Disaster Recovery: When the Going Gets Tough…

Planning for something unprecedented, to foresee the unforeseen is at best tough. Having said that, planning for something like the World Trade Center (WTC) attack must have been relatively less complex, because it did have a precedent. Though none could have foreseen the extent of the damage, the precedent did help in planning ahead and the state of readiness. When the WTC was bombed in 1993, disaster recovery was a fledgling concept with most businesses not yet ready to tackle any disruptions to their computer- and network-centric operations. However, when disaster struck the second time, most of them were ready, armed with some of the most professional backup and recovery plans. And, when the twin towers went down, these disaster recovery plans were already activated, ensuring smooth data flow.

A case in point is Verizon Communications, whose office adjacent to the WTC was extensively damaged by the attacks. The telco operates 2 million phone lines in lower Manhattan alone and fulfills 20 percent of Wall Street's communication needs. Remarkable efforts from the telecommunications company saw The New York Stock Exchange, which was closed for business for four days, resuming operations within the week. The exchange managed 15,000 voice and data backups within five days after the disaster and handled a record volume of 2.37 billion shares on the day it reopened. Verizon had reconstructed, constructed, or rerouted some 4 million voice and data circuits in Manhattan and parts of New York within the first week of the attacks and transmitted a record number of calls each day. The key to its resilience? Planning.

Planning is All

For IT professionals, disasters are an everyday reality. Disasters may come in all sizes and shapes-right from spilling coffee on your computer to a Trojan attack or one of the WTC kinds. Typically, disaster recovery plans are like your insurance-they are of little use until you actually need them one day. But, operating without one of these recovery plans in place could mean business failure, especially so when e-business is gaining widespread acceptance. Implementing a well thought-out disaster recovery plan could be time and resources consuming, but the impact of downtime and data loss could be worse-lost revenue, loss of customers, decline in share value, and poor profitability. And, if bound by contractual obligations or federal regulations, you may be required to deliver the goods no matter what.

Planning for disasters is complex, and requires the time of technical staff, funds, and whole-hearted support from the management. A typical disaster recovery plan would include the following:

• A thorough understanding of the kind of risks a business is likely to face and defining the scope of the project
• A study of the existing security systems and assessing their vulnerability
• Determining the enterprise's disaster threshold. For example, rate the risks on a factor of ten and determine the severity of impact, grading them from the least harmful to the most
• Step 3 will help in defining the requirements in terms of hardware, software, and remote support and facilities
• Identify the vendor, upgrade existing systems to ensure compatibility with the disaster recovery plan
• Test, test, and test. Try out a partial recovery. See if the system is in working order. This exercise will also help gauge the timeframe for getting the business up and running in case of a disaster
• Maintenance and frequent upgrades. The latter depends purely on business requirements

The Crack Team

Three names that continuously popped up in the media in the aftermath of the September 11 attacks were IBM, SunGard, and Comdisco. Their disaster recovery services range from providing office space to supplying computers to recreating data.

IBM's Business Continuity and Recovery Services Group achieved miraculous success in helping businesses affected by the attacks by providing backup locations. Most of its customers were back on their feet within 72 hours and critical telecommunication lines were restored as early as 48 hours. The company has already outlined major plans for Project eLiza, which will focus on developing self-managing systems that will reduce the cost and complexity of IT infrastructure. IBM promises that such systems will not just reduce the need for human intervention, but will also improve performance and efficiency dramatically as well as simplify user management.

There were 30 SunGard customers in the WTC and a hundred others located within a mile radius, all of which successfully recovered their data, and resumed their networking and backoffice functions. SunGard got its first SOS just eight minutes after the first plane hit the WTC. By September 14, it had configured 50 workstations with PCs and a WAN connection to an RS/6000 in its Philadelphia MegaCenter for the New York Shipping Association and put the harbor back in action. The company has now tied up with the GSA Federal Computer Acquisition Center (FEDCAC), a federal agency, to offer hot site services, mobile, workgroup and network recovery, electronic vaulting and recovery plan development, and testing services to agencies belonging to the U.S. Government.

After the attack, 47 companies with roughly 3,000 customers declared disasters with Comdisco, which meant their operations had to be shifted to remote locations. A majority of them were banks, insurance companies, investment banks, and brokerages, to whom downtime or data loss could prove nightmarish. The company, which was also supporting one of the exchanges in New York, had 13 of its 23 data recovery centers in the United States operating in full swing at one point of time. And, by the 25th of the month, 20 of its 47 customers had returned to their facilities.

The Cost Factor

Data recovery services range from simple system recovery (usually a tape backup) to complex hosting services (no data loss and a maximum downtime of two hours in case of a major disaster) with uptime guarantee and continuity services. The costs too vary accordingly, from a few thousands to close to a million dollars for continuity services wherein all the client data is mirrored in servers at a remote recovery center. Most stock exchanges as well as a majority of health service providers rely on this service to protect their data.

For companies that had just taken a perfunctory look at disaster recovery so far, the happenings of September 11 have changed everything. The redundancy built in by WTC has taught them a lesson in disaster recovery and planning for contingencies.

strategic marketing solution

Generally, managers are hired for their strategic abilities to plan and problem-solve to achieve business goals. And that's what you spend your time doing, isn't it?

If you answered, "Right. Who are you kidding?" you probably belong to the vast majority of managers with the ability and expertise to bring tremendous value to their organizations. In reality, you just don't have time to make that strategic contribution to efficiency and productivity - you're too busy putting out fires.

Most managers can relate to this phenomenon. The number of problems in any business exceeds the number of people or the amount of time available to solve them. So people learn to juggle problems, patching here, patching there, all in a race to get that last patch on before the first one falls off again. And it invariably does, strategic marketing solution article.

When you look at it that way, it seems rather futile, doesn't it? Yet managers do it every day, week and month of the year, knowing full well it's a never-ending cycle. Why? Because they don't see any practical alternative. Doing anything else would take more time - and they don't have any of that to spare, strategic marketing solution article.

If this sounds uncomfortably familiar, it's time to rethink things. As leaders, we show our employees how we expect them to approach their work - and their problems. And if we already know what we're doing is ineffective, do we really want the next group of up-and-comers doing the same thing?

So how can we break the cycle? By taking a more effective approach to problem solving. After all, if that first patch had been a long-term solution, you wouldn't be rushing to get back to it now, would you?

The answer is to develop a problem-solving culture, and that means taking a different approach to problems as they occur. Start by reviewing each problem and assigning priorities based on business impact. Then establish strategic problem-solving teams that consist of various levels of employees and management. Their mandate? To determine the root causes of problems and solve them - permanently, strategic marketing solution article.

Training problem-solvers using a systematic approach is the best way to build the problem-solving skills required and ensure consistency of approach. This also allows standard measurement criteria to be established for the purpose of employee reward systems that reinforce the problem-solving culture, strategic marketing solution article.

effective teamwork

Despite the warmth and fuzziness of the "effective teamwork" concept, many companies have found that implementing a team-based organizational model is not as easy you might expect.

