This post is somewhat of a continuation of my previous post about the bailout. I found a good video talking about CDS( credit default swaps) and what went wrong that caused the massive financial crisis.  Part 1:   Part 2:   So its not that Credit Default Swaps are worst thing in the world, It is that these over the counter (OTC) derivatives are not...

I was reading FORTUNE the other day and stumbled upon an article about how the life of  Erin Callan, former CFO of Lehman Brothers changed after the financial crisis in 2008. A thought struck me; many investment firms were taking too much risk. Take AIG for example, AIG was writing too many credit default swaps than it could possibly write. As long as everything...

Hedge funds have been making the news lately and I am not surprised that they are. Hedge funds, like mutual funds, basically pool money from investors and invest that money. Mutual funds are tightly regulated, while hedge funds are not regulated. So a mutual fund is restricted to some or one type of investment vehicle, while hedge funds are not. So hedge funds can...

Lets face it, future contracts are extremely risky. One bad trade could wipe your account clean. Like options, futures have great leverage. In the futures market, there are two participants, hedgers and speculators. Hedgers are actually interested in the commodity being traded and want to lock in a price so that they can profit from the changes. A hedger might be a...

There are many things that somebody could invest in. You could invest in stocks, bonds, mutual funds,etc.  Some of the best investment vehicles, such as futures and options are the ones that many traders fear and don't really understand. Options are derivatives that derive their value from an underlying asset. This means that the price of an options contract...