mmg – Miro Zecevic

NFT – Non-Fungible Token

April 6, 2022 mirozecevicmmg

An NFT (non-fungible token) is a code that identifies you as the owner of a one-of-a-kind digital asset.

Fungible vs. non-fungible

An NFT is a type of digital collectible. They were initially released in 2015, but their popularity has lately skyrocketed.

To comprehend NFTs, it’s necessary to first grasp the distinction between fungible and non-fungible objects:

Fungible: It’s simple to count and exchange. You can, for example, exchange two $5 bills for one $10 bill and get the same amount of money.

Non-fungible: It’s one-of-a-kind and can’t be replaced. The Mona Lisa may be downloaded and framed by anybody, yet there is only one original painting.

The one-of-a-kind quality of an NFT (and the scarcity that it entails) is a big part of why they’re so popular (and expensive).

Why popular

NFTs are popular with buyers in part because they are an investment opportunity. If the price of an item rises in the future, the buyer can sell it and profit. Of course, NFTs are only worth what someone is willing to pay for them, and no one can guarantee their future value.

NFTs appeal to creators since it provides them with a direct market for selling their work (rather than having to go through a middleman). They also get more control over their works and may be able to earn royalties when someone buys or sells their NFT.

How to buy

Purchasing an NFT is similar to purchasing anything on eBay (only you won’t receive anything physical in the mail at the end of the day).

1.Get some cryptocurrency
(most NFTs are priced in ether, the cryptocurrency of the Ethereum blockchain)
2.Visit an NFT marketplace
(e.g., Rarible, Mintable, OpenSea, NBA Top Shot)
3.Bid or buy the item right away
(depending on how it’s offered)
4.Pay for the item with cryptocurrency
You’ll be charged for both the item and any additional costs.These might include a percentage of the closing fees or the energy used to conduct the blockchain transaction.

How to sell

On an NFT site, almost anybody may list items for sale. The following is how it works:
1.Create a digital wallet and buy some cryptocurrency (you’ll need this to cover the cost of creating your listing)
2.Go to an NFT marketplace
3.Connect your wallet to the marketplace
4.Upload your digital file
5.Provide some details about the file, such as whether it’s an original or a copy
6.Decide if you want to build in royalties
7.List the item and wait for it to sell

Although NFTs are popular right now, simply listing something does not guarantee that it will sell.People are often on the lookout for extremely rare collectibles offered by celebrities or well-known companies. Remember that bragging rights are a big element of NFTs.

Future uses

Many experts predict that we will be able to utilize NFTs for nearly everything in the future, including event tickets and passports. This is due to the fact that it is very easy to verify ownership on the blockchain and very difficult to fake or alter the owner (without their permission).

Conclusion

An NFT is a code that identifies you as the owner of a one-of-a-kind digital property and is stored on a blockchain. Works of art, albums, trade cards, and avatar accessories are the most frequent NFTs. People buy them not just to gloat about owning something unique and wonderful, but also in the hopes that the NFT will appreciate in value and profit the owner. Although anybody may upload and sell an NFT, this does not guarantee that there will be purchasers. Furthermore, an NFT is only valuable what someone is willing to pay for it. Experts believe that NFTs will have numerous practical applications in our daily lives in the future.

Liquidity

April 1, 2022 mirozecevicmmg

The ease with which you may sell an investment or asset at a reasonable price is referred to as liquidity.

Liquid assets are those that can be exchanged for cash:

Quickly and easily
With little or no transaction fees
At their current market prices (i.e., without having to entice a buyer with a big discount)

Something is more liquid in general if:

Many individuals would be interested in purchasing it;
It’s simple to determine its value;
It’s simple to transfer ownership from one person to another;
The object or investment is more standardized (i.e., less unique)

A share of Apple stock, for example, is liquid because it’s simple to buy and sell, and many people would want to possess it at the proper price. You can figure out how much it’s worth by looking at the stock market’s current pricing. Furthermore, the corporation has billions of outstanding shares, therefore it isn’t unique.

A piece of custom-designed luxury real estate, on the other hand, is illiquid since there may be only a few potential purchasers, it’s difficult to agree on exactly how much it’s worth, and the transfer procedure can take a long time.