Why? Consider the reason for the meteoric rise in popularity of the team-based approach - primarily the widespread adoption and use of new technologies and integrated information systems. Their extensive introduction in the '90s has changed organizational focus from standardization, coordination and control to creativity and innovation. To achieve the former, management "policed" the system, where the latter requires a radically different management philosophy and style - and therein lies the challenge , effective teamwork article.

The benefits of the team model are significant. Increased pressures from global competition, the need to reduce costs, restructuring, downsizing and outsourcing have all led to reduced numbers of "core" employees. Lower head counts necessitate greater flexibility within the remaining workforce, so teamwork provides an ideal vehicle for efficiency gains and productivity improvement, effective teamwork article.

In addition, the empowerment in work teams gives individuals and teams the ability to better manage both their work and their immediate environment. For many, this has been a welcome change in quality of work life, and has increased problem-solving and innovative capabilities for businesses, effective teamwork article.

To achieve results in a team-based organization, management supports people and new technologies by creatively problem-solving. They manage events and transactions "by exception" (meaning simply those transactions or events that fall outside the parameters of "normal" thus cannot be handled by "the system"). This means that problem solving is more complex, and, thanks to automation, management faces a barrage of issues in rapid succession on an ongoing basis, effective teamwork article.

Not surprisingly, a number of problems associated with team-based organizational models have emerged. For example, teamwork can introduce its own inefficiencies such as requiring more meetings that take up more time. And research has shown that seven out of every ten teams fail to produce the desired results, effective teamwork article.

Another issue is that senior managers may opt to focus on team building to achieve performance improvement rather than adopting more immediate solutions to company problems. These efforts often do not result in improvement, as research has also shown that a combination of changes to both technology and social organization is necessary to move toward best-practice standards, effective teamwork article.

Finally, typical implementation problems include the difficulty of defining clear team objectives, the tendency toward "group think", conflict between teams and worsening tensions across functional areas. This is exacerbated by failure to change reward systems focused on individual achievement to those that are aligned with the strategic direction of a team-based philosophy, effective teamwork article.

So, can team-based business models work? Absolutely. Are there strategic advantages to be gained with a team approach? Definitely. Do they have the potential to help organizations make the most of their people and other resources? Without question. How can your business reap the rewards of a team-based approach? By ensuring that management and employees at every level are committed to the direction, operate within the new team structure and are rewarded for doing so.

strategic business thinking

The more we read about business, the more we hear about strategy, strategic planning and the strategic thinking that we need to get our businesses to where we want them to be. Clearly, the idea of being strategic ­ essentially viewing the evolution of your business over the long term ­ is a practical one. Not so clear, though, is exactly what strategic business thinking is. Thinking strategically is similar to thinking scientifically ­ the central activities of both are the generation of hypotheses, and the testing of those hypotheses. In simple terms, strategic business thinking means asking the creative question, "What if?", as well as the practical question, "if …, then …?". Strategic business thinking allows relevant data to be included in the analysis of the potential outcomes and financial impacts of a proposed plan of action.

One of the benefits of strategic business thinking is that it requires managers to think beyond their own realms of responsibility. They learn to appreciate the connection between their roles and the operation of the broader organization. In the process, they develop a greater sense of the interdependencies between the various functions and the roles of their peers with their own.

Strategic business thinking assumes a future that can only be defined in general terms. A shape or direction can be defined, but the specifics will continually evolve as the business environment changes over time. Therefore, those closest to the front line are able to contribute critical information that is vital to the development of long-term strategy. The concept challenges the traditional top-down planning process by requiring involvement at many levels of the organization.

Thinking strategically requires a re-thinking of how we develop our business strategies, how we share information and with whom. In the past, information was shared on a "need to know" basis, so mid level managers and their employees often did not understand why they were doing what they were asked to do. The ability to think strategically was once only valued in executives. Now it is important for managers and employees at many different levels to possess this capability, so they can make a valuable contribution to the strategic business planning process and ultimately the long-term evolution of the company.

Good advertising strategy

Good Advertising Means Making a Great First Impression
"You never get a second chance to make a first impression"… and in the case of advertising, truer words were never spoken. Brochures and advertisements are often the first communication between your business and your potential customers, so the image of your business depends on them.

All of the elements of your advertisements carry a message - the pictures, the layout, the colours and, above all, the words (or "copy"). Often it isn 't what you say but how you say it that makes the difference between communicating the way you intended - and the way you didn't intend ­ with your target audience.

So, who writes the best text for advertising? Like designing a product or managing a business, writing marketing copy is a special skill, so a professional writer is your best choice. Many business people think they should write their own marketing copy, because they know their business best. And they're right ­ they do know their business and their market best. But they should partner with a professional writer to make their knowledge, ideas and messages come to life. The fact is that most people who are not in the business of words lack the skill and experience required to create the right tone and style. But just what makes a good advertisement?

Good advertisements are:
Entertaining ­ both fresh and interesting.
Informative ­ they tell your customers what you want them to know.
Appropriate ­ customers are comfortable with the content, vocabulary, tone and style.
Well designed - layout is appealing, attractive and complements the text message.
Well illustrated - contain the right pictures or graphics with a few words to clarify what the picture is saying.
Well written ­ grammatically correct; no spelling errors. There are some other critical elements of advertising that also should be considered when developing an advertising piece. Is the choice of type and image professional? Does the text consist of a few, well-chosen words? Everything, even the paper you print on, carries a message.
One of the foremost authorities on advertising, David Ogilvy, says the fact that few people actually read the average advertisement is in most cases the fault of the design. The layout, graphics and text must work together to effectively communicate the message. It is not uncommon for the visual image to dominate to the point where the brochure or advertising looks terrific, but the message is entirely lost.

With this in mind, give careful consideration to the development of your next advertising piece, program or campaign by asking the following questions:
What do you want to achieve? (the purpose)
Who will receive the advertising? (the audience)
What do you want to tell them? (the content)
What format will be used? Booklet, brochure, newspaper, magazine, billboard, online?
What software and hardware resources do you already have or want to use, and what are their specifications?
What are your document management requirements?
What is your budget?
Once you've determined the fundamentals, call in the specialist skills needed to bring your ideas ­ and your business ­ to life for your customers. For more information on developing advertising campaigns, promotional materials or special marketing programs, contact 5th Business. Our Marketing Mix services can help you create innovative, dynamic marketing programs and materials that deliver results fast.

integrated business strategies

Marketing professionals have different ideas about what it takes to build the ideal market presence but most agree that the key to success is an integrated overall strategy.

