hello,

heard of lot of tech terms
i should u have beeen great in explaining many here
in simple laguage

there is some more if u could help us with
like beta, and i saw "gamma" in dealers computer
in some calulators(an option in dealers software)

and
plz help me to read a graph i meeen
i knw the ratios like pe and eps ,or say emaand all that
how do u align them for results
because they always give mixed results

hi there alchemist
if u could help

Sorry, I am not able to reply to queries on time.

As for your query,

beta is used for comparing security with another group of securities.

it can be explained as the ratio of returns (or volatility) of a stock compared to the returns (or volatility) of a group of stocks (or entire market).

e.g.

if a stock A has a beta of 1.5 compared to an index I, A is likely to move 1.5% every time the market moves 1%. beta of stocks vary with both time and change in prices of the stocks.

Suppose a stock A has a beta of 1.5 compared to an index I. If the index goes down 70%, the stock will not go down 105%. beta is applicable for a particular price of a stock.

If a stock has beta of 1.5 at price of 100, you can assume that its beta will be around 1.5 for prices close to 100 (lets say 90-110).

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delta is the ratio is rate of change of price of an option to the change in price of the underlying.

It is always less than 1 (or 100% when expressed in percentage).

I have explained a few basics of options in this thread -

Options - How to track and have the knowledge

delta moves towards 1 as an option goes deeper in-the-money.
delta moves towards 0 as an option goes more and more out-of-money.

delta of at-the-money is near 0.5.

e.g a stock is at Rs 100, then the change of price of Rs 100 call (or Rs 100 put) will be Rs 0.5 for every Rs 1 move in price of the underlying stock.

If stock moves to Rs 101, the price Rs 100 call will increase by around Rs 0.5 and price of Rs 100 put will decrease by around Rs 0.5.

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gamma is the rate of change of delta compared to price of the stock.

gamma is maximum for at-the-money options. This means at-the-money option prices have maximum sensitivity to prices of the underlying security.

gamma is more for options which are closer to expiry.

then there are other Greeks as well:

theta is the rate of change of option value w.r.t. time.
vega or kappa or lambda is the rate of change of option value w.r.t. volatility of the underlying security.
rho is the rate of change of option value w.r.t. interest rates.

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I will have to explain delta, gamma and theta better. I will make a separate thread for these in a day or two.

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Which graphs are you asking about?

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hi,
thanx a lot for those explanations
its fine i dont mind u taking some time if u could give such simple explanation of such terms
great
and...
by graphs and sheets i ment....
i meeen how should i read a balance sheet of a company or how shold i read any tech graphs of the company so that i can get good conclutions by my self without any help...i can get all this beta delta calculations

i do realise u can read balance sheet and look some basic info like is company in profits
is their future plans good...
but
i want to knw which are the primary areas u should be looking
i meeen a step by step procedure
to be a good reader of such things
i hope i have been able to explain to u wht i meeeen
thanx

Hi Alchemist.

Even I am very impressed with the way of your explanation.

I also want to know how to choose the right stock for investment so that we can ourselves come to a conclusion and would be in aposition to compare the stock with other.

I want to invest in some good stocks for investment (medium to lomg term). Please suggest in which stocks should I invest.

Your advise really matters alot.

Regards

Lets do one thing.

Why don't one of you guys pick one stock. Then we can go step by step. That way it will be more interactive and also easier to understand.

Choose a stock and post in in this thread.

Fundamentally analysizing a stock.

Then we start with it.

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Let's start with MTNL

Time n again we have seen sensational rewards from the ambani group to its shareholders.

So I suggest we start with a top stock then move to others.

Also since the rel power ipo has been postponed to 2008 we may have a great opportunity to cash in on REL which can zoom after the ipo pricing is done.

So Please start with RIL and REL.

RIL in particular has been my fav since I have never lost in that counter during my intraday times

MTNL won't really be a good stock to start with.

The reason is that it has been range bound for many many months now - it is going nowhere.

Technically analysis works better with trending stocks.

I think I will start with the Nifty itself. That would be the best choice.

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any simple formula for calculating beta value?

The beta values of stocks that are part of the Nifty 50, and Nifty Junior indices can be got from the NSE website.

On the homepage, Click on Indices -> Statistics. Here under "Monthly" data heading you can find the values, which are calculated on a monthly basis.