Liquid

Stocks
Bonds
Mutual funds
Exchange-traded funds (ETFs)

Illiquid

Real estate
Art
Antiques
Collectibles, like coins, stamps, or baseball cards

Because you may easily convert cash into other assets, it is the most liquid asset.
Money market accounts and funds, savings accounts, and various forms of very short-term debt investments are all examples of “cash equivalent” investments. (Certificates of Deposit or CDs are a little less liquid since they lock your money up for a certain length of time and charge a fee if you need to withdraw it early.)

While there’s nothing wrong with retaining illiquid assets, people and businesses both benefit from having some liquidity.

For day-to-day needs or unexpected obligations, you’ll need some liquid assets. If your sole asset is a house, selling it immediately for a fair price to fund a car repair would be difficult.
Liquidity is required by businesses to fund short-term costs and maintain financial stability. If the company’s revenues are hit hard by a sudden economic downturn, having adequate cash on hand might help it get through it.

Liquidity refers to how quickly and easily an item may be sold for a reasonable price. Stocks, bonds, and ETFs (exchange-traded funds) are all liquid assets that are simple to sell. Real estate and fine art, for example, are illiquid assets that are more difficult to convert into cash. It is critical for both individuals and businesses to have sufficient liquid assets in order to pay short-term payments and cover any unforeseen expenses or financial difficulties.

Key points:

Liquidity refers to how quickly and easily an item may be sold for a reasonable price.
Although cash is the most liquid asset, equities, bonds, mutual funds, and exchange-traded funds (ETFs) are all considered extremely liquid. Houses, coin collections, and art are all illiquid because finding a buyer willing to pay a fair price takes time.
While having some illiquid assets is acceptable, you should balance them out with liquid assets that you can sell quickly if you need cash.

Liquidity text on wood block with a pile of coins on a blue and white background

What Are Financial Derivatives?

March 22, 2022 mirozecevicmmg

What is a derivative?

A financial instrument based on another asset is known as a derivative. Stock options and commodities futures are two of the most common examples of derivatives, and you’ve definitely heard of them but aren’t sure how they operate.
Derivatives allow consumers the option — but not the duty — to acquire or sell an underlying asset at a later date. The underlying asset and the period until the contract expires determine the derivative’s value.

How Financial Derivatives Work

Financial derivatives are financial products whose value is determined by one or more underlying financial assets, such as stocks, bonds, commodities, currencies, or interest rates.

Investors engage in contracts with stated terms, such as the period of the contract and the consequent values and definitions of the underlying assets, to purchase and sell derivatives.

Futures, options, swaps, and forwards are examples of financial derivatives. Futures and options are often traded on the CME, which is one of the world’s major derivatives marketplaces. Swaps and forwards are traded on an over-the-counter (OTC).

Derivative Regulations

The SEC and the CFTC regulate financial derivatives in the United States. FINRA regulates the parties engaged in financial derivative contracts.

Ways Derivatives Are Used

Derivatives are rarely used as part of a long-term buy-and-hold strategy due to their complexity.

Derivatives are used for:

Hedging: To limit losses, an investor can use derivatives. For example, if an investor is concerned about a rapid drop in the price of security they own, they can buy put options, which can benefit if the price of the security drops, thereby offsetting the loss of the other asset.

Leverage: Financial leverage may be achieved by using derivatives to boost the returns of an underlying asset or index.

Speculation: If an investor feels the price of an asset will move dramatically in one way, they can utilize a derivative to profit from the projected price movement.

Access to complex assets: Financial derivatives can give an investor indirect access to assets or markets that would be difficult to access otherwise.

4 Derivative Investment Types

The four main types of derivatives are futures, options, forwards, and swaps. Common types of underlying assets within these derivative types include stocks, bonds, commodities, bonds, interest rates, currencies, and cryptocurrency.

The four main types of derivatives are:

Futures
Futures are financial derivatives that include a contract between two parties to exchange an asset at a certain price and date in the future. Regardless of the prevailing market price at the time the contract expires, the buyer of the futures contract must purchase (and the seller must sell) the specified asset at the price indicated in the contract
Options
Options are financial derivatives that involve a contract that provides the buyer the right to purchase or sell the underlying asset but not the obligation to do so.
The call option and the put option are the two types of options available.
– A call option allows an investor to purchase a stock at a specific price by a specific date.
– A put option allows an investor to sell a stock at a specific price by a specific date.
Forwards
Forwards, also known as forward contracts are financial derivatives that involve two parties entering into a tailored contract to purchase or sell an asset at a specific price on a specific future date.
Swaps
Swaps are financial derivatives that include a contract that permits two parties to exchange cash flows for a certain period of time. An interest rate, currency exchange rates, or the price of a stock or commodity may all influence cash flows.

