Report on Short-Term Commodity Trading

Analysis of Earning per share

Looking at the business earnings per share the company ought to be given a passing score. The earnings per share of sold shares are seen to be higher than some stocks that the company buys. It means that the company is earning more from the sale of its shares which is beneficial hence making the business a great success. As you can see, on the first test carried out on Tuesday, the total amount of shares bought by the company were 4898 shares at 491.27, and the whole amount of shares sold by the company were 6892 shares at 1631.97. It implies that there was a great deal of profit made since there were more shares traded compared to the ones bought.

Tue 12:14: Sold one share at 359.87

Tue 11:53: Sold 183 shares at 356.16

Tue 11:36: Sold 27 shares at 356.75

Tue 10:49: Bought 534 shares at 351.95

Tue 11:45: Sold 102 shares at 139.50

Tue 11:44: Sold 141 shares at 139.66

Tue 11:29: Sold 837 shares at 140.58

Tue 10:13: Bought 4364 shares at 139.32

Tue 9:14: Sold 5601 shares at 139.45

Analysis of the test final

From the data provided, it is evident that the business is doing well. Theres a definite change of 1.56% in the amounts of funds invested, the initial funds spent were 1,000,000 and the closing value accrued was 1,015,628.A positive closing value indicates that the business is making the profit. The business also showed results of appositive market index whereby the initial value of the market index was 4,312, and the closing value was 4318 accruing a +0.13%.

Here is an overview of the performance of the several teams

Trade-data

Page 2

Bevico buy 377.9 2036 484.7 Monday 11:51

Insanto buy 133.84 1265 184.66 Monday 12:07

Bevico sell 380.44 2036 487.28 Monday 12:13

Insanto sell 134.05 1265 184.79 Monday 12:13

Insanto buy 132.42 2506 265.92 Monday 12:24

Insanto sell 133.75 2506 267.59 Monday 12:39

Bet Link buy 121.94 730 144.51 Monday 13:01

Bet Link sell 123.33 730 145.01 Monday 13:13

Pan Asia short sell 404.19 13 102.63 Monday 13:50

Pan Asia buy 400.11 13 102.6 Monday 14:02

Commodity trading in commerce is where commercial consumers and producers are allowed by the market to offset the risks associated with future price movements in the commodities they are interested in buying and selling. This type of trading has its limitations because it depends on the speed of trading. In the traditional sense, commodities are put together, and the only form of contact is through a broker (Kumar 2006). Even though this method that can be used to earn quick money it also has its risks and bears a higher risk. Apart from this there are other disadvantages

Concerning relevant literature, critically evaluate the limitations associated with an individuals short-term equity/commodity trading.

Fundamental biases

During the selling of a stock option, it is deemed that the price of that particular stock depends on many factors. These include comments from the board members of the CEO, regulatory decisions, corporate earnings or a market direction that is broader (Broman and Shum 2016)

Liquidity

There are complains arising from a large number of equity options traders about the poor liquidity hampering efforts to exit or enter positions. Even though some future contract might have more significant open interest compared to others, essential agreements such as crude oil, natural gas have public interest and substantial volume, enabling thousands of contracts per strike price (Booth, Gurun and Zhang 126).

Diversification

Most of the investors are looking for diversification away from the equities in current financial markets. By providing expansions into commodity options, one can only gain an investment that is equity related; option positions also might be not be connected to one another.

Attractive premiums

This type of incentives can be owned through out-of-money strikes. In capitals, theres collection of valuable bonuses.

Lower margin requirement

It can also define as high return on income investment. It is a significant factor that attracts most of the stock option traders to futures.

Another factor that needs consideration in short time only trading is overconfidence. Overconfidence can lead to higher risk taking in investments and over placing in trading activities. When an investor is the overconfident chances are that they will overestimate the like hood of a specific investment. If the portfolio is extensive, it will imply that the investor would have a personal notion towards it (.Azencott, Beri, Gadhyan, Joseph Lehalle and Rowley 2014) In most cases, overconfidence leads to the expected return portfolio falling short of its expectations. Overconfidence is mainly related to excessive trading. It is imperative to realize that caution should be observed while making short-term equity investments.

In short-term trading, time plays a crucial role in the conducting of business. Sometimes the trade might take several days to conclude but in most cases, the time limit may be reduced to a matter of minutes. One factor that is employed is the understanding the overall patterns and cycles in the trade. Traders can get an advantage in the system by analyzing the averages used and determining the appropriate times to enter into short or long positions. Another way of ensuring the success of short-term trading is to realize that there are risks involved and there is need to control the said risks. One method of controlling risk is by use of buy and sells stops. In sell stop, the main point of focus is to be able to sell stock when the stock reaches a certain predetermined price (Wang et al 2007). Firstly the rate is determined by observing trends, and once the cost of a capital reaches the optimal, it is sold. In buy stop, the stock is bought when it reaches an average of 14 percent. At this percentage, it ensures that even if losses occur from unexpected turnouts they are manageable and if there are profits gained they are more.

In conclusion, it is relevant to realize to make the most out of short-term trading many tools and methods need to be employed. The different strategies may be used in various circumstances to ensure the maximization of profits. The primary goal in short-term trading is to make as many earnings with the little time available and taking care to reduce the number of losses incurred. The observance of patterns and trends will prove useful in future trading..

Bibliography

Kumar, K. and Bhattacharya, S., 2006. Artificial neural network vs linear discriminant analysis in credit ratings forecast: A comparative study of prediction performances. Review of Accounting and Finance, 5(3), pp.216-227.

Wang, J.L. and Chan, S.H., 2007. Stock market trading rule discovery using pattern recognition and technical analysis. Expert Systems with Applications, 33(2), pp.304-315.

Azencott, R., Beri, A., Gadhyan, Y., Joseph, N., Lehalle, C.A. and Rowley, M., 2014. Real-time market microstructure analysis: online transaction cost analysis. Quantitative Finance, 14(7), pp.1167-1185.

Booth, G.G., Gurun, U.G. and Zhang, H., 2014. Financial networks and trading in bond markets. Journal of Financial Markets, 18, pp.126-157.

Neuhoff, K., Batlle, C., Brunekreeft, G., Konstantinidis, C.V., Nabe, C., Oggioni, G., Rodilla, P., Schwenen, S., Siewierski, T. and Strbac, G., 2015. Flexible short-term power trading: Gathering experience in EU countries.

Broman, M.S. and Shum, P.M., 2016. Short-Term Trading and Liquidity Clienteles: Evidence from Exchange-Traded Funds.

Rinne, K. and Suominen, M., 2016. Short-term reversals, returns to liquidity provision and the costs of immediacy.

Chang, E.C., Luo, Y. and Ren, J., 2014. Short-selling, margin-trading, and price efficiency: Evidence from the Chinese market. Journal of Banking & Finance, 48, pp.411-424.

Dayton, G., 2014. Trade Mindfully: Achieve Your Optimum Trading Performance with Min

Bradrania, R., Grant, A., Westerholm, P.J. and Wu, W., 2016. Fools mate: what does CHESS tell us about individual investor trading performance?.