Cover Story How can you protect a potentially profitable but volatile position? By Frederick Ruffy Sometimes called a hedge wrapper or a fence, the collar is considered a good starting point for new options traders because it can offer a low-risk way to participate in the price increase of an View Past Issues | Subscribe Breaking News Patent fight heats up By Yesenia Salcedo In what the International Securities Exchange (ISE) is calling an independent action not related to its battle with the Chicago Board Options Exchange (CBOE) over index licensing, the ISE filed a Report to survive/expand By Daniel P. Collins How vital is the Commodity Futures Trading Commission’s (CFTC) commitment of traders report to futures traders? Judging from the volume of and invective in the responses to the CFTC query to either DOJ probes CME/CBOT merger By Chris Mcmahon That the U.S. Department of Justice (DoJ) is investigating the antitrust implications of the proposed merger between the Chicago Mercantile Exchange (CME) and the CBOT is no surprise. The DoJ’s Trading Techniques Choosing the right option By Tony Elenbaas One of the main differences between futures and equity products is that a futures contract is an obligation to buy or sell an underlying instrument at a pre-set price and date while equities are Putting time on your side By Paul D. Cretien Time is both an advantage and a problem in option trading. Time to expiration acts like gravity — continuously tugging option values toward final price premiums of zero. Those who buy and sell Reading economic reports By Anthony Crescenzi Most retail traders would be surprised at how little many professional traders on Wall Street know about economic reports. With a little work, anyone can take their knowledge to a level that many on Driving the dollar By Ashraf Laidi As Federal Reserve monetary policy further cements its impact on currency markets, forex players have no choice but to scrutinize every signal subtlety communicated by policymakers. Yet, at a time Trading the plan By Leslie K. Mcnew At this point in the conversation, you should leave the room, remove any money under management you have with this person, and run like crazy for the front door. To paraphrase Talem, this trader is Forex Trader Lessons in chaos and currencies By Abe Cofnas Trading activity during the recent Thanksgiving holiday was a classic example of the dynamics forex markets. While U.S. traders were taking holiday time off with the markets closed, global sentiment Futures 101 Forex fundamentals: moving the markets By Chris Mcmahon Because of higher housing prices and increased consumer confidence, the Bank of England was widely expected to temper rejuvenated economic growth with an interest rate hike at its meeting on Nov. 9. Industry Trends New products for a new world By Steve Zwick London Metal Exchange’s (LME) Chief Executive Officer Martin Abbot declared, “We hope to make the LME a household name in the next few months,” in an opening presentation in Chicago late November on Quotes and velocity By Steve Zwick The debate about quote traffic has ebbed and flowed for years, but huge leaps in capacity have banished the days when exchanges would allot bandwidth to members and charge them for overage. Thanks to New tools By Steve Zwick These days market makers face a dizzying array of risks and opportunities, being active in scores of correlated markets at any time. It’s common, for example, for a trader to make markets and hedge Markets 2007 Economic outlook By Carla M. Bauch While interest rate forecasts lately seem to change with the wind, there is some consensus coming from economists on this year’s economic outlook. The housing slump seems destined to be the main Editor's Note The ICEman cometh By Ginger Szala In December the New York Board of Trade (Nybot) membership overwhelmingly voted to be acquired by the IntercontinentalExchange (ICE). Ironically, Nybot is one of the last U.S. exchanges to shun Book Reviews Behavioral Finance and Wealth Management: How to Build Optimal Portfolios That Account for Investor By Leslie N. Masonson There have been numerous research projects conducted on investor behavior and one universal finding is that many investors act against their own interests. Investors invariably buy high and sell low, The Handbook of Pairs Trading: Strategies Using Equities, Options and Futures By Nelson Freeburg Pairs trading is a market-neutral investment strategy that attempts to take advantage of temporary anomalies between related stocks. Ehrman’s text, though not an exhaustive treatment of the subject, Market Analysis Laughing all the way By Chris Mcmahon More and more corn is being allocated for ethanol production, and the proof is in the USDA’s ending stocks report, which came in at 935 million bushels. “Anything under a billion is friendly,” says What euro strength? By Chris Mcmahon In December, European Central Bank President Jean-Claude Trichet said he was “closely monitoring developments,” language that has presaged rate increases. But he then waffled about a January hike. A Crude range By Chris Mcmahon Thomas says demand fundamentals remain unchanged and he expects supplies to remain stable, balancing renewed efforts by the Russians to increase production against violence in Nigeria. “But long Managed Money RJO jumps in commodity pool By Daniel P. Collins The JWH Global Trust commodity pool has been somewhat of a vagabond in recent years moving from Cargill Investor Services to Refco Commodity Management and then into limbo with the Refco bankruptcy, The year 2007 could be historic By Garrett Jones In developing a market strategy for 2007, it is important to be aware we are currently in what is arguably the longest economic expansion in U.S. history, which began in 1933 with the Great Putting the commodity back in CTA By Daniel P. Collins The term commodity trading advisor (CTA) has become a misnomer of sorts. It describes active managers in the futures arena and is a legal definition, but most CTAs — particularly the larger ones New For Traders New for Traders By Chris Mcmahon The New York Mercantile Exchange Inc. (Nymex) has launched side-by-side trading of Comex miNYs, Asian metals and London metals futures contracts on the CME Globex and migrated the gold, silver, People LaSala is Nymex’s new chief regulator By Staff Writer David Geen has been named European general counsel at The International Swaps and Derivatives Association. Previously he was executive director and senior counsel for Goldman Sachs International in News NYSE-Euronext close to reality By Steve Zwick The proposed merger between Euronext and the New York Stock Exchange (NYSE) took a giant step towards reality in December, with Deutsche Boerse calling off its bid for Euronext and regulators from Nybot says yes to ICE By Chris Mcmahon The 977 members of the New York Board of Trade (Nybot) approved their proposed acquisition by the Intercontinental Exchange (ICE) by 93%, but days before the Dec. 11 vote, Nybot permit holders filed CBOE says merger sets it free By Daniel P. Collins The board of directors of the CBOE on Dec. 12, submitted a rule filing with the SEC declaring that upon the closing of the proposed CME Holdings acquisition of the CBOT, the CBOE exercise rights will Trader Profile Patrick Weber: The Strategy of Carbon By Steve Zwick “Trading is a lot like chess,” says Patrick Weber, 27, who runs the greenhouse gas emissions books for Dresdner Kleinwort out of London and is one of the world’s first full-time emissions traders.