessment on who is likely to pay back loans on time.

What is a credit score?

A credit score is a number given to individuals by banks based on their activity to determine their creditworthiness.

Depending on the credit score lenders charge a rate of interest. The general industry rate of interest is 13% to 17%. However, this score can change depending on your credit worthiness.

What are the Factors Affecting the Credit Score?

There are many factors that are used to determine the credit score. The most commonly used factors are:

  1. Payment History

The records of timely payments on your current and past credit accounts are checked. If you make late payments, it will result in a lower  score.

  1. Public Records

The public records of bankruptcies, etc. and payment history nearly accounts for 35% of your score.

  1. Credit History Size

The longer your credit history, the better confidence banks will have in giving you a loan. Credit history can account for almost 15% of the credit score.

  1. Multiple Accounts

Opening new accounts in a short duration and having multiple accounts may negatively impact your score.

  1. Request for Your Credit Score

Every time your credit report is checked by anyone an inquiry is recorded. Many recent inquiries could negatively impact your score.

  1. Social Media Activity

Personality score is a fairly new introduction which uses data from social media to determine your score.

How is Social Media Used to Determine Your Score?

The personality score that is determined from your social media activity is based on every aspect of your account such as your friends, the location you are in, activities you enjoy.

For example, in case your feed on social media suggests that you are a gambler then your credit score will reduce thus requiring you to pay higher interest rate.

How much Impact can Social Media have on your Score?

Your Social Media activity can have a very high impact on your credit score. It has been reported that the personality score can bring down the interest rate to as low as 9% or increase it to as high as 30%, whereas the industry standard is around 13% to 17%.

Why is Social Media Score a Valuable Asset for Lenders?

The personality score helps bring down the risk of lenders by 8%. Since they are able to better understand the lifestyle and personality of the individual the lenders can assess the risk better.

For example using GPS tracking they were able to prevent a person’s girlfriend from borrowing money on his behalf. The said individual had previously applied for a loan which was rejected after which his girlfriend applied for the same loan in her name.

Thanks to the age of big data every activity online and offline is becoming a part of your identity. They all put together to contribute to your creditworthiness.

LSI Keywords: credit score, contribute to your creditworthiness, Personality score, current and past credit accounts

Facebooktwittergoogle_plusredditpinterestlinkedintumblrmailFacebooktwittergoogle_plusredditpinterestlinkedintumblrmail

Why Lenders May Look At Your Social Media Profile To Assess Your Creditworthiness(Content Princess – SEO)

With prices of property on the rise, it is fast becoming next to impossible to buy your dream house out of your pocket—which is where the several financial institutions come in to save the day.

With the help of various home loan options available at hand, any prospective property buyer may now be able to fulfil his or her dream of owning a home that is well and truly, their own. Here is what you need to be doing to make sure that your application for the home loan is accepted the first time around.

What Is A Credit Score?

Credit score—or CIBIL score—is a three-digit number—with 300 being the lowest value it can take, and 900 the highest value—that is an indicator of a person’s creditworthiness. Now, creditworthiness in financial terms means how trustworthy and/or regular a person is, in terms of paying their dues

While applying for home loans (where the loan amount generally tends to begin from a whopping 16-17 lakh rupees), it becomes all the more crucial to convince the bank and the loan officer of your intentions of paying back the money you are borrowing from the bank. Generally, a CIBIL score of 700 or above qualifies you to apply for a home loan, and the closer your credit score is to the maximum, more are the chances of your application being approved.

How Do Lenders Utilise The Credit Score?

CIBIL maintains an entire database of all credit-related activity of all its customers, which is used to calculate their respective credit scores.

  • Having a credit score of 700 or above ensures the bank that you have a history of timely payment, and getting approval for a home loan application further helps increase your credit score.
  • Higher credit score presents you as a minimum risk investment for the bank, and it is more likely that you receive your loan on better and more attractive terms than usual.

How To Ensure A Higher Credit Score?