Integrated business strategies have changed with the business environment over the past 10 years. As a result, there has been a dramatic shift in the way successful Integrated business strategies look at new integrated marketing strategies. In the 80's, it was not uncommon for many marketing strategies to parallel national social attitudes ­ in other words, spend, spend, SPEND. Companies often relied on narrow marketing initiatives that focused on a single media or mechanism ­ strictly advertising, for example. The theory was that more money = more results.

Today, companies are far more strategic in their marketing strategies- the emphasis is on maximizing exposure and minimizing cost. This results in a best-value scenario that ensures a high impact market presence and an excellent return on marketing investment. The best way to achieve this for your business is to integrate a variety of strategies and tactics, including both proven performers and innovative new programs.

The integrated approach to busines strategies offers significant advantages:
increased exposure through a variety of media and mechanisms
improved efficiency as a result of better targeting
more consistent messages and improved corporate image
market perception that your business has achieved greater critical mass
opportunity to differentiate from competition
flexibility to allow quick response to changes in market conditions
The key to successful integration of marketing activities lies in two critical marketing tactics. First, dramatically increasing impact on your target market by creating a barrage of consistent, high impact messaging and imaging. How? As an example, instead of spending the entire marketing budget on trade advertising split it between direct mail, targeted publicity and promotion, telemarketing, online marketing and trade advertising. (Keeping in mind that you don't want to "water down" your marketing messages too much.)

Secondly, and most importantly, ensure that all your messages are consistent. All marketing communications activities should be guided by an overall strategy. Specific key messages must be repeated through a variety of media to ensure that every marketing dollar is working to build your business, integrated business strategies research.

Larger firms can still afford to maintain a full in-house marketing function but in the '90s the trend is toward "outsourcing". This can be accomplished either on a project by project basis or through an ongoing relationship with a firm that offers a full range of marketing and communications services. A good way to determine which approach is best for you is to meet with a reputable marketing communications firm to discuss your objectives and current market position. A qualified firm can work with you to tailor an integrated marketing solution that will work with your business objectives as well as your budget.

effectiveness of advertising in media

The daily newspaper is, in comparison to other media, the medium that satisfies cultural demands most according to its users' expectations regarding layout and reporting. Newspapers, as documents of the "relevant set," are continually forced to keep their articles "reasonable" and "relevant to everyday life."

In the entirety of this "reasonable/relevant" quality lies the strength of the advertising medium newspaper. The information in newspaper ads pertaining to prices, retail addresses and product details serve in the orientation and decision-making processes in a confusing world of goods and brands.

Even studies regarding quality show that newspapers have a credibility advantage in comparison to all other media. The credibility and seriousness of the reporting spreads out to the advertising in the newspaper.

The credibility of the newspaper as an advertising medium is not only a prerequisite for selling success, it is also an important guarantee for the success of image and information campaigns.

In image campaigns, the daily newspaper proves to be an important medium of rationality and relevance to everyday life components of a brand's image, which are brought across reliably to consumers. Information campaigns can rely on newspapers as an advertising medium to be fact-oriented and contain informative product- and brand-advertising.

Another plus, particularly of local and regional newspapers, is newspapers' local and regional competence. From international politics to local events, newspapers prepare "the world" for a "local life." Brands and services can thus be "regionalised," meaning the consumer is shown how he can reach products and services in the most economic way.

For the effectiveness of advertising in regards to quality, the context in which editorial or advertising are placed is significant. This applies to an even greater extent to radio and television advertising. I am not speaking only of the context of placement, but, more importantly, the position of an ad within the advertising section has influence upon its effectiveness. In radio advertising, for example, the same ad can make a loud and obnoxious or a moderately quiet impression, depending on the placement of the ad.

customer specific advertising

ZMG carried out a customer specific advertising success check in the spring of last year for a clothing chain store named C&A. Within the setting of a regional split design, a part of the readers of a regional subscription newspaper received a full-page, four-colour advertisement, while the other part received an advertising supplement with similar offers.

The study confirmed that approximately 15 percent more attention was paid to the ad. It also showed that the ad reached a broad readership as well - even rare C&A customers and readers with low product interest.

In contrast, the supplement aroused above all the attention of those interested in the products and the frequent and periodic C&A customers. The ad thus proved itself to be the advertising medium with which one can gain attention next to the already existing customers - of consumers that have either little or no contact to the store and its products.

The advertising supplement, on the other hand, is an effective advertising medium for presenting the full spectrum of product offerings to regular customers.

This function of supplements has been confirmed in other studies. The decision to take a closer look at a supplement in a newspaper depends on two factors: first, if there is interest in the products offered; second, if one is already a customer of the store.

The qualities of newspapers regarding their advertising effectiveness result directly from the situations in which they are used and the disposition of the readers, as well as the specific dimensions of effect the media have. In general, five central aspects of advertising effectiveness can be distinguished:
1. The specific quality of effectiveness of a medium.
2. The seriousness, i.e. credibility of an advertising medium.
3. Its regional competence.

4. The compatibility of an ad with its surroundings.
5. The acceptance of or the resistance to advertising.

effectiveness of advertisements in newspapers

Beneficial Value Defines Commitment - effectiveness of advertisements.
The amount of commitment to media also has influence upon the perception of the advertising contained. The stronger the commitment to a medium, the more the user interprets the advertising in that medium as informative and recommendable.
The commitment to newspapers is thus relevant to the success of advertising in newspapers.
The strong emotional commitment to a newspaper does not come out of the blue. It develops over the years. Not reading the newspaper is, for most people, unimaginable. This is so not because reading the newspaper is a habit, rather because of the beneficial value that newspapers offer their readers. The beneficial value is determined from four central performance features that only newspapers offer in this combination: actuality, universality, orientation and availability.
The attention invested in an ad or an advertising supplement is the first important prerequisite for advertising success. Advertising copytests give information on the attention paid and use of ads and supplements, as well as the factors that have influence upon these. The instruments used to measure the advertising success correspond methodologically to the test procedure developed by Daniel Starch in the United States. Such tests have been used continually since 1968 in Germany to measure the effectiveness of advertisements in daily newspapers.
We have stored the results in ZMG's Advertising Copytest Databank. It contains information from approximately 500 copytests, in which more than 8,000 advertisements were examined. The data attained concerning the influence of format, colour and placement are relatively global. More interesting data can be gained by customer-specific projects.

smart shopper

The "Smart Shopper" - A New Consumer Type
The opinion of newspaper readers is that brand-name items are worth buying and that life should be enjoyed. This, however, does not mean that newspaper readers are not open to special offers. Newspaper readers have the characteristic that the Agency Grey discovered as the new consumer type of the 1990s: the "smart shopper" buys the highest quality at the lowest price.
Newspapers and goods of mass demand have, to a great extent, identical users. By placing an ad in the newspaper, almost all interested people - consumers and users of consumer and mass goods - are reached. This is the main reason newspapers have developed into the classic advertising medium of retail. Through advertisements and advertising supplements in newspapers, information about current special offers and services reach large consumer groups.
However, newspapers do not only efficiently transport commercial offers. They are also the right medium when information about products need explanation to a large audience. Information about prescription-free medication or about telecommunication suppliers reach target groups through ads in newspapers. Banks, insurance companies and the service sector can effectively get the advantages of their offers across to the public.

