The larger % of my poker bankroll is in EUR, though I play on US sites. With the starting downtrend of EUR/USD I'm starting to think that is wise to convert some amount of EUR to USD now,to avoid big losses if the EUR becomes weaker. What do u think? Is the EUR going to become weaker compared to USD in the not so distant future?

Have you read: http://forumserver.twoplustwo.com/30...hat-do-700622/ ?

Good luck Harry. For a newbie question thread, you are getting the same kind of answers I get when I post. Basically no response.

He should do a forum search.

Can mutual funds, bond funds, private wealth management firms, and similar asset management companies use derivatives? Or is there some sort of regulations that prohibits them from using these markets (similar to how some firms can't short stocks)?

The reason I ask, is because it seems they would be severely limited without the ability to use derivatives. For example, options can be used to hedge risk, protect against downside while still having exposure to upside, and similar strategies. It seems to me, one would be severely limited in managing a portfolio, without the ability to use options and other derivatives.

I bought a house last year that I live in alone. A co-worker has informed me that they would like to move out of their current house and find a rental property in my area. I would have no problems moving out of my house and finding an apartment to live in with lower costs. I'm not really sure how to find out at what point this would be worth my while to do. Should I start a thread or post this in a different one?

They can not, and yes, its pretty limiting.

I would stop asking your friend for advice in this area. He may be a smart guy who thinks somehow his intelligence in one field necessarily pours over into other fields. But some of those statements are just ridiculous.

It seems like a stupid regulation. Is there something I'm missing? Is it a good idea that mutual funds, private wealth management firms, etc, are not allowed to use options (and other derivatives) to hedge risk and protect other peoples' portfolios?

Do you have to be a hedge fund in order to buy options? Or are there other firms that can be involved?

Perceived risk and complexity of those products. Mutual funds, pension funds, are funding people's retirement. Traditional techniques are viewed as safer and more transparent.

I see the logic. Still seems kinda funny though, since some of the most widely used derivatives strategies revolve around hedging.

I found this, though I'm not sure exactly what it means.

https://personal.vanguard.com/us/Sec...FundIntExt=INT

Vanguard Total Stock Market Index Fund Investor Shares (VTSMX)

"The fund reserves the right to invest, to a limited extent, in stock futures and options contracts, warrants, convertible securities, and swap agreements, which are types of derivatives. It may use these investments for two reasons: to keep cash on hand to meet shareholder redemptions or other needs while simulating full investment in stocks or to reduce costs by buying futures instead of actual stocks when futures are cheaper. Losses (or gains) involving futures and options contracts can be substantial—in part because a relatively small price movement in a contract may result in an immediate and substantial loss (or gain) for the fund. Similar risks exist for warrants, convertible securities, and swap agreements. For this reason, the fund will not use such investments for speculative purposes."

When people talk about the FED changing interest rates, are they really talking about the interest rates banks charge to lend to other banks?

If so, how does this effect bond prices? I understand that bond prices will be effected by changes in returns on investment, such as interest rates that banks charge to customers. However, it seems the only way that bond prices would be effected by the rate at which banks charge to lend to one another, is if this leads to different interest rates for customers. Do changes in the FED funds rate change the interest rates that banks charge customers (such as CD interest rates)?

Newbie query: OK, let's say a daytrader makes $50,000 a year using some set aside bankroll ($25,000 capital).

In poker, I can make $50,000 a year with $3,000 set aside in capital by playing microstakes games. But I wouldn't make $100,000 a year with $6,000 set aside, because moving up in stakes will hurt my winrate. (I'll move up from $12 sngs to $24 sngs, but I won't be as successful.)

In daytrading, would you be able to just double volume of your trades and double your profits? The market isn't changing like "moving up in stakes" in poker. But I feel like I must be missing something.

Sorry if that example is unrealistic or I'm missing something way obvious.

It depends whether the trading being done is scalable.

Poker there are differences in skill level, generally, as you move up in stakes and therefore you have to change how you play. ABC poker is only scalable to a certain point and then you have to actually play 'Poker' to win.

In trading if a method is scalable, it doesn't matter what level you play on, it's going to work and scale the profits accordingly.

http://stocks.about.com/od/understan...dint111004.htm

Explains it pretty good.

The fed rate is what the federal reserve charges banks. Inter-bank lending would be independent of that rate, but based on it.

Poker is not trading so quit making these analogies.

When you use more contracts/shares it becomes more difficult to fill your orders. This makes it harder to move in and out of the market. There's also economy of scale questions in regards to commissions and balancing position when you need to make a hedge. Every speculation you put money on has a risk/reward ratio and a potential size determined by the market conditions. That last sentence gives you every thing you need to work out how 'bankrolls' work with regards to trading.

I'm still a little confused.

Wikipedia says:
I think I understand the general concept of why interest rates and bond prices move in opposite directions. The way I understand it is, you pay a price for a bond, and you receive some future cash flows. If you wanted, you could quantify this relationship by talking about a rate of return. If interest rates changed (for example, CD deposits), then there would have to be some change in the price of the bond, in order to change the rate of return on that bond to the interest rate (because nobody is going to buy a bond that pays 5%, when CDs are paying 6%).

What I'm fuzzy on, is how the FED funds rate changes interest rates. The FED doesn't just go out and say, "CDs now pay X% interest." Rather, the FED supposedly changes these interest rates by controlling the FED funds rate. It's not clear to me how changing the rate at which banks lend to one another, changes the interest rate that banks charge their customers.

I am probably wrong, but I simply thought that if it became more expensive for banks to borrow from the fed, then they need to charge higher interest to banks and customers to compensate. So if Bank A has to pay 5% interest when they borrow from the Fed, they're going to pass along this higher cost to bank B who needs to borrow from Bank A and to customers who need to borrow money for a house or something.

As a side note, if you're wondering why banks borrow from each other, I think they often have to borrow money to meet reserve requirements.

Are they borrowing money from the FED, or other banks?

YoungEcon read anything by Frank Fabozzi, dude knows a lot about bonds and interest rates.

Hi everyone,

I'm currently in my sophomore year of college and am looking into investing/day trading. I know absolutely nothing about it so I checked Art's thread on what to read and am planning to buy The Intelligent Investor and Stock Market Primer. I figure that I should tackle investing first before I even look at day trading. Does this seem like the right way to start out?

Definitely, get a solid understand of how the market functions, people's expectations on it, etc. get a good feel for how things work. Then work towards a day trading slant later. Remember, patience.

Thanks Art, I look forward to reading a lot more of your threads lol

Take a look at the blogs too, reading those daily is a great way to get a feel for the pace that finance works at.

Anything you don't know just google/wiki it, store it in the memory, rinse repeat.