The credit score helps the loan officer make the final decision on whether to accept or reject your application. Other tips and tricks one needs to bear in mind while aiming for that above average credit score are given as follows:

  • Keep track of your payment history, and be on time with all the payments—credit card bills, utility bills and so on—to ensure that nothing comes in the way of you and that 700 or above credit score you are aiming for.
  • It is always a better idea to get rid of accounts that you do not use on the regular. This is because the bank also takes into account the total credit limit at your disposal while deciding your loan amount.
  • Be sure to file for home loans at an interval of a couple of months, as applying for home loans close together signals the financial institutions that you are in desperate need of money, which may work against you.

LSI Keyword: credit score, applying home loans, home loans, credit report

Facebooktwittergoogle_plusredditpinterestlinkedintumblrmailFacebooktwittergoogle_plusredditpinterestlinkedintumblrmail

Applying For a Home Loan: Now Get Rewarded For Better Credit Score(Rank Princess – SEO)

With prices of property on the rise, it is fast becoming next to impossible to buy your dream house out of your pocket—which is where the several financial institutions come in to save the day.

With the help of various home loan options available at hand, any prospective property buyer may now be able to fulfil his or her dream of owning a home that is well and truly, their own. Here is what you need to be doing to make sure that your application for the home loan is accepted the first time around.

What Is A Credit Score?

Credit score—or CIBIL score—is a three-digit number—with 300 being the lowest value it can take, and 900 the highest value—that is an indicator of a person’s creditworthiness. Now, creditworthiness in financial terms means how trustworthy and/or regular a person is, in terms of paying their dues

While applying for home loans (where the loan amount generally tends to begin from a whopping 16-17 lakh rupees), it becomes all the more crucial to convince the bank and the loan officer of your intentions of paying back the money you are borrowing from the bank. Generally, a CIBIL score of 700 or above qualifies you to apply for a home loan, and the closer your credit score is to the maximum, more are the chances of your application being approved.

How Do Lenders Utilise The Credit Score?

CIBIL maintains an entire database of all credit-related activity of all its customers, which is used to calculate their respective credit scores.

  • Having a credit score of 700 or above ensures the bank that you have a history of timely payment, and getting approval for a home loan application further helps increase your credit score.
  • Higher credit score presents you as a minimum risk investment for the bank, and it is more likely that you receive your loan on better and more attractive terms than usual.

How To Ensure A Higher Credit Score?

The credit score helps the loan officer make the final decision on whether to accept or reject your application. Other tips and tricks one needs to bear in mind while aiming for that above average credit score are given as follows:

  • Keep track of your payment history, and be on time with all the payments—credit card bills, utility bills and so on—to ensure that nothing comes in the way of you and that 700 or above credit score you are aiming for.
  • It is always a better idea to get rid of accounts that you do not use on the regular. This is because the bank also takes into account the total credit limit at your disposal while deciding your loan amount.
  • Be sure to file for home loans at an interval of a couple of months, as applying for home loans close together signals the financial institutions that you are in desperate need of money, which may work against you.

LSI Keyword: credit score, applying home loans, home loans, credit report

Facebooktwittergoogle_plusredditpinterestlinkedintumblrmailFacebooktwittergoogle_plusredditpinterestlinkedintumblrmail

Applying For a Home Loan: Now Get Rewarded For Better Credit Score(Content Princess – SEO)

Credit score of an individual is a single numeral that indicates the creditworthiness of that person. Creditworthiness refers to the credibility of that individual to fend debts like loans, mortgages, housing loans, etc.

A credit score is equivalent to your financial reputability

Undoubtedly, the credit score is a numeric representative of your financial health and integrity.

Better credit scores will help you get the status of mortgage pre-approval faster; you can obtain loans and credits easily, you may not be subjected to any extensive procedure of getting pre-approved in case you want to apply for new loans in the future.

Thus one must always strive to get a credit score above 700.

Your credit score can prove to be a godsend while procuring a home loan

Imagine moving to a different city or state and going through the hassle of applying for your first mortgage, because evidently if you are moving to a tier 1 cosmopolitan city, borrowing a housing loan is unavoidable if you belong to the mid-income class.

Thus, with an impressive credit score, you can streamline the inconveniences of setting up a new account and security deposit and many more processes.

Below are few perks of owning a first-rate credit score.

Lower interest rates

One of the biggest rewards a good credit score can fetch you is lower interest on home loans. It makes you look reliable.

