Speaking about his humanitarian works, Soros once said, “I’m not doing my philanthropic work, out of any kind of guilt, or any need to create good public relations. The philanthropic works by him are done through an entity called Open Society Institute (OSI), which was created by him in 1993. He is the chairman of ‘Soros Fund Management’ and the ‘Open Society Institute’, a stock investor, American currency speculator and political activist. In 1992, Soros earned himself a profit of whopping $1 billion and the title, the man who broke the Bank of England, betting against the Bank of England with $10 billion worth of pounds. He is a former member of the Board of Directors of the Council on Foreign Relations.
Since the 1970s, George Soros has shown active involvement in philanthropy and social work. The firm made a spectacular achievement by giving more than a 4000% return within the next ten years.. He was thirteen, when Hitler’s Wehrmacht seized Hungary and began deporting the country’s Jews to extermination camps. As a global financier and philanthropist, George Soros is popularly known for his unmatchable skills related to the field finance and currency speculation. I’m doing it because I can afford to do it, and I believe in it.”
“Markets are designed to allow individuals to look after their private needs and to pursue profit. In August 2006, he wrote an article titled A Self-Defeating War, in the Wall Street Journal. In 1956, he moved to United States, and started working as a financial analyst. OSI is a private operating and grant making foundation which aims to promote human rights and social reforms. In 1969, he founded his first offshore hedge fund, which grew immensely through speculation. In 1970, he co-founded the famous Quantum Fund with the help of Jim Rogers. One of his most notable humanitarian works is, the generous donations he made in order to eradicate extreme poverty from Africa. It’s really a great invention and I wouldn’t under-estimate the value of that, but they’re not designed to take care of social needs.”
These were the famous words of George Soros, who has made his mark as an enormously successful speculator.
In recent years, Soros has been a vocal critic of America’s military endeavors and foreign policies. Soros graduated from the prestigious London School of Economics, in 1952, and obtained an entry-level position with an investment bank namely Singer and Friedlander.
While studying in London, Soros became acquainted with the work of a philosopher, Karl Popper, which had a great influence on Soros’ intellectual development. The article was in context of the American foreign policies which were applied on several fronts like Iraq, Gaza, Lebanon, Afghanistan and Somalia, and killing of thousands of innocent civilians.
Childhood and Early Life
George Soros was born on August 12, 1930, in Budapest, Hungary. Soros survived the Nazi invasion of Hungary from March 1944 to 1945, and in 1947, he emigrated to England and supported himself by working as a railroad porter and a restaurant waiter
For example, if a party has a fixed rate payment obligation and another one has a floating rate one, the two can swap their interest obligations with each other without settling the underlying debt.
Shares of company XYZ have an intrinsic value of $20 each. While most financial assets have intrinsic asset values or prices, the intrinsic value of a derivative is based on the financial asset that forms the basis of a derivatives contract. If you wish to play the stock markets, they offer an unbelievable amount of ground to play in, especially when it comes to hedging and risk management. Many an investor have fallen to greed in this market, for everyone else, it is a risk management boon.
Whether futures and options, or swaps and forwards, all require careful and deliberate study. On the other hand, forwards, swaps, and CDS are usually traded on the over-the-counter (OTC) markets. Forwards contracts are over-the-counter contracts that usually trade on commodities. Be careful and ask all the right questions before you bring out the cash.
Since most of them involve the play of big money with very little in the way of initial investment, most people fail to foresee the impact they can have on their total funds. Research them and you will find a very grim picture, more houses have been broken with these instruments than have been built. Lack of knowledge coupled with greed, turn them into your worst possible nightmare. On the other hand, a put option gives the buyer the right but not the obligation to sell a certain asset at an agreed price (strike price) by a certain date in the future. Options are not limited to the exchange traded derivatives markets and some are also traded on the OTC markets.
Learning about derivatives is one of the most important lessons to learn, for anyone making new forays into investment finance. The intention is to buy low and sell high in two different markets and pocket the differential profits.
They allow for large portfolio position changes without incurring the buying and selling transaction costs.
Forwards Contracts and Futures Contracts
By definition, a forwards contract is ‘an agreement to buy or sell an asset for a predetermined, fixed price, at a certain time or date in the future’. But before you start thinking about having bigger yields out of these instruments, know a little more about them. When investing in these instruments, be aware of the risk that you are taking on with that kind of leverage.