Producers of brand-name items have the opportunity to present to practically the entire population in one big "bang" their new or improved products or the new positioning of a product in a universal and everyday situation.

Advertisers can rely upon the special characteristic of this advertising medium - newspapers transport pieces of information relevant to everyday life that shape the formation of judgment and decision.

For most people, the daily newspaper is an almost natural part of everyday life. Reading the newspaper is just as much a part of the day as the morning cup of coffee or tea. The newspaper is read at different times of day. The reader decides alone when and where the newspaper will be read.

According to a study ZMG did in Germany, three quarters of readers have read their newspaper by noon. Reading time usually precedes shopping time. This is a substantial prerequisite for being able to take advantage of the offers placed by local and regional retailers. The numbers speak for themselves: 71 percent of the readers use their newspaper as a source of information before shopping.

Next to the use of the media, the attitude toward the media is of great significance for the effectiveness of advertising messages. More precisely: What does the user think of the different media, and how does this relate to the advertising placed?

An important feature of media is the ability to commit users to a certain medium. Commitment to one medium is usually a long-term and emotional development. It is based upon three factors:
1. Familiarity with a medium.
2. Closeness to a medium.
3. The fact that it would be strongly missed if one had to do without it.
From these three factors, the index for the amount of commitment can be determined and is particularly marked in newspapers. The reader-newspaper commitment has led, in most cases, to a partnership between newspaper and reader that manifests in a long-term subscription.

advertising should sell

Despite differences in the marketing concepts of the various sectors, advertising has one common goal: advertising should sell! Products, services and brands - in the short- and long-run. The different media support this advertising goal with various qualities of effectiveness.

The newspaper is the print medium that is universally tailor-made for the broadest section of society, and - in view of the fragmenting electronic media - probably the only communication forum that reaches the various social groups simultaneously: the young and old, the less- and the higher-educated, those with low and high income. Newspapers are a mirror image of society.
Although the newspaper is a mass medium in the strongest sense of the word, it is used more intensely by some groups of the population than others - in particular, by people with a high economic and social standing. Newspapers reach particularly well the top-notch of business and industry, as well as consumers with influential personalities that act as opinion disseminators.

advertisement media change strategy...

Half-Life of Strategies Sinking
Despite efforts by newspapers and other media, the decision over which form of media is to be used in an advertising campaign has not gotten easier. More and more, advertising media and placement possibilities are at the media planner's disposal. Meanwhile, the increasing pressure of competition among advertisers leads to a decrease in the half-life of their marketing strategies.
This calls for a continual examination of the communication goals and, thus, of the money invested in advertising. A quick change in strategic orientation often results in an advertising campaign unable to develop its full effect.

Online offers and the Internet have created a stir in recent years, although the euphoria has died down, considering the relatively limited number of users and the only less-than-optimal utilisation comfort.

Despite the dynamics of electronic developments, offers have become consolidated within the classic media. In particular, the dominant growth rates of television are over. Even magazines are reaching their limits in their search for new target groups; instead of market expansion occurring, a competition for markets is taking place.

Which mix of media should advertisers use in today's marketing landscape?
The decision depends, of course, upon the individual marketing concept. These concepts, on the other hand, are for the individual businesses using advertising completely differently. Retailers have different marketing goals and communication than producers of brand-name items or service industries. For retail advertisers, winning customers and sales are the main focus of marketing considerations. Producers of brands focus upon the distinctive positioning of brand images. The service sectors, then, concentrate on a reliable presentation of the trustworthiness in the efficiency of their products and services.

competition in media advertising

The competitive situation of the media has intensified markedly over the past years. Where once one advertising medium dominated the scene - usually the local newspaper - there exists today a multitude of competitors. The battle for a piece of the no longer opulent advertising cake has been raging for quite some time already.

Parallel to this development is the increasing focus by advertisers and agencies on the effectiveness of the money invested in various media. The famous saying, "50 percent of advertising is money wasted, I just don't know which 50 percent," is no longer valid in a period of time in which detailed studies of the market can be applied.

Newspapers are still the No. 1 advertising medium in Germany. With approximately DM11 billion invested in advertising and a 30 percent share of the market, newspapers are in the lead, far ahead of television and other advertising media. In addition, newspaper distribution sales total DM7 billion.

Meanwhile, the market situation in the rest of Europe is completely different. Whereas in the Scandinavian countries (Norway, Sweden, Finland) the position of the newspapers is unchallenged, the southern countries (Spain, Portugal, Italy) are dominated by television. In North America, newspapers are, ironically, strengthening national influences as television audiences fragment.

Which advantages do newspapers have to tip the scales in the battle for advertising budgets and for the time budget of today's readers? Does the efficiency of newspaper advertising have to do with quality or quantity? Which arguments reach the ears of the decision-makers? The following article attempts to shed some light onto these questions.

competition in media advertising rises...

antitrust case examples - Virgin Atlantic v. British Airways

Virgin Atlantic v. British Airways Dismissed
Judge Throws Out Case on Summary Judgment

In a decision that "astounded" Virgin Atlantic Chairman Richard Branson, a federal judge threw out a $1 billion lawsuit filed by Virgin Atlantic Airways against our client, British Airways. Virgin Atlantic had sued British Airways, claiming that British Airways' incentive agreements were anti-competitive and predatory. In granting summary judgment, Judge Miriam Goldman Cedarbaum largely adopted the critique of Virgin's expert report prepared by our academic affiliate, Professor Robert S. Pindyck, of MIT's Sloan School of Management. This report found that Virgin could not provide evidence that British Airways engaged in predatory or otherwise anti-competitive conduct.

Principal Richard Starfield and Vice President Steven Herscovici worked with Professor Pindyck to analyze the competitive effects of the incentive programs on certain trans-Atlantic routes. We found that Virgin's claims were theoretically unsound and that British Airways' fares fell as competition grew on these routes, as is expected in a competitive market.

antitrust economics

Antitrust issues are becoming increasingly complex. U.S. and European enforcement agencies are applying new theories and models of actual and potential anticompetitive harm in evaluating mergers and acquisitions, and in civil and criminal investigations. Private antitrust actions have kept pace. New theories of liability, impact, and harm and innovative approaches to damages are altering the landscape of traditional antitrust. Combine these developments with the rapid technological change and increased globalization that face most industries, and the challenge to design and implement an effective antitrust analysis becomes a daunting one.