Your lender may not impose heavy interest rates as he gets a positive image that you cannot make any defaults in redeeming the credit. An unblemished credit history lowers your credit risk.

Thus a positive credit score means a low monthly instalment which means you save money.

Hassle free documentation process

One more advantage of having a good credit score is that you can qualify for a loan without documenting your assets, income and background in detail.

You can earn the ‘go-stated’ status which implies that you need not provide your pay slips for procuring the loan. You just have to disclose the last two years’ income.

If you qualify for a no-ratio loan with your credit score, you can disclose your income without pay stubs, bank statements or tax returns.

You can also get qualified for a no-income-no-asset loan which means you only have to disclose your name, social security number, the amount of down payment and address of the property you are going to purchase.

Although, fewer documents means higher risk for the lender. Thus, he may impose a higher rate of interest.

Freedom to shop

Since you will qualify for loans easily with your good credit score, you can shop around for lenders. You get the liberty to choose the lender which suitably fits your financial objectives and budget.

 Avail higher amounts

Your ability to repay the loan is judged by your income, assets and your credit score. A bad credit score will lead the bankers or lenders to give you approval for a lower amount.

But a commendable credit score can help fetch you higher amounts which can serve your purpose satisfactorily.

LSI Keywords: how to get my credit score above 700, mortgage pre-approval

Facebooktwittergoogle_plusredditpinterestlinkedintumblrmailFacebooktwittergoogle_plusredditpinterestlinkedintumblrmail

Foreigners Now Have Complete Control In The Philippines (Rank Princess – SEO)

Efficient cross-border payments by leading e-commerce service provider in the Philippines – Qwikwire

With money comes power, yet many foreigners investing in the Philippines feel helpless when it comes to knowing where their regular remittances from paying their bills go. Qwikwire allows Filipinos abroad to simply pay all their bills online like Social Security System, PhilHealth, Manila Water, Meralco, Philippine Long Distance Telephone Company, and everything else. Qwikwire optimises and customises billing with invoicing systems for overseas Filipinos. Qwikwire empowers banking, property management, medical billers, and BPOs with their B2B e-commerce solutions.

Why Choose Qwikwire

Ray Refundo, the founder CEO started Qwikwire based on his personal experience of not being able to receive an online payment since he did not have a credit card or bank account to his name. With his educational background in both Economics and Finance, from San Jose State University in California and his friends Scott Yu, Jason Foldi, and Bing Tan from the USA devised the perfect solution to all the problems about online payments for foreigners.

Qwikwire specialises in efficient cross-border e-commerce solutions to overseas Philippines residents with no credit cards or bank accounts to transact their online payments. The goal of the company is to facilitate e-commerce in the Philippines 2016

Advantages When Using Qwikwire

  1. Anyone can sign-up for the Qwikwire service to acquire a transaction code and receive their payments in less than 2 hours after being sent whereas online payment service providers like PayPal take up to 2 weeks in the Philippines for a single transaction.
  2. Only about 2.5 million people in the Philippines own some form of bank cards like Visa and less than 10% in the age range of 25-54 years. For clients who do not have a credit card or a bank account, Qwikwire uses freelancers who transfer the money deposited in their bank account to the company’s to make further payments on your behalf.
  3. Qwikwire facilitates secured transactions for their clients in simple, clear, and easy to understand steps.
  4. All users and freelancers are vetted and are required to produce their identification-related documents and abide by the local money transferring regulations and the Philippine land ownership laws.
  5. Qwikwire uses social media and search engine data to validate its user identification. It gives them access to the merchant account faster than other known service providers.

Qwikwire Is The Future

The recent years have shown foreign land ownership in the Philippines is on the rise, and many Filipinos living and working overseas are finding it difficult to track their remittances. Qwikwire can give their clients the full details for where their money is being spent.

Founder, CEO Ray Refundo is a financial analyst with expertise in market research and tax preparation which helps determine the best solutions for Qwikwire users.

Get the Power back in your hands

Qwikwire’s goal is to return the power to overseas Filipinos with foreign land ownership in the Philippines becoming an enjoyable process. Qwikwire provides faster and more transparent online money transactions than their competitive e-commerce websites in the Philippines.

