Reviewed by Charles Potters

Technical analysis is a trading tool that uses trading activity statistics, specifically price movement and volume, to try and predict future movement in the market. When a technical trader talks about price action, they are referring to the day-to-day fluctuation in the price of a particular stock. 

Key Takeaways

• Price action is the daily fluctuations of a company’s stock price.
• Price action trading involves analyzing a stock’s price movements and patterns to predict future trends.
• It is a subjective strategy as each trader interprets the results differently, which is why it’s important to use price action trading along with other strategies.
• Traders rely on technical indicators like the relative strength index (RSI) and the moving average convergence divergence (MACD) to understand the price movements.

What Is Price Action?

Traders gauge a stock’s price action by monitoring patterns and indicators to help find order in the seemingly random movement of price. Generally, a trader uses candlestick charts to better visualize and contextualize price movement.

It’s a subjective art; two traders might study the same price action and arrive at completely different conclusions about what the pattern represents. This is one reason that price action is best considered just one part of the overall trading strategy. 

Price action trading is a trading strategy in which trades are executed strictly on the basis of an asset’s price action. It’s a tactic most often employed by institutional and retail traders. Generally, these traders use leverage to place large trades on the basis of small underlying price movements.

Important

Price action traders need to be aware of “false breakouts” where the price temporarily breaks a support or resistance level but reverts back.

Predicting Price Actions

Hundreds of indicators have been designed to help predict an asset’s future direction. These include the relative strength index (RSI), the moving average convergence divergence (MACD), and the money flow index (MFI). They use historical trading data to analyze and predict price movement. 

Short-term traders plot this information with charts, such as the candlestick chart. Common chart patterns include the ascending triangle, the head and shoulders pattern, and the symmetrical triangle. Patterns are an integral part of price action trading, along with volume and other raw market data. It’s a difficult strategy, part art, and part science, that even experienced traders struggle with. 

Ultimately, in trading, no two people will analyze every bit of price action in the same way. As a result, many traders find the concept of price action to be elusive. Like other areas of active trading, gauging the price action of a stock is completely subjective and price action should be just one of many factors under consideration before entering into a trade.

What Is an Example of Price Action?

Price action is the movement of a financial security’s price over time. For example, Company ABC’s stock price opens at $50 on Monday and closes at $55, confirming an upward trend. On Tuesday, the price opens at $56 but during the day drops to $54, before closing the day at $55. The price action shows that while there was a pullback during the day, it maintains its support at $54, indicating buyers are still active. Technical traders may infer this as a continuation of the uptrend, looking to see if the share price breaks above $55 in the following days.

What Is Technical Analysis?

Technical analysis is a method of evaluating and predicting the price movement of a financial security, such as a stock. Technical analysts study historical price data and volume, using charts and indicators to identify patterns and trends to help determine exit and entry points (buy and sell decisions). The belief is that past price data can predict future price data. Technical analysis is suited for short-term trading and stands in contrast to fundamental analysis, which is better suited for long-term trading. Fundamental analysis focuses on a company’s financial profile to make investment decisions.

What Are Common Technical Analysis Indicators?

Common indicators used in technical analysis include moving averages (MA), relative strength index (RSI), moving average convergence divergence (MACD), Bollinger Bands, and stochastic oscillators.

The Bottom Line

Price action trading, a component of technical trading, studies a stock’s historical price movement and volume to predict future trends. It uses candlestick charts and patterns, like triangles or head and shoulders, to make its predictions.

The process is a subjective approach because traders interpret the price action differently, so as with most trading strategies, it is best used in conjunction with other strategies. Short-term traders use other indicators, like RSI and MACD to refine their results.

Reviewed by Margaret James

The forward price-to-earnings ratio (P/E) is a valuation metric that measures and compares a company’s earnings using expected earnings per share and the current stock price.

The forward P/E ratio measures the relationship of the current stock price to the forecasted EPS figures. Here’s how to calculate a company’s forward P/E ratio for the next period using Microsoft Excel.

Key Takeaways

• The forward P/E ratio forecasts a company’s earnings for a period.
• Published data can be used to calculate forward P/E in Excel.
• Excel can help you quickly compare multiple companies.

Understanding the Forward P/E Ratio

The forward P/E is similar to the price-to-earnings ratio, which measures the relationship of the current stock price to the current or historical EPS, except it forecasts P/E. You can calculate a company’s earnings per share using the data provided from its financial statements, but companies will typically estimate future EPS for you in their forecasts.

Companies generally provide you with the expected earnings per share for each of the upcoming quarters. From there, you can calculate the forward P/E ratio using the formula:

Forward P/E ratio = Current Share Price ÷ Expected EPS for a period.

The forward P/E ratio is helpful because it can signal whether a company’s stock price is high or low compared with the expected EPS in the upcoming quarters. You can also compare the forward P/E of a company to other companies within the same industry to get a sense of whether the stock price is overvalued or undervalued.

