Fractal Trading

a fractal must contain at least 5 bars. the middle bar must the longest bar and the other 4 bars must be shorter than the middle bar.
prices are the last thing that changes. first momentum changes.

Fractal Trading

a fractal must contain at least 5 bars. the middle bar must the longest bar and the other 4 bars must be shorter than the middle bar.
prices are the last thing that changes. first momentum changes.

BAYER BUY

Buyer is the strongest stock in the german chemie index.
german chemie index performs very well.

ENTRY: 58
stop loss: 55.21
target: 60

RANKING

Name	Last	rank
BAYER AG O.N.	57,92	1
BASF AG O.N.	97,13	2
WACKER CHEMIE O.N.	160,3	3
K+S AG O.N.	105,39	3
FUCHS PETROLUB AG O.N.	64,65	3
SGL CARBON AG O.N.	35,16	4
LANXESS AG	36,75	4
LINDE AG O.N.	86,15	4
H+R WASAG AG	27,53	5
SYMRISE AG INH. O.N.	19,05	6
SKW STAHL-METAL.-HLDG.ON	34,19	6

DAX Elliot Wave sketch

DLIA (NASDAQ)

SHORT ENTRY
stoploss 5.20
entry if lower than 5.05

CBK (NYSE)

SHORT ENTRY
stoploss 13.37
entry if lower than 13.09

Reading 62: Features of Debt Securities

a. explain the purposes of a bond’s indenture, and describe affirmative and negative

Bond indenture is a contract that specifies all the rights and obligations of the issuer and the owners.

Contract provisions are called covenants

• negative covenants (prohibits on the borrower)
• restriction of asset sales
• negative pledge colleterals
• restriction on additional borrowings
• affirmative covenants ( actions that the borrower promises to perform)
  
• maintanance of certain financial ratios
• timely payment of principal and interests
  

b. describe the basic features of a bond, the various coupon rate structures, and the structure of floating-rate securities;


Embedded options: they are integrated part of the contract and not a seperate security

Security owner options

• Conversion option
• owner has the right to convert the bond into fixed number of common shares of the issiuer
• Put provisions
• owners has the right to sell the bond to the issuer at a specified price before maturiy
• Floors
• set a min. on the coupon rate for the floating rate bonds

Security issuer options

• Call provision
• bond issuer has the right to redeem (pay off) the issuer prior to maturiy
• Prepayment options
• e.g. mortgages, and car loans
• Accelerated sinking fund provisions
• Allow issuer to retire a larger proportion of the issue than is required by the sinking fund provision up to a specified limit
• Caps
• set a maximum rate for floating rate bond

Coupon rate structures

• Zero coupon bonds
• no periodic coupon interest payments. They are and par value is paid at maturity
• Accural bonds
• similar to zero coupon bonds but coupon interest rate is compounded
• Setup notes
• coupon rates increase at sepecified rate
• Deferred-coupon bonds
• interest coupon payments are defered for some time

Floating Reate Securities

• Coupon rates vary based on specified reference interest rate or index. Coupons are reset periodically (e.g. every 3, 6, or 12 months) and then adds/substracts a margin rate from the referance rate. e.g. refer. rate is U.S. Treasury Secs. or LIBOR
• Quoted Margin can also vary by time. Schedule is refered to as coupon formula.
• new coupon rate = reference rate +/- quoted margin
• Caps and floors
• caps set upper limit
• floors set lower limit
• collars set upper and lower limits
  

c. define accrued interest, full price, and clean price;


test

d. explain the provisions for redemption and retirement of bonds;


test


e. identify the common options embedded in a bond issue, explain the importance of embedded options, and state whether such options benefit the issuer or the bondholder;


test


f. describe methods used by institutional investors in the bond market to finance
the purchase of a security (i.e., margin buying and repurchase agreements).


test

REFERENCES:

• Debt securities
• Bond features tutorial