When they are used for hedging, they perform exceptionally well but when used for speculation, it is not prudent to rely too heavily on them. For many of these instruments, small changes in the underlying asset can swing your fortunes from millionaire to bankrupt within seconds. Even though you have invested only $100, the position that you had taken in the market was on $10000 shares. By definition, they are financial instruments that derive their intrinsic values from the underlying asset that they are based on. Futures are also agreements to buy or sell commodities at a certain predetermined price at some predetermined time in the future. Inexperienced options expire once their time duration ends and it is only the premium paid for buying the option that exchanges hands between the two parties.
These markets happen to be of two types. These non-standardized financial instruments bear some amount of credit risk, since no exchange interferes between the buyer and the seller. When you hold a long position in a forward contract, i.e., you have agreed to buy the underlying commodity at the agreed price, your payoff will be the differential between the forward price and the spot rate at that point in the future (F – S). These are extremely powerful instruments and though, ‘no guts no glory’ does summarize the ‘higher risk, higher potential return’ mantra of investment finance; having open positions in them is never prudent. Being traded on exchanges robs the futures of the customization that is available on forwards, but on the other hand, as exchanges play clearing houses in the transaction, futures have relatively lower credit risk.
They are simple financial instruments. Hull in his 1999 book titled ‘Options, Futures, and Other Derivatives’.
Understanding Futures and Options
A point to note here is that, while futures and forwards are obligatory buy and sell contracts for the holders, options are rights and not obligations that the holder can choose on whether to exercise or not. Not understanding how they work and investing large sums of money in them blindly is a folly. They are a boon for the hedgers but not always so for the arbitrageurs and speculators.
Uses in Investment Finance
Certain exotic types like Cacall, Caput, Barrier options, etc., lure investors with the greed of returns, but what happens many a time is that, traders fail to see the complexity involved in them. Last but not the least, they lend monetary power to the traders, for they can take large positions in the stock market with the minimal amount of cash, i.e., by just paying the premium amounts.
Options are basically of two types, a call option and a put option. Forwards and futures prices are good reflectors of the price directions as well as the expected change in the future prices of the underlying asset.
They offer the traders an option to change the nature of their liabilities and exchange the risks associated with some of their unwanted liabilities with some more bearable ones.
They can be used to make arbitrage profits. Here’s and example of an underlying asset.
Below are some of the uses as listed by John C. The only difference between them and the normal financial instruments (like shares), is just the little term called ‘underlying asset’. These are normal financial instruments where you just buy or sell shares of company XYZ (for $20 each, if market value equals the intrinsic value). How else is it possible that just investing $10 should help you take positions worth $1000. Interest rate swaps are also derivatives for they too derive their values from the underlying debt instrument. The term futures encompasses all things like foreign exchange futures and stock index futures as well. They can be used to hedge open positions in stocks and this makes stock trading safer. The only difference between a normal spot transaction and a forward transaction is the time span between the contract and its fulfillment. You’ll know then, why all traders haven’t mastered the art yet and become overnight millionaires. Plain vanilla swaps, or the least complicated of swaps, allow two parties to swap their interest obligations. They offer the trader, the option of passing on some of the risk that he’s bearing over to another party. Futures and options trading is fantastic as a risk reducing measure (hedging), but may not be equally fantastic as a speculative bet, especially when you do not have the required expertise, neither in derivatives nor in forecasting.
They are very good risk management tools and are mainly used to hedge risks that a trader is routinely exposed to. But when you have a derivative option on the shares of this company, you are basically holding a financial instrument that has no intrinsic value of its own. Marginal swings in the value of these shares can leave you with the outcome – ‘Investment – $100 and Total Loss $100, 000′. So for once, a financial instrument has been named correctly, an instrument that derives its value from some other asset is termed as a derivative.
Futures contracts are derivatives very similar to forward contracts, with the main difference being that while forwards are traded OTC, futures are traded on an exchange. Know their uses and advantages, their drawbacks as well as their various types, namely forwards, swaps, futures and options.
What is the Derivatives Market?
