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How to trade breakouts by D este
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How to trade breakouts |
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Investment,Finance & Investment
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Remember, we are trying to find businesses where the returns of the business exceed the costs of the capital that is required to run the business. An easy conceptual example might be the lending activities of a bank like JPMorgan Chase (NYSE:JPM), whose product is money. Way back, JPM obtained money from the capital markets (either by borrowing from investors or selling equity in themselves). Getting access to that money cost JPM (either explicitly via interest on its debt, or implicitly by needing to meet equity investors' expectations in exchange for them forking over their hard-earned cash). Then they lend that money at some interest rate to earn profits. OK, OK… the real JPM is a little more complicated than that (it actually has a bunch more ways it makes money), but the general idea is that there better be a decent spread between the cost of the money and the amount JPM earns by lending it. Otherwise, it will eventually be out of business. How to trade breakouts Have to be careful as they can be more than you mske on the trade.Which brings up the point that you may not to do them wne you might as well to a standard option. Consider a vertical spread where max gain is something like $25 were as you might get $100 for the standard option. While both the price of Gold (NYSEARCA:GLD) and the Gold Miners ETF (NYSEARCA:GDX) peaked in September 2011 and again with a lower peak in July 2012, it is clear that the Gold Miners have taken the brunt of the recent gold complex pain. With Gold down roughly 20 percent from its 2011 peak, the Gold Miners ETF is down about 45 percent.
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