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Fast Execution ' a good opportunity may be gone if not executed fast.

After Hours Trading ' if you like trading longer hours.

Sweep Facility ' a good broker would automatically take your available cash to have it placed in a money market to generate interest.

No hidden fees ' many brokers have all sorts of endless hidden charges. Do not take this nonsense.

Powerful trading Tools ' like streaming real time quotes, screeners, stock charts, etc.

Wireless trading facility ' most of the time for day traders

Ability to execute complex options trades ' many brokers provide options trading but this is not good enough!

A good stock broker may not be a good options broker because options trading are relatively new.

STEP 4: The mimicking Setup - the Right Partner

With loaning in technology, the options trading art can be easily setup with a few clicks of the mouse. Welcome to the online world of trading.

Equity trading is a serious doings it involves a lot of money – your money. It can forge wealth and can also destroy wealth. Either you make money from the market, which belongs to someone else, or you lose your money to the market, which will benefits not the same trader. So please take it seriously seeing most traders and investors do not. So if you are serious, would you trust your office dealings to just all but anybody? I hope not!

A mimesis that does not have reliable partners typically will not succeed for the long term unless a new reliable partner is quickly identified. In the options trading business, brokers are our partners. As such, we would have to identify and be very selective in appointing the dealing house to help us run this business.

With so many retailing firms out there, it can be quite a tough and confusing for many of us. In fact, first choice the wrong stock dealer can be expensive.

So we have prepared an easy way to shortlist these brokers. A good “business partner” should have:

Attractive plenum rates – understand if it is fixed or if it depends on the number of trades. Low dividend does not mean it is good.

High utility on their website – since essentially all transactions are executed online. Understand contingency as well when website is down.

Fast Execution – a good opportunity may be gone if not executed fast.

After Hours Trading – if you like trading longer hours.

Sweep Facility – a good mortgage broker would compulsively take your within sight cash to have it placed in a money market to generate interest.

No hidden fees – many brokers have all sorts of endless hidden charges. Do not take this nonsense.

Powerful trading Tools – like streaming real time quotes, screeners, stock charts, etc.

Wireless trading facility – most of the time for day traders

Ability to execute complex options trades – many brokers provide options trading but this is not good enough!

A good stock specialist may not be a good options two-dollar broker seeing that options trading are relatively new. when stock scot and lot firms offer options trading, they are still in arrears in many of the services offered by firms that specializes in options trading. Once you understand options trading, which has more than 20 different trading strategies, stock trading looks like child’s play.

When selecting a barter firm, select the best to prevent any heartbreak later on. We have worked with several options brokers and, in our opinion, www.optionsexpress.com and www.thinkorswim.com are the best around. These two options trading firms meet the requirements aloft while many have failed to impress. yesterday proceeding to the next step, start working with the right partner. It only takes a short while to open a new account. This is an important decision.

Stay tuned for STEP 5 – Arm Yourself With Options Trading Knowledge

Copyright 2005 William Tan

A couple months ago, I posted a blind stock valuation. Basically, I just gave you 7 important financial figures for each of the last 6 years and asked you to value the stock as best you could. I didn’t give you the name of the stock.

And – although I didn’t tell you this – I multiplied all figures by 10 to eliminate any bias caused by you realizing this was a very small stock.

I promised I would give a copy of Ben Graham’s The Intelligent Investor to the reader who sent in the best email telling me how much the stock was worth.

The stock was actually a foreign microcap called Watlington Waterworks. It’s a water company on the island of Bermuda.

Bermuda is a rich island nation – actually a territory of the United Kingdom – 650 miles off the coast of South Carolina. It has a population under 70,000. Bermuda’s economy is based around insurance and American tourism. Its currency is convertible into U.S. dollars at a fixed 1-to-1 ratio.

There is no fresh water on the island. Bermuda’s water comes from removing salt from seawater and collecting rainwater.

This is an analytical exercise. Not a stock tip. In all likelihood, your broker doesn’t have the ability to buy stocks for you in Bermuda.

Here is the information I provided about the company:

And here is the best email a reader sent in:

1) Growth in sales and earnings is roughly tracking inflation.  This is a mature, roughly no-growth business so I will pay no premium for growth.

2) FCF is consistently less than earnings.  So this is a business with a significant amount of long-term assets which causes CapEx to exceed accounting depreciation due to the effect of inflation.

3) FCF in this case is a more relevant determinant of value than earnings.

4) The FCF yield on equity has averaged roughly 10% over the 6-yr period presented.

5) My hurdle rate for investment is 10%, therefore I am willing to purchase the company at 1X equity.

6) So I would be willing to pay up to 181/10.5 or approximately $17.25 per share.

7) An additional consideration: The company is carrying very little debt and has stable earnings.  As a control buyer or an activist investor, I would give strong consideration to leveraging up my equity.

The stock trades on the Bermuda Stock Exchange. Shares last traded hands at $13.95 a share.

Most readers sent in valuation estimates in the $20 to $30 a share range.

Thanks to everyone who participated.

Talk to Geoff About Blind Stock Valuation

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