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Saturday, April 29, 2006

Currencies, Anyone?

ONLINE TRADING ISN’T JUST FOR FOLKS WHO TRADE STOCKS and options. Some Web-based brokers appeal specifically to those with an interest in trading currencies, commodities and other instruments.

OANDA (http://fxtrade.oanda.com), which was launched as a Website that provided exchange-rate quotes in the late 1990s, morphed into a foreign-exchange platform called FXTrade in 2001. Based in New York City, it has about 15,000 customers, but more than 100,000 have “demo” accounts that allow them to trade currencies with model portfolios, not real money. The platform makes extensive use of price/time graphs.

Late last year, OANDA introduced an options contract called FXBoxOption, which allows a customer viewing a price chart of a particular currency pair, such as the U.S. dollar and euro, to indicate via a box on the chart where the price, or exchange rate, is likely to be at a subsequent time, be it five minutes or six months later. The system then calculates the payout that would accrue if the price of the currency pair in question reaches the level stipulated. Lower-probability price targets have higher payouts, and vice versa.

Once the payout is calculated, the customer can decide whether to purchase the option and, if so, how much to invest. If the price hits its target by the prescribed time, the customer receives the payout. If it misses, there is no payout.

This option is intriguing, though risky, because it is priced in real time after the customer defines it. As noted, it can be held for minutes or months. BoxOptions aren’t traded on any exchange; they are a contract made between the customer and OANDA. You can learn more about BoxOptions at http://fxtrade.oanda.com/boxoption/.

Like most forex-trading firms, OANDA doesn’t charge commissions. Instead, it collects the spread between bid and ask. Spreads are relatively tight; the U.S. dollar (USD)/euro spread is 11/2 pips, though some pairs have much higher spreads. (A pip is 1/100th of a cent.) The pound/yen spread, for instance is 6-to-6 1/2 pips. The spread is the same whether you’re trading a lot of $1,000 or $1,000,000, which is somewhat unusual. Many other forex firms tighten the spread as the size of the transaction increases.

Another key component of forex trading is utilizing leverage. Stock and option traders know this practice as trading on margin, but their use of margin is significantly less than that employed in foreign-exchange trades. OANDA lets customers enter a trade with 50-to-1 leverage, and lever up to 100-to-1 to maintain the position. If the price moves against them, they either have to liquidate the position or put up more money to maintain it.

OANDA has no minimum for opening an account, and you can trade lots as small as $1. Interest accrues by the second, rather than on a daily basis, which is customary.

SOME BROKERS LET YOU TRADE COMMODITIES ONLINE, though most restrict you to electronically-traded contracts such as S&P 500 futures. Xpresstrade (http://www.xpresstrade.com) offers 24-hour trading of electronic and open-outcry futures products, including crude oil and gold, around the world. Customers also can trade 20 currency pairs on the same platform. The firm provides access to more than 25 exchanges and more than 300 products. Based in Chicago, it has customers in more than 100 countries.

The Xpresstrade platform, developed in-house, runs from a browser using Java. Dan O’Neill, Xpresstrade’s principal, says the site aims to offer a full suite of trading tools and resources, including conditional and trigger-type orders. Many electronic-futures platforms operated by the exchanges don’t accept GTC (good until cancelled) orders, so the platform simulates one by maintaining it on the broker’s computer and on the exchanges for you. You can also place time-directed orders, which might, for example, work for 20 minutes and then be canceled, or activated, two hours after the order is placed.

All the quotes on the Website are real-time, offered at no additional charge. O’Neill says, “It’s a huge expense for us, especially the overseas exchanges, but our customers can’t afford to trade off delayed quotes.” The platform allows customers to trade futures/options combinations, such as butterflies, condors and spreads.

If you’re wondering how the commodities and futures markets work, Xpresstrade offers 11 self-study courses on its site that can be accessed at any time. Topics include Oil Market Basics and How to Trade Futures.

Commissions depend on what you’re trading. Futures commissions range from $5 to $11 per contract. Options on futures are $10 per contract. Currency trades don’t carry a commission. Like OANDA, Xpresstrade makes its money on the bid/ask spread, which ranges from 3 pips (USD/euro) to 15 pips (euro/Australian dollar).

Published in Barron’s, April 24, 2006

Posted by twcarey on 04/29 at 09:00 AM
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Friday, April 28, 2006

In Search of Java

I purchased an espresso maker back in 1994 that did the job for me for over 11 years.  That included 2 1/2 years in Tokyo, where the machine had to be plugged in to a step-up transformer to work.  It typically took 2 1/2 to 3 minutes to make my favorite caffienated beverage, a wet cappucino. 

Still, it served me well, until that fateful day early last summer when an internal seal blew.

I sadly retired my faithful machine and went searching for a new one.  I drank drip coffee for a few weeks, but it just wasn’t the same.  My work suffered.  The level of caffeine in my system fell to dangerously low levels. 