In antitrust economics, we have analyzed numerous issues, including allegations of monopolization, predatory pricing, tying arrangements, and other anti-competitive activities. In these engagements, we have demonstrated our expertise in the analysis of industry conditions, market definition, pricing, behavior of individual firms, and efficiency gains and losses resulting from collective behavior. We have provided analysis in a multitude of antitrust cases in a broad range of industries, including professional sports franchises, food, transportation, higher education, retail and wholesale grocery distribution, and computer software.

Presenting Economic Expert Testimony to a Jury: Five Golden Rules

If you ask ten antitrust trial attorneys for their ideas on the best way to present economic expert testimony to a jury, you would likely get ten different answers. The same would likely be true if you asked the same question of ten expert economists who have testified. About the only thing that everyone would agree on is that it depends at least in part on case specific issues such as the testimony to be offered and the precise make-up of the jury.

Therefore, it is with some hesitation that we offer a few observations relevant to the presentation of economic testimony to juries. In our experience these observations more often than not hold true, perhaps because they are consistent with human behavior. In any event, here are five "golden rules" about juries, accompanied by short descriptions of ways that expert economic testimony can be presented to take them into consideration.

1. Juries only listen to and accept what they can understand

No matter how thick the economist's C.V., if the jurors do not understand the testimony, they will discount it. Therefore, it is essential that the economic expert be able to explain his or her analysis in simple yet accurate terms that the jury can understand.

Sample courtroom recommendations: Use of technical jargon should be kept to a bare minimum and demonstrative exhibits should be interesting and understandable. Throughout the presentation, a balance should be struck between being precise and presenting understandable yet accurate testimony. In other words, the "perfect is the enemy of the good." However, the economic expert must be able to present without a hint of condescension as described under the next observation.

2. Juries react very negatively to any hint of condescension

Jurors want the respect from those in the courtroom that the jury's role as decision maker warrants. Any hint of condescension can provoke a backlash. This observation defines the tightrope that the economic expert must walk at trial: the presentation must be simple enough for the jury to understand, but must not insult the jurors' intelligence. In fact, it is more important not to appear condescending than to simplify.

Sample courtroom recommendations: The best way that we have found to walk the tightrope defined above is to be a teacher to the jury. This shows that you want the jurors to understand your testimony, not just accept it on faith. An excellent courtroom technique for achieving a teacher/student relationship with the jury is to have the economic expert leave the stand and use a whiteboard or flipcharts to explain his testimony directly in front of the jurors. This forces the witness to have an open body position relative to the jurors and removes physical "barriers" between the witness and the jury. These actions reduce the risk that the jury will perceive that the witness is talking down to them.

In addition, it is useful for the expert to stand to the left of the whiteboard or flipchart while explaining it, because people process information from left to right and one wants the jury to pay attention to the speaker, not just the chart.

3. Juries hate conflict

Sitting on a jury and deciding which side is right and which side is wrong and how much money must change hands is a stressful, generally unpleasant task for most people. Therefore, jurors are looking for a quick and expeditious resolution to the conflict. Thus, they can become perturbed if the economic experts on each side offer apparent polar opposite opinions, because it increases their sense of conflict. If one expert or the other appears to be the cause of this conflict, the results can be disastrous.

Sample courtroom recommendations: One way to try to avoid this problem is to have your expert clearly define and, if possible, quantify the issues that separate the experts. This could take the form of an exhibit that explicitly shows each of the major areas of disagreement and their effect on the "bottom line." In a damages context, this means providing an exhibit that shows intermediate values between the two experts' numbers. The exhibit can show an intermediate value, for example, which obtains "if the jury agrees with Expert 1 on issues 1 and 2, but disagrees with Expert 1 (and agrees with Expert 2) on issue 3." This bridges the apparent gap and shows the jurors a way to resolve the conflict in a way other than just "splitting the baby." The expert that uses this approach is more likely to be seen in a positive light by the jury and to have her opinion given more weight.

4. Juries have expectations which must be met in order to
establish trust.

Juries expect economic expert witnesses to be objective and to have performed the procedures that are necessary to reach a sound, reliable conclusion. If the expert is perceived as an advocate and/or to have skipped certain steps that the jury would expect are necessary to reach a sound, objective conclusion, the jury can discount the expert's testimony.

Sample courtroom recommendations: Start off the economic expert's testimony with a description of the steps that the expert took. For example, "I first asked to have access to all of the documents produced by both sides, and was given that access. Next, I or my staff selected those documents that I felt were necessary for my analysis. Next, I went to outside sources to verify the information that I obtained from the documents ...". This explains to the jurors the work that economic experts undertake and works to establish the jurors' trust. Another good idea is to give the opposing expert credit where credit is due. Jurors are appropriately skeptical that an economic expert, who frequently has been qualified by the Court as an expert, is wrong on everything. Finally, a presentation that clearly defines the issues that separate the experts and an even-handed style help to establish the jury's trust.

5. Jurors reduce even complex cases down to a few common
sense themes.

The economic testimony is more likely to be well received by the jury if (a) a common sense theme is identifiable for the economic testimony itself, and (b) it is presented in such a way that it is easy to see how the economic testimony is consistent with the general case themes identified by the trial attorneys.

Sample courtroom recommendations: Time and thought should be given to identifying common sense themes that accurately reflect the essence of the economic testimony. The expert should be able to summarize his direct testimony in no more than 4 or 5 common sense points. For example, if a part of the expert's direct testimony is that the opposing expert's analysis rests on undocumented assumptions rather than real empirical research, the common sense theme could be that "his model is not consistent with the real world."

trading methods - Long Option or Synthetic Option

One thought that crosses my mind when trading is that the 5 percent of the time that I am directional in my trading, Which long option strategy is the best in terms of practical risk and reward? Many of you are probably scratching your heads right now thinking that I might be off my rocker. For those of you who are novices there is 2 ways to construct a risk graph that looks like a long call option. The first is by buying a call option and the second is by creating what is known as a synthetic long option. This is done by buying the underlying and also buying a put for protection.

For example purposes lets say we are interested in a long strategy in the S&P 500. At the money calls and puts are each trading for 15 points. I can create the same risk graph by either buying the at-the-money call or by buying the futures and buying an at-the-money put. Does these two positions offer the same risk and reward. Lets examine the entry of each.

S&P = 900 and 900 calls and puts are both 14.50 bid and 15 ask each

• Example 1
  Long 1 S&P 900 call at 15 points
  Cost - $7500 + 1 commission
• Example 2
  Long Futures at 900 + Long 1 S&P 900 put at 15 points
  Cost - $7500 + 2 commissions

Example 1 looks like the logical choice because we only have 1 commission versus paying an additional commission for example 2. Why then do professional traders sometimes take a synthetic approach to trading rather than simply buying the call of the put. Well if the trader intends to hold the position and look for a big increase in his favor, the synthetic will in most cases, be the better strategy in the long run. Lets look once again at the example to find out why.