Advantages

Hedging: Derivatives can be used by investors to hedge an existing asset position. The derivative contract’s earnings may be used to cover losses in the underlying asset.
Financial leverage: It’s possible to utilize it to boost the returns of an underlying asset like a commodity or an index.
Access to unavailable markets: Derivatives can provide investors access to assets or markets that would otherwise be difficult to reach.

Disadvantages

Complexity: Derivatives and associated methods can be difficult to grasp for many investors since they frequently need extensive investment expertise and understanding.
Risk: Derivatives can expose investors to losses that are greater than those incurred by the underlying asset.

Quarter – Q1, Q2, Q3, Q4

February 24, 2022 mirozecevicmmg

On a company’s financial calendar, a quarter is a three-month period that serves as the foundation for quarterly financial reports and dividend payments.

The majority of financial reporting and dividend payments occur quarterly. Not all companies’ fiscal quarters match the calendar quarters, and it’s customary for businesses to complete their fourth quarter after their busiest season.

The fiscal quarter and the fiscal year are the two primary accounting periods for businesses. Most businesses’ fiscal years span from January 1 to December 31 (though it does not have to). The following are the traditional calendar quarters that make up the year:

– January, February, and March (Q1)
– April, May, and June (Q2)
– July, August, and September (Q3)
– October, November, and December (Q4)

Companies, investors, and analysts compare and assess trends using data from multiple quarters. A company’s quarterly report, for example, is frequently compared to the same quarter of the prior year. Many businesses are seasonal, making a comparison of quarterly results deceptive.

Quarterly Reports

For publicly listed corporations and their investors, quarterly earnings reports are critical. Each press release has the power to influence the stock price of a company. A company’s stock value may rise if it has a strong quarter. The value of the company’s shares might plummet if the company experiences a bad quarter.

After their first three fiscal quarters, all public corporations in the United States must file quarterly filings with the SEC, known as Form 10-Q. The prior three months’ unaudited financial statements and operating data are included in each 10-Q.

An annual report, known as Form 10-K, is also required of a publicly traded corporation. An audited statement, presentations, and additional disclosures are frequently included in annual reports that are more extensive than quarterly reports.

Forward-looking “guidance” for the following several quarters or through the end of the year is frequently included in quarterly earnings reports. Analysts and investors use these estimates to forecast performance over the next several quarters.

Quarterly Dividends

In the United States, most corporations that pay a dividend will spread it out across four quarters. It is common in many economies outside of the United States to divide the yearly dividend into quarterly installments, with one payment being significantly bigger than the rest.

When it comes to quarterly dividends, the ex-date might cause considerable volatility in a stock’s price.

Non-Standard Quarters

Some public corporations will adopt a non-standard or non-calendar quarterly reporting structure for a variety of reasons.

A corporation may use a non-traditional fiscal year to aid in business or tax planning. According to the IRS, companies can pick a “tax year” that is still 52–53 weeks long but does not finish in December.

Quarters’ criticism

The significance of the quarterly reporting method has been questioned by some. The main criticism of the system is that it places too much pressure on companies and executives to generate short-term outcomes to impress analysts and investors, rather than focusing on the business’s long-term objectives.

Another difficulty is that corporations only publish their summary annual statements once a year, causing the data to grow stale and out of date in the meantime.

What is a Fiscal Quarter?

A fiscal quarter is a three-month period during which a company’s financial performance is reported. A year is divided into four quarters, as the name indicates, and a publicly listed company would produce four quarterly reports every year.

Fiscal quarters are used by both companies and investors to keep track of their financial outcomes and company changes throughout time.

Are Quarters always lined up with the calendar year?

The calendar year may not necessarily correspond to the quarters. For example, if a corporation decides to start its fiscal year in February rather than January, the first quarter will be February, March, and April. Companies may do so if they want their fiscal year to conclude during their peak season.

What are the pros and cons of Quarterly Reporting?

The major benefit of quarterly reporting is that it provides investors with more data on which to make investment decisions. Investors might examine a company’s quarterly filings instead of waiting for its annual report to get a feel of how the company is doing throughout the year.