Clients of the company can view all the transactions details. Having control over one’s finances gives the overseas Filipinos a sense of security. The entire team at Qwikwire strives to give their clients more choices and the freedom to choose how their hard-earned money is being spent.

LSI

e-commerce websites in the philippines

philippine land ownership laws

foreign land ownership in Philippines

e-commerce in the philippines 2016

Facebooktwittergoogle_plusredditpinterestlinkedintumblrmailFacebooktwittergoogle_plusredditpinterestlinkedintumblrmail

Importance Of Lead Qualification (Rank Princess – SEO)

So what is a lead? A lead defined by Wikipedia is “The identification of a person or entity that has the interest and authority to purchase a product or service.” Leads nowadays usually refers to potential customers or entities that are interested in buying a product or service, and this usually means filling out a form online, or even a straight up physical DM form that can be filled out by hand!

But regardless of the entity the lead takes on, it is important that lead consists of the person’s contact details (Or the company’s contact information) so that the firm pursuing the lead will have the right information to target the required demographic, translating into potential sales. A qualified lead is, however, much different from just a “lead.”

What Is A Qualified Lead?

A qualified lead contains more than just information about the person or entity (Company) that is interested in your product. It contains the “Qualification” that company has towards buying your product.

This is done using the BANT approach which stands for Budget, Authority, Need, and Timescale.

  • By “Budget,” it means to analyse if the company has enough finance to purchase the product.
  • “Authority” refers to the decision of making the purchase.
  • “Need” means to analyse whether or not the service or product they are willing to buy can be of any use to them, and

Time usually refers to whether or not they want to make the purchase within a particular time frame.

With this newfound information, the company issuing the lead can now analyse and determine which leads can turn into potential sales, and which cannot. These leads that can turn into potential sales are called as qualifying leads.

To learn more about Qualified Leads click here.

Leads Classified As Levels

Now there are certain “Levels” within which you may rank a lead into:

Level 1: Any contact is a lead, even if it is the most basic of information.

Level 2: At this stage, it is important to know the position of the person in a company or the company’s data and stocks.

Level 3: It is important to acknowledge the leads at this point, whether or not the company in pursuit of the leads can issue the product.

Level 4: The Company needs to be clear on the requirements from the lead’s side.

If not it is important to hold back the lead until the prospect’s requirements are cleared.

Level 5: The firm pursuing the lead would issue the BANT at this point. It is important to hold off any progress until all the requirements for fulfilling BANT have been ticked off.

A “Sales Ready” lead is often more than not a very difficult thing to pull off. It requires the right judgment and the proper marketing to translate into a successful sale.

By following the steps that have been played out for the lead qualification such as BANT etc., a company can take advantage of its comprehensive marketing capabilities to find the right “Qualified Leads” that would translate into potential sales.

References

www.fullcontact.com

www.dwsassociates.com/marketing

www.inflexion-point.com/blog

LSI Keywords

Lead qualification importance

Qualified lead contents

BANT approach lead qualification

Determining leads into potential sales

Leads classification by levels

Sales-ready leads

Steps for lead qualification

Requirements from leads in marketing

Facebooktwittergoogle_plusredditpinterestlinkedintumblrmailFacebooktwittergoogle_plusredditpinterestlinkedintumblrmail

Calendar Spread Strategies For Volatility Challenged Markets(Content Strategi)

When market conditions are making trading a tricky affair, it can be difficult to know where to look for secure trading. A calendar spread can be a strong medium to long term options strategy to reduce the risk of getting burned by a volatile market and to exploit any market conditions for a decent gain.

What it is

In essence, a calendar spread is a group of Options of the same stock, with the same strike price, but, crucially, with different expiration dates. Options, obviously are a time-sensitive asset, and the calendar spread profits from this sensitivity.

In essence, the trader can integrate the advantages of spreads, the difference between the market value and the strike price, with the pros of a more directional option for a trading strategy. With the strengths of these two styles combined, a calendar spread can almost guarantee profits under any trading conditions.