S&P is now at 925.	900 calls are bid 25 and ask 26
	900 puts are bid 1 and ask 1.15

In example 1 we can exit the trade buy selling the 900 calls for a price of 25 therefore capturing a profit of $5000 (12,500 - 7500)

In example 2 we can exit the futures side for a profit of $12,500 plus exit the put side by selling for 1 point and incurring a $7000 loss, thereby netting us a profit of $5500.

Example 2 now looks better due to less slippage and in this case, some time premium left over in the puts. Remember that volatility can play an important role in determining which strategy is more practical. Just some food for thought.

Good trading!

The Risk of Trading - trading methods

Directional Risk is the most common risk in the eyes of any trader. There are many different factors that affect supply and demand, therefore affecting the outcome of any trader who invests on one side of the market. In the stock market, an upward move is normally what most traders like to see. That’s because 90% of all traders that have stock are long the market.

However, a decline in the price of a stock can hurt the stock trader’s portfolio. This is referred to as downside risk. When you are long a stock, the downside risk is limited to the price that the stock is. This means that if Trader A purchased 100 shares of XYZ for $100 per share, his directional downside risk is limited to $100. If Trader B also purchased 100 shares of XYZ, but for $50, his directional downside risk is limited to just $50.

What about futures traders? Long and short futures traders have directional risk, but because futures trading is a zero sum game, both long and short traders have equal directional risk -- both upside for short sellers and downside for buyers. Let’s get back to our stock traders above. Which has more directional risk, Trader A or Trader B? Trader B has 1/2 the directional risk when compared to trader A. Is there any way Trader B can have the same risk as Trader A even though both traders bought at different price levels? Yes he can. Here’s how:

• Portfolio Risk is determined by taking the number of trades in one account and analyzing the total risk of the entire portfolio. Trader B can have the same risk above as Trader A if he/she were to buy 200 shares of XYZ at $50. Many traders think that buying more shares at cheaper prices lowers their risk while increasing their rewards. This is all too common in the marketplace. The trader who puts too much money on one trade can open himself up to a greater drawdown. It pays to not only research your trades, but to diversify your account, not only in different trades, but different sectors as well. While we may have a long bias in the Bond market, we may elect not to take a long biased trade in the T-Notes due to too much directional exposure in debt instruments that correlate together.


• Volatility Risk can be described by how much or little an asset or derivative that is being traded moves. It makes no sense to trade in a volatile market that could risk a margin call and wipe you out of a potentially good trade. The margin requirements are there for a reason. If the historical volatility on an asset or derivative were to double, so could the margin to trade it. This helps take the risk out of the brokerage firms’ hands and puts it into your hands. Volatility risk for an options trader is different however, according to his/her trade. If the trader is long volatility, any trade that dramatically rises or falls is good for the trader. Traders who are short volatility are looking for a collapse in volatility, or dull market conditions. In each case, the volatility traders are looking to gain by market momentum, or lack of it. Any trader short volatility in a market collapse could certainly lose his entire portfolio. What about the long volatility trader? Where does his/her risk come from?


• Theta risk is for long options traders only. Theta risk is how much option’s premium is lost while holding a long position. Option sellers do not have theta risk, but they have volatility risk. As for the option buyers, the theta risk is determined by how much or how little was paid for the option they hold. Obviously, the less paid for the option, the less theta risk is involved.

We are continually teaching our students how to limit risk while still being able to realize a good reward. We concentrate on strategies that are not only non-directional, or have a directional bias, but other things as well. We try to develop strategies that are not only delta neutral, but theta and vega neutral as well. This type of strategy can consistently crank out good yields while limiting your exposure.

We try to develop strategies that are not only delta neutral, but theta and vega neutral as well. This type of strategy can consistently crank out good yields while limiting your exposure.

trade volatility

Volatility Skews Explained

Volatility is probably the most confusion issue that options traders deal with. If that is the case, than the volatility skew is like rocket science to most traders. I want to explain volatility skewing and how a trader can take advantage of this useful information.

As you may realise, volatility is a major factor to the overall price and value of an option. As volatility rises and falls, so does the price of options. Statistical volatility is related to the past ranges of the underlying, as determined through a calculation using a standard deviation in options prices that is averaged. Most people use 21-30 days of data. Implied volatility is calculated using an option pricing model, and takes in to effect the strike price, asset price, volatility, days to expiration, and the risk free interest rate at that time. The result of implied and statistical volatility can greatly differ at times.

Volatility skewing occurs when options of the same underlying have different implied volatility levels. This skewing occurs through supply and demand mostly. This occurs mostly on in the money options as well as out of the money options. In the money options generally have a higher skew due to options price movement, while out of the money options command a higher volatility due to demand for the cheaper option from most traders. This basically means that some option strikes are trading at a higher than normal price when compared to the entire option series. If a trader were to plot volatility on a graph, it would look similar to this.

The graph above is actually taken from recent information in the soybean market. As of this article, Soybeans have a high volatility and a high volatility skew. Notice that the 625 strike has an implied volatility of 30, and that the 850 strike has an implied volatility of a 50. This means that the 850 calls are priced 66% higher than they should be when comparing them to the implied volatility of the 725 strike.

So how can a trader benefit from this information. "Buy Low and Sell High" is a phrase that makes complete sence to volatility traders. If you are spreading options in a market that has a high volatility skew, than make sure the options you are buying are on the low side of the skew and the options that you are selling are on the high side of the skew. By doing this you are further reducing your risk, if you are spreading options at a 1 to 1 ratio. If you are ratio spreading or back spreading, your risk reward may be different, but can vastly improve by researching volatility before entering a trade.

CNBC Ticker

CNBC Ticker Tape Terminology

I know that not everyone that trades is not a full-time trader, therefore not everyone owns a real-time software package. I do know that from time to time, everyone in this business sits down in front of the tube and turns on CNBC. For some of us, reading the Ticker Tape at the bottom of the screen is second nature. For the novice, understanding the numbers can be confusing at times, so I am going to attempt to piece the puzzle together for you.

First, there are two ticker tapes running on CNBC before, during, and after market hours. The top ticker tape, which is displayed in white, represents the NYSE stocks and is quoted in real-time. The bottom ticker tape, shown in blue, is the AMEX and NASDAQ stocks delayed 15 minutes. AMEX symbols are posted in four letters and NASDAQ trades on the bottom ticker use a five letter symbol.

Before the market opens and after the market closes, you can see all the settlement prices for every stock in alphbetical order. During the market, stock symbols are displayed as they are traded. About every minute the market summary will appear in the top ticker which gives you current broad market averages such as DJIA and other averages, ups, downs, tick, volume, etc.

Let's take a look at IBM 3 different ways to show you what the translation means:

IBM 120 1/2	- This means that 100 shares of IBM traded at 120 1/2
10sIBM 120 1/2	- This means that 1000 shares of IBM traded at 120 1/2
10.000s IBM 120 1/2	- This means that 10,000 shares of IBM traded at 120 1/2

Obviously this can vary from time to time as does everything in this business. But for now, the novice can now gain a better understanding of how to read the ticker tape.