However, some say that quarterly reporting causes organizations and investors to be more focused on short-term success.

The SEC’s new plan might be a significant gain for day traders

February 16, 2022 mirozecevicmmg

Have you ever traded penny stocks with a small account only to be frustrated when it came time to make another trade? Many people who invest in small-cap stocks are concerned by the Pattern Day Trade regulation.

To purchase and sell penny stocks or higher-priced stocks within a single day and more than three times during a rolling 5-day period, traders must have at least $25,000 in their trading account. In many circumstances (depending on your broker), you may avoid this by using a cash account.You can make as many day trades (buying and selling in the same trading session) as you like.However, you can only use the amount of settled funds in your account.

You must be mindful of settlement time-frames if you trade penny stocks.Your money will usually be settled two business days following the trade date (T+2).That implies you’ll have to wait a few days after selling out of your transaction before you may trade with those funds again. The “benefit” is that you are “forced” to refrain from over-trading.

On the other hand, you won’t be able to profit from market volatility as rapidly as you’d want.
If you’ve ever day traded with a smaller account, you’re all too familiar with this problem. However,
the US Securities and Exchange Commission (SEC) may be attempting to assist ordinary traders.

The Securities and Exchange Commission (SEC) submitted a document explaining a
potential adjustment to this settlement regulation earlier this month.

The SEC agreed to recommend rule changes to lessen risks in clearing and settling securities.
Shortening the normal settlement cycle for “most broker-dealer transitions” in securities is one technique to do this.The shorter settlement involves switching from a T+2 (two business day) to a T+1 (one business day) settlement time. The changes, according to the Commission, are intended to reduce “credit, market, and liquidity” risks in transactions.

This might be a huge gain for day traders, particularly those with smaller accounts who don’t qualify as “day traders.” Trading options is one of the few strategies to accomplish a T+1 settlement.
However, options have a higher volatility and numerous other elements, such as time decay, that work against them. With a planned T+1 settlement for securities deals, investors wishing to get into the market might do so considerably more quickly.

The SEC’s document explains what this means for “self-directed” or retail traders. Recent events, in particular, motivated these decisions, according to the white paper:

“Accelerating Time to Settlement” and “Settlement Optimization.”59 Among other things, the DTCC-owned clearing agencies have been exploring steps to modify their settlement process to be more efficient, such as by introducing new algorithms to position more transactions for settlement during the “night cycle” process (which currently begins in the evening of T+1) to reduce the need for activity on the day of settlement. Portions of these two initiatives have been submitted to the Commission and approved as proposed rule changes.”

In addition, the SEC’s document discussed: “More recently, periods of the increased market volatility—first in March 2020 following the outbreak of the COVID-19 pandemic, and again in January 2021 following heightened interest in certain “meme” stocks—highlighted the significance of the settlement cycle to the calculation of financial exposures and exposed potential risks to the stability of the U.S. securities market.”

The DTCC’s February 2021 document discussed how speeding up settlement beyond T+2 may “provide considerable benefits” to market players, which sparked this debate.
The DTCC predicted that a T+1 settlement strategy would be implemented in the second half of 2023, and that this form of settlement cycle would reduce the volatility of individual margin needs by “up to” 41%.

When it comes to penny stock investing, everyday patterns change swiftly. As a result, a shorter time to clear might provide market players with opportunities to be more systematic in their approach. The DTCC, the Securities Industry and Financial Markets Association, and an Industry Steering Committee released a T+1 Report late last year describing the proposed transition to a T+1 standard by 2024’s second quarter. Furthermore, an Industry Working Group looked at the possibility of a T+0 settlement. While this may be at the bottom of the priority list, it is still being discussed. Is it possible that traders will have a 0 settlement timescale for deals in the future?

Summary

The Securities and Exchange Commission (SEC) is considering rules that would reduce the usual settlement cycle for most broker-dealer transactions from two to one business day following the trade date (T+1).
In order to protect investors, minimize risk, and improve operational efficiency, the SEC proposes additional standards for broker-dealers, investment advisors, and certain clearing agencies to execute institutional trades.
Compliance with a T+1 standard settlement cycle would be needed by March 31, 2024 if the bill is passed. The SEC is also considering whether a same-day standard settlement cycle (i.e., settlement no later than the end of the trading date, or T+0) should be required.