Interest Rate Swaps
Mastering these instruments can make you a millionaire overnight, but it is good to understand them first. In a put option, the option will thus, only be exercised if the strike price is higher than the going market price at that specific point of time in the future. While spot is an immediate, present tense contract, a forward is a later date or future tense contract that is just being finalized today. Two or more options can be combined together (synthetic options) to give the trader just the kind of payoff he was visualizing, given his forecasts of the future price movements on the stock exchange. For many, what they invest in these instruments are their savings so you can only imagine the impact.
Many investors fail to understand that investing in them means indulging in a kind of leveraging. On the other hand, with a short position (agreement to sell), your payoff will be the differential between the spot price of the commodity then and the futures price that you have agreed on (S – F).. Options are fantastic in their ability to cater to every possible need of the stock market trader. First the futures and options are traded on the exchange traded derivatives market and are standardized instruments with negligible credit risk. A call option gives the buyer the right but not the obligation to buy a certain asset from the call option writer, by a certain date and for a certain price, known as the strike price. Think about it and you’ll know why so many have gone down while betting on these instruments. There is no monetary transaction to the contract when it is first negotiated, and money only changes hands on contract maturity. Arbitrage profit opportunities are those opportunities that allow for risk-free, zero net investment profits, by capitalizing on price differentials on the same commodity in different markets. The value of your option to either buy or sell the shares of this company, derives its value from the actual market prices of the underlying asset, in this case, the shares of company XYZ. He either takes on another risk in return or makes a cash payment in exchange for the risk transfer.
Instruments like forwards and futures play a key role in giving directions to the market prices of the future. Since it is the ‘right but not the obligation’ to buy an asset, it is obvious that the call option will only be exercised if the strike price is lower than the going market price for the underlying asset at that certain time in the future
The offshore books with whom I work are top grade but it is in the offshore environment that problems occasionally occur.
It is not that easy finding a reputable sportsbook – partly because the web is populated by website owners who will sing the praises of a sportsbook or casino simply because they earn revenue from signing up customers via an affiliate program. King
Well I am in a position to speak from some experience – I did at one time hold accounts with about sixty bookmakers in Europe, UK, Australia and offshore – the latter catering mainly to the US market. I also like SportingBet (www.SBSportsbook.com) who take US customers and cater for global sports.
So you have decided to start betting online – or maybe you just want to find a new trustworthy sportsbook – what do you need to look out for?
Not all the above are critical – but help towards finding a secure book. These vary quite a bit from book to book. Therefore you should think of the sportsbook you are considering as a bank – a place that you intend to keep funds long term.
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“How to Choose the Right Sportsbook!”
by: Daniel B. Often these website owners know nothing about betting, do not hold accounts with the sportsbooks they are advertising and have not researched the companies they are involved with.
Read press articles as opposed to reviews – reviews are usually written by the sportsbook’s marketing team.
Test run the software by joining and playing for free – most sportsbooks offer this facility.
Find out if your funds are insured or separated in ESCROW accounts so that if the sportsbook company goes under – your funds are still safe.
Find out if the sportsbook is independently audited.
How long has the operation been online – three to four years is usually a good marker as a minimum.
Test out the customer services to see if they meet your standards or the standards they promise you.
If you know about betting already, then check some of their odds and lines – are they in keeping with what you would expect? Some less scrupulous sportsbooks offer very attractive prices to lure unsuspecting bettors. It is, therefore, critical that those US customers put in the research before signing up.
You are keeping your money in an account online.
This article was posted on October 22, 2004
I would say that US bettors are at most risk since they are generally forced to bet at offshore sportsbooks due to legality issues. But ask yourself ; “how easy is it to get access to my money and how much does it cost?”
If you have already have an account with a sportsbook watch out for lapses in customer service and slowness of payment – these can be signs that the company could be in trouble.
The UK has a number of established books including William Hill, Ladbrokes, Coral, and Victor Chandler. I have had at least three online sportsbooks go broke on me – luckily my losses were kept to a few thousand dollars – that may sound a lot but it could have been a lot worse.
So what do you look for:
. Options should be available that are ‘free’ or where the sportsbook absorbs the charges. Sometimes this means added solidity.
What are the deposit and withdrawal options and the associated charges.
Find out if the sportsbook is part of a larger group of companies