Good Luck and Good Trading!

Index Spreads

Creating Index Spreads - Cash Versus Futures markets

When evaluating spreads, especially those with more than 2 legs to the strategy, what you may see as a great trade isnt always what you get. In the futures market, you have a better chance of being able to make a profit on a trade such as a butterfly or condor. Commissions on future options are usually less than half those of stock options and when you look at the leverage factor the differences are really seen. Lets take a look at 2 scenarios:

S&P Futures Condor

Buy 1 SP 955 Put - 13.50
Sell 1 SP 960 Put - 17.25
Sell 1 SP 970 Call - 17.25
Buy 1 SP 975 Put - 12.50

Credit of 8.50
Risk - 1.50
Reward - 8.50

Lets add in slippage of 1.00 to this spread

Now your risk is 2.50 and your reward is 7.50. Still a good risk / reward trade.

Your commissions on this trade are now $30 per round turn per contract. $30 x 4 = $120 in commissions or another .25 cents in commissions added to the spread. Now the trade risk reward after commissions looks like this:

Risk after commissions - 2.75
Reward after commissions - 7.25

Still looks pretty good for a strategy in a non moving market.

NOW - lets look at it again using S&P Cash Market.

S&P Cash Condor

Buy 1 SP 955 Put - 13.1/2
Sell 1 SP 960 Put - 17.1/4
Sell 1 SP 970 Call - 17.1/4
Buy 1 SP 975 Put - 12.1/2

Credit of 8.50
Risk - 1.50
Reward - 8.50

Adding the same slippage as the futures trade, our risk becomes 2.50 and our reward becomes 7.50. Commissions, however, are a bit different. An average discount broker will charge about $45 for each options transaction, both to enter and exit the trade. Lets add them up and see what commission would cost for this trade.

$45 x 8 (4 to enter and 4 to exit) = $360

This would represent about .75 in commissions for the cash trade. The new risk / reward looks like this:

Credit after commissions - 6.75
Risk after commissions - 3.25
Reward after commissions - 6.75

Using the futures markets can yield 10% more in after commission profits to this trade and can cut the risk after commissions by 16%. Obviously it can be done in both markets, but you need to take in account the slippage and commissions and weight them in your decision. Taking the time to view all risk and reward positions can help maximize your profit potential and keep the income flowing.

Good trading!

The Dow and E mini Contracts

The Dow and E mini Contracts -- Are they worth Trading?

There has been a lot of hype about the new Dow and Mini S&P Futures and Options contracts that have hit the exchanges over the last few weeks. Questions have been pouring into the office about these products and we feel it is necessary to explain them in detail:

** The S&P Mini contract was introduced on September 9, 1997 as an alternative to trading the big S&P contact. This is an electronic traded product using computers. Also referred to as the E Mini, it is 1/10 the size of the S&P — $50 per full point. The contract trades in 1/4 point increments and the margin is about $2,200. You need a lot of movement to make any money trading E-Mini. Commissions are a factor as well, as most brokerage firms charge the same commission as they do for any future or option trade. As far as order types, the E Mini trades like Globex products, which means most firms do not take stops. However, if they do take stops and its not filled after 1 full point, then it becomes a limit. This leaves a bad taste in my mouth knowing that if I call in a sell stop at 950, it could be filled below 949. Options are traded on this product, but it is hard to get a bid/offer from a broker on any strikes.

** The Dow contract was introduced the first week of Oc-tober. It is an open outcry market unlike the E Mini. This future moves at $10 per point, meaning if the Dow climbed 50 points in one day, a long future would have gained $500. The commissions should be the same as any futures contract at your firm. This market also has options, which are easier to get than the E Mini contract. Margin on this futures contract is about $3,300.

I think if I was considering using these products as an options trader, I would lean toward the Dow contracts for two reasons. First, I like the open outcry system of getting bid/offers to have an idea of what I am going to pay for a trade. Secondly, if the commissions are the same, it looks as if I get about twice the reward potential using the Dow product than the E Mini — when looking at the movement of both.

I must mention OPTIONETICS does not trade any new products until they have been on the market at least 60 to 90 days. With the S&P splitting at the end of October, there could be a shift away from these new products and back to the old reliable one. Only time will tell!

physical health of trader

Physical Preparation
It has been said, "markets are a cruel lover and more emotions can be experienced in a month’s worth of trading than many will experience in five year’s of normal living". As a trader, I would not dispute this statement. However, I do feel there are a number of steps you can and should take to help defuse some of the discomfort long before they become actual problems.

The first potential problem is your own physical health. After you reach early to mid-thirties, it becomes increasingly important for you to maintain your physical condition. If you feel sluggish, you will be amazed at how good you will feel by engaging in a brief period of aerobic exercise 3 to 4 times a week. All you need is 15 minutes a day where you can raise your heart rate to 80% of its maximum capacity.

You may feel your computer screen is better than mom’s apple pie. However, it is also replacing the "t" in "Stud" with a "p" as you may be turning into a computer potato. If you are using OPTIONETIC’s strategies, there is really no need to watch the computer screen all day long. Our strategies are designed to be low risk/low stress, freeing you to engage in other activities during the day.

Finally, how often do you watch ___________________ (fill in the blank with the six o’clock news, the ten o’clock news, the Today show, a football game, the Jay Leno show, Financial News Network, etc.)? If you watch your local or national news on a daily basis, you could be cycling on a stationary bike for those 30 minutes. If you do this daily, you will end up feeling much better about yourself than any news or talk show will ever make you feel. If you commit to such an exercise program, you will quickly find out you are getting much more out of your TV programs and have a "refreshed" feeling. If you are over 30, please consult with your doctor before beginning an exercise program. Being in good physical shape prepares you both physically and mentally for a successful trading career.

Why I won't trade new markets -- just yet...

In an earlier article I mentioned the Dow Futures and the E mini S&P as well as my hesitations to trade these products during the early stages of their infancy. Looking at what happened last Thursday, I am glad I wrote that article. Let's first revist the Dow contract and then talk about last Thursday.

The Dow contract was introduced the first week of October. It is an open outcry market unlike the E Mini. This future moves at $10 per point, meaning if the Dow climbed 50 points in one day, a long future would have gained $500. The commissions should be the same as any futures contract at your firm. This market also has options, which are easier to get than the E Mini contract. Margin on this futures contract is about $3,300.

Now look at last Thursdays action on Wall Street. Hong Kong's stock market went into a freefall of historic proportions last Thursday, with panic selling set off by rising interest rates and regional instability. The blue-chip Hang Seng index plummeted 1211.47 points, or 10.4% -- its largest one-day point loss in more than seven years -- to reach a 19-month low of 10426.30. The decline affected the US markets, as well as world markets abroad.

