Trading Options on Foreign Stocks

Trading Options
on Foreign Stocks
By
www.Options-Trading-Education.com

Many investors look offshore for profits.
http://www.options-trading-
education.com/11042/trading-options-on-foreign-stocks/

Traders also buy and sell foreign stocks.

Trading options on foreign stocks is also a
route to profits.

For most traders the most effective means of
trading options on foreign stocks is with
American Depository Receipts,ADR’s.

These shares represent offshore companies
listed on the New York Stock
Exchange, NASDAQ or over the counter.

An ADR is a negotiable security of a non-US
based company which trades in United
States markets.

Such stocks are denominated in US dollars
and, when they pay dividends, pay in US
dollars.

Many investors use this route to invest in
offshore companies as these companies
must live by the same rules of transparency
as other companies listed on US stock
exchanges.

When using ADR’s in trading options on
foreign stocks one can apply the same
fundamental and technical analysis that one
does for home grown stocks.

There is no great need to understand a
foreign language or deal with a foreign stock
exchange.

Both European style stock options and
American style stock options can be used in
trading options on foreign stocks.

Choosing Foreign Stocks

When trading options of foreign stocks a
trader uses the same approach as when he
wants to trade options on domestic stocks.

He looks for volatile market sectors and
volatile stocks. In trading options on foreign
stocks a trader searches for a foreign market
that is likely to grow.

Mexico and Brazil are large and growing
LatinAmerican markets.

In fact Brazil is the first named of the so
called BRICS nations. These nations are
expected to reach the first rank of economic
success within a generation.

Here are a few examples from
Brazil, Russia, India, China and South Africa.

ADR’s of Russian stocks include the oil and
gas giant, Gazprom, Sberbank, and
Novolipetsk Steel.

Chinese based ADR’s include China Eastern
Airlines, China SouthernAirlines, Shanghai
Petrochemical Company Ltd and Yangzhou
Brewery Company Ltd.

ADR’s of Indian stocks include Tata
Motors, Infosys Ltd, and HDFC Bank.

When you think of South AfricanADR’s think
of De Beers and diamond mines.

Brazil based ADR’s include Petroleo Brasile,
Rio Tinto Plc Co, Telefonica Brasi, and CPFL
Energia S.A.

Analysis of Foreign Stocks

A level 3 ADR requires the same amount of
transparency and information as any
American stock.

These companies must adhere to the
strictest set of rules when offering stock in the
USA.

They are issuing stock to raise capital in the
USA and must adhere to SEC rules
consistent when what US based stocks must
do.

Both technical of level 3 ADR’s for trading
options on foreign stocks is easier because
of the English language materials which the
company must furnish investors and the fact
that the trader can track the value of the
option in real time on his trade station.

Basic options strategies that work for
domestic stocks work when trading options
on foreign stocks and the same mistakes
lead to the same bad results whether you are
trading domestic stocks or trading options on
foreign stocks.

Trading Options on Foreign Stocks

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