How calendar spreads work

A calendar spread can work in one of two ways: you can take a market neutral position and benefit from the time decay in the value of the stock options or, alternatively a shorter term market neutral position with a longer-term directional strategy.

Time Spread

A long-term calendar spread strategy, known as a Time Spread is the selling and buying of either a call or put option at the same strike price, but, crucially, those which expire at different times. In its most basic sense, you buy the longer-dated option and sell the shorter dated one. Taking this position on the short-dated option has the effect of bringing down the price of the longer dated one. Thus the trade becomes cheaper than the outright buying of the longer term option.

A long calendar spread can be one of two types. A call strategy or a put one. The put strategy has some advantages over the call, but it depends on your opinion of the underlying stock. Those of a bearish tendency will want to buy a calendar put spread; the more bullish will opt for a call.

The overall effect is to create a relatively neutral, low-risk position which will gain from the time decay of the front option sold short.

For example

Say MegaCorp stock has traded for years at between $55 and $65, this sort of “sideways trading” low volatility stock is perfect for a calendar spread. We can reasonably assume that the selling price isn’t going to shift that much regardless of market conditions. So if the stock’s trading at $61.10 our strategy is first to sell the January, $62.50 calls for $0.30 each then buy the March ones at $0.80 apiece. So the calendar spread’s net debit at this juncture is $0.50. That $0.50 represents the total risk of the trade, which is part of the reasons why calendar spreads are a good option for a canny trader.

Now, in an ideal world, the MegaCorp stock will rise a little before falling below $62.50 at the January expiration. This has the effect of removing all value from the short January call. So with two months to go until the March expiration, without too much volatility in the stock price the March calls value will stand at around $1.70. That’s a profit of $1.20 on the $0.50 spent.

The short term option expiring without making its money is, of course, a best case scenario; not all calendar spreads will work this efficiently. The beauty, though, lies in the flexibility, you still have that long position, so if you think that the market’s going to remain relatively neutral, you have the option of selling another option against that position, effectively rolling the spread over into a new one.

If, however, you feel that the stock is starting to move more in the direction you expected, you have the option of treating it as normal. It’s the ability to cover both ends of the market which make the calendar spread a healthy choice.

The secret’s in the planning

The first thing you need to do when laying the plans for a long-term calendar spread is to get a good feel for the market sentiment surrounding the stock and get a good feel for what trading conditions are going to be like over the next few months. If it’s looking bearish overall, then a put calendar spread is a healthy option.

The next step is to identify your stock. As we’ve already seen, we don’t want a stock that’s too volatile; you wouldn’t want a big difference between the bidding and asking prices.

Once you’re in the trade, close monitoring is essential. If your little option doesn’t decline as much as you’d expect, then the parameters of your overall debit (and the profit you can turn on the extended position) start to shorten. Be vigilant.

The downsides

While a properly managed calendar spread is a relatively low-risk investment strategy, it should be remembered that all investments are risks. Too much market volatility and the long position suddenly becomes a more vulnerable one.

With a time-sensitive strategy such as this, it’s important to make sure you’re keeping a close watch on the option expiration dates and time your entry into the market precisely, to ensure that you’re trading in the general direction of the stock. A mistimed entry running against the market could result in a sizeable loss.

Conclusion

The main thing to remember about calendar spreads is that it is at the start a neutral position, and generates profits only as time decays start to factor in play. It can be used in a bull or bear market, but just make sure you’re running the same way the market is. The number one thing to take away is that a calendar spread is most effective when you expect the price to stay stable in the short term, and move with market trends in the longer term. If that’s what you expect to happen, then this could well be a fruitful trading option for you.

Sources

http://www.nasdaq.com/investing/options-guide/definition-of-options.aspx

http://www.investopedia.com/terms/s/spread.asp

http://www.investinganswers.com/financial-dictionary/optionsderivatives/strike-price-2125

http://www.investorwords.com/6792/directional_trading.html

http://www.call-options.com/what-are-call-options.html

http://www.theoptionsguide.com/put-option.aspx

http://www.investorwords.com/8638/market_sentiment.html

Facebooktwittergoogle_plusredditpinterestlinkedintumblrmailFacebooktwittergoogle_plusredditpinterestlinkedintumblrmail