Anyone who was long Dow Futures going into Thursday morning got hammered. Why? Even thought the Dow opened down over 100 points, the Dow Futures opened down 3 1/4, or the equivelant of 325 points. The Dow limit is 3 1/2. Due to thin market trading of this contract and high volatility, many small traders headed for the exit doors only to be greeted by bad fills. Also think of the high slippage as well.

Once again, I write this to tell you that we do not trade any new markets for at least 60-90 days. I have friends who are traders in the pits begging me to give them business. This alone tells me not to. Just another lesson about illiquidity and the effect it can have on you if you trade markets with low volume. Good trading! -- Tom

S&P trader

Cause and Effect for the S@P 500 Split -- Who did it help?

Well if you actively trade the S&P 500 futures than you already know by now that the contract size has been cut in half. What does this mean? What are the details of this change and how does it affect the S&P trader? I will attempt to answer that in this weeks article.

For any open positions after October 31, 1997 the exchange will double market participants' open positions and will halve the underlying value and performance bond requirements. The underlying value of the contract will be reduced from $462,125 to $231,062 at recent index levels of 925.00. The action will not affect the price level of the S&P 500 stock index, the U.S. equity benchmark. The minimum price increment (tick) for futures and options contracts will increase from 0.05 to 0.10 index points. This change in tick size will have the effect of maintaining the value of one tick at $25.

What does this trader think? Well, Im not too excited about this, since I trade S&P futures and options on a regular basis. Firstly, I don't beleive the remarks by the exchange that this will "help the investor" by reducing risk and volatility. Most directional traders will just double up on their positions and have the exact same risk as before. What about all those new traders that will be able to finally trade the S&P at half the margin as before. After the recent turbulance, margins have doubled, and after the split, are nearly the same as they were a month ago. I don't expect to see any new traders enter the S&P soon.

So who benefits? Brokers @ Clearing firms just got a big revenue increase due to the increase in volume from all areas, whether institutional, large speculator, or small trader. The second entity that will ultimately benefit will be the exchange in the area of exchange fees. I don't see either of these two groups cutting fees at all to "help the trader" as they say that this split will do. What about the floor trader? Well they got a big paycheck as well. Although the contract split in half, the tick value did not split -- in fact the tick value increased to 10 cents from 5. Talk about a raise!

Hmm... Knowing all this I think the best thing to do now is to buy a seat on the CME. Its just one "upstairs" traders opinion. Good trading!

hedging strategies

Are High Returns Achievable using Hedged Strategies?

As a Delta Neutral Trader, I’m often asked if achieving returns of 100-300% are realistic while trading an account delta neutral. After completing one of the Optionetics 2-day workshops., one might wonder if trades that are hedged would attain returns that money managers would envy.

While most of the trades that I take are dull and boring, they do have the ability to reap great rewards when looking at the capital at risk. I normally do not have more than 20-25% of my trading capital working at one time. Let’s take a look at an example using the WealthWire Futures Account for 1997

WealthWire Futures - Real Time Account
Account Start at 1997 - $10,000 (Beginning Balance)
Number of Trades taken - 44 Trades
Average Number of Days in Trade - 15 Days

Average Cost of Each Trade - $300
Account Balance to Date - $17,010 (After Commissions)
Return on Investment - 280%
Return on Account - 70%

Notice that the Return on the WealthWire Futures account stands at 70 percent. This average is quite above that of the S&P, which is currently up just over 20 percent for the year. However, when looking more closely, the Return on Investment is up 280 percent for the year. Return on Investment is the return on the cost of trade. If one trade cost $300 to enter, and was exited for a $300 profit, the Return on Investment for that particular trade would be 100 percent.

As you can see, it is possible to achieve a high rate of return while risking very little on your account. Optionetics strategies allow this with both directional and non-directional trades. I know this is true, because I do it every day. Good trading!

trading methods

article : trading methods - Shorting the Box

Important Note: For Information Purposes Only. Consult your CPA or Tax Attorney for individual tax advice.

How can you protect a long stock position to prevent drawdowns? One particular way that I avoid drawdowns on long-term securities is with a method known as "Shorting the Box." This method of trading will allow a trader to hedge long term securities without selling the actual stock. It also does not involve buying or selling any options, therefore, eliminating the possibility of time value. Shorting the box involves selling securities against the ones you already own. For example, if you own 100 shares of IBM and you wanted to short the box, you would instruct your broker to sell short 100 shares of IBM. The broker would loan you the stock from the firms inventory, or sell short the stock on the exchange for you, while you continued to hold your IBM stock. Most people who want protection on their securities will buy puts as disaster insurance in case of a possible collapse of the securities that they currently hold. When shorting the box, the short stock will lose one dollar for every dollar made from the long stock held, and vice versa. As you can see, when you short the box, you have locked your gains, until you close out one side of the trade. What is the benefit of shorting the box? The biggest reason for shorting the box is to delay paying taxes against securities that you have made a tidy profit on. Let's assume you bought 100 shares of IBM at $50 per share, and the current price is $120. If you sell the IBM stock at $120 per share, you will have realized a $70 taxable profit. You may feel that next year your income may be lower allowing you to sell the stock and allowing you to fall into a smaller tax bracket. Yet if you wait, the market may correct itself, causing a decline in the price of IBM. By shorting the box, you have not closed a position, but now have 2 positions open. The profit is now locked but the trade will remain open until you close out one or more sides of the trade. You could leave the trade open as long as you like. Closing the trade out is done one of 2 ways. You can either leg out of the trade, legging out the short side first and then closing out the long side; or you can tell the broker to deliver the shares you own to cover the short.

The biggest misconception with shorting the box involves the long-term gain of stocks. Most people who first learn about shorting the box think to themselves, " I can short the box against that Netscape stock I bought 3 months ago at 20, and lock the profits in for a year, at which time I will close the position out and take the long- term capital gain tax against the trade." The IRS has taken this strategy into account and has set up rules regarding this which states the following:

"If you held property substantially identical to the property sold short 1 year or less on the date of the short sale, or if you acquire property substantially identical to the property sold short after the short sale, then:
1. Your gain, if any, when you close the short sale is a short-term capital gain; and
2. The holding period of the substantially identical property begins on the date of the closing of the short sale or on the date of the sale of this property, whichever comes first."
IRS Publication 550

Notice here that this last quote taken from the IRS specifically states that you cannot short the box, and close the trade out to avoid the short-term capital gain on the stock. An example would be that if you held a long stock position for 50 weeks, you cannot short the box and close out the position 2 weeks later as a long- term capital gain. As a matter of fact, if you do short the box- - even with only 2 weeks remaining before the trade becomes a long-term stock- - the holding period is cancelled out and starts over the day you cover the short position of the trade. Traders beware that you cannot short the box to avoid short-term capital gains.