Finally, I purchased a shiny Italian job for around $230 that promised a great capuccino.  As some of you might guess, I’m a bit of a gadget freak, and am able to follow directions even if they’re badly translated into English.  This machine’s instructions were so badly written that I ended up having to email the seller several times, only to find that they had failed to ship an important part.  Once the part arrived, I struggled with the machine for a few months, cranking out my two daily cappucini.  It would take about 5 minutes to brew each cup, which seemed excessive to me.  The attachment to steam milk was especially cranky. 

Then some internal part made a loud POP, and the machine stopped working.  So there I was, in mid-October, having killed a rather expensive piece of equipment. 

I did some more research, and picked up a cute little French number, which set me back a little less than $200.  Again, its workings were a little complex, and it would take almost 5 minutes to brew up a cappucino.  This one broke just before Christmas. 

Santa came through with another espresso machine for me that cost him/her about $150.  This one was somewhat more efficient, brewing up a cappucino in about 3 minutes.  After extracting the liquid gold through the coffee grounds, I would push a second button that heated the water up for steaming to a higher temperature.  One morning in March, shortly after finishing my annual review of online brokers, the machine made a loud popping noise, and spewed hot water all over the counter.  Fortunately, in spite of the low caffeine level in my bloodstream, my sprinter’s reactions got me out of the way of the geyser.

After several email exchanges with a nearly-illiterate technician, we discovered that the problem with this third machine was a small rubber ball that was supposed to be seated inside a spring.  Following the tech’s instructions, I disassembled the machine and found that the former ball had turned into rubber rubble.  The tech sent me a new one, apparently made of a better material, but the re-assembly process was not a success. 

This left me feeling that I had turned into a very efficient murderer of cappucino machines.  I felt deep despair at the thought of having to shell out big bucks every day so that my young pal Crystal at Peet’s could make me a couple of wet cappucini.  After killing 4 machines in only 8 months, I figured I should probably give up.

While wandering aimlessly, and in a low-caffeine state, around downtown Palo Alto last weekend, I noticed a board outside the Palo Alto Toy Shop advertising ... a coffee maker.  ?!???!  This seemed like an odd thing for a toy shop to push.  It turns out to be an invention of a local firm called Aerobie, which makes fun things to throw around, like the Squidgie Disc

One of their inventors came up with a brilliant device called the Aeropress Coffee and Espresso Maker.  I picked one up, figuring that a $30 experiment was worth my time.  This thing is nothing short of amazing.

First and foremost, it makes a great cup of coffee with very little fuss.  There are no fancy pumps or springs or internal seals to break.  The pressure that creates the flavorful brew is supplied by the user.  The device looks like a huge syringe, but without the needle on the end.  It takes about a minute to actually make the coffee; a total of two minutes if you count in setup time.  To create a nice foamy milk top for my cappucino, I bought a milk frother, so technically I am out about $55 for both pieces.  The frother is very simple—I heat up the milk in the glass container in the microwave, then whip up the heated milk.  I don’t have to generate steam in a machine that I will certainly just break in the very near future. 

I don’t think I can break the Aerobie very easily.  It simply doesn’t have the pieces that turn me into a Fatal Attraction.  It’s made of a hard plastic, so even if I drop it I can’t break it.  It’s very easy to clean, with no risk of scattering wet grounds all over the kitchen ... uh, no, I don’t know ANYone who would EVER do that .  The downside is that it makes one cup of coffee at a time, but most cappucino makers have that same restriction. 

I expect my productivity level to rise significantly now that I can efficiently caffeinate myself.  If you become an Aerobie Aeropress user, please let me know what you think. 

Posted by twcarey on 04/28 at 09:48 AM
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Saturday, April 22, 2006

Brilliant! Send This to EVERYONE You Know!

Don’t those emails that start off, “This is completely true!  Send it to everyone you know!” irritate you?  I find them a colossal waste of time.

So imagine my delight when I came across this delicious post from the Personal Tech Pipeline.  It starts:

“I’m repeatedly amazed that I still get e-mail hoaxes, always sent earnestly by relatives who have been suckered in. Give-away hoaxes ("Bill Gates"), sympathy hoaxes ("Little Girl Dying of Leukemia"), warning hoaxes ("Stay Out of the Mall on Halloween!"), chain letters ("Hawaiian Good Luck Totem"), urban myth e-mails ("Flesh Eating Bananas")—I’m sure you’ve gotten your share.”

The author, Mike Elgan, encourages readers to end email hoaxes by participating in one themselves.  He says, “I received yet another e-mail hoax yesterday, and thought: There has to be some way to educate the public. Millions have been educated about hoax e-mails—you almost never see technical people, for example, passing these around. The victims tend to be less computer savvy.

“So how do you reach these people?

“Then it hit me: E-mail chain letters! Why not write an ‘e-mail hoax to end all e-mail hoaxes’?”

I encourage you to read his entire article by clicking here:  Email Hoax to End All Email Hoaxes

Send this to everyone you know!! 

Posted by twcarey on 04/22 at 07:00 PM
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