Company executives often adjust their EPS forecasts (up or down) throughout the year. If you follow a company’s forward P/E over long periods, you can determine whether the stock price is accurately valued relative to the newly adjusted EPS forecasts. As a result, the forward P/E ratio can more accurately reflect a company’s valuation vs. using the historical P/E ratio.

Here are the steps to calculate forward P/E in Excel.

#1 Format Your Worksheet

In Microsoft Excel, first, increase the widths of columns A, B, and C by highlighting the entire sheet. Click on the corner of the worksheet (to the left of column A and above the numeral 1 in row one). Once the sheet is highlighted, right-click on the top of any column (labeled A, B, C), and a dropdown menu will appear. Left-click on “Column Width” from the dropdown and change the value to 30.

It helps to first establish the column heading names. You can label these however it works best for you, but this example follows this format:

• A1 = Merge cells A–D and enter a label
• A2 = Company
• B2 = Stock Price (or Market Price)
• C2 = EPS (expected)
• D2 = Forward P/E

Once you have that done, you can begin entering your data.

As an example, assume Company A has a current stock price of $50 and an expected EPS of $2.60 for a particular quarter.

#2 Enter Your Data

Next, enter the data for your first company into your spreadsheet:

• Cell A3 = Company name
• Cell B3 = $50
• Cell C3 = $2.60

#3 Calculate the Forward P/E

As a reminder, the formula to calculate the forward P/E Ratio is:

Market Share Price / Expected EPS

So, to calculate the ratio:

• Place your cursor in cell D3.
• Please note that all formulas in Excel begin with the equal sign.
• Type the forward P/E formula in cell D3 as follows: =B3/C3
• Press Enter or Return on your keyboard

You’ll notice that Excel highlights the cells involved in the formula automatically. Once you press Enter, the calculation will be completed:

#4 Compare Multiple Companies

If you want to compare the forward P/E ratios of multiple companies, you can follow the same process, inputting the information in each row for the companies you’re analyzing.

However, when comparing multiple companies, you don’t have to rewrite the formula in each cell within Column D. Instead, you can place your cursor in the results cell, right-click, and choose copy. Next, click on the next cell in the column, right-click, and select paste. You can also click the first cell with the formula, move your mouse pointer to the bottom right corner of the cell, click and hold, and then drag the pointer down to the row desired. The cells should autofill with the appropriate results.

What Is the 12-Month Forward PE Ratio?

A 12-month forward P/E ratio forecasts P/E 12 months into the future. This figure is commonly used when companies forecast earnings for one year.

What Is COST Forward P/E Ratio?

As of Feb. 21, 2025, Costco (COST) had a 2025 forward P/E ratio of 57.39.

How to Calculate Forward Price?

Forward price is calculated as follows:

• Current Spot Price x 2.7183^{(Risk-Free Rate x Years)}

If carrying costs exist, the formula will change to:

• Current Spot Price x 2.7183^{(Risk-Free Rate + Costs) Years}

The Bottom Line

Once you know how to format the formula in Excel, you can analyze the forward P/E ratios of various companies before choosing to invest. Remember that the forward P/E ratio is only one ratio and shouldn’t be used exclusively for determining a company’s stock price valuation. Many financial ratios and metrics should be used along with forward P/E, and it’s important to compare those metrics to companies with similar companies in the same industry.

Fact checked by Vikki Velasquez

With climate risks and high home insurance costs becoming a growing concern for homebuyers, Zillow has identified seven Midwest cities where homes face minimal threats from flooding, wildfires, wind, and other extreme weather events.

According to Zillow, fewer than 10% of new home listings in Cleveland, Columbus, and five other Midwest markets carry significant climate risks. Here’s why these cities make the list—and what buyers should know when evaluating climate risks in any town.

Key Takeaways

• Zillow ranks Cleveland, Columbus, Milwaukee, Indianapolis, Minneapolis, Detroit, and Kansas City, Mo. as the U.S. metro areas with the lowest climate risk.
• Fewer than 10% of new home listings in these cities face major threats from floods, wildfires, or extreme heat.
• Before making a purchase, check a home’s disaster history and understand insurance requirements to avoid unexpected costs and protect your investment.

Which U.S. Cities Face the Lowest Climate Risk?

New home listings in key Midwest markets hold the lowest climate risk in the country, according to Zillow’s climate risk score, which evaluates how likely a property is to experience climate-related hazards over the next 30 years.

The website evaluated historical weather data involving five climate threats—floods, wildfires, wind, heat, and air quality—and found that while states like California, Florida, and Louisiana see a significant percentage of new listings classified as high-risk, seven Midwest cities remain largely insulated from these threats.

According to Zillow, fewer than 10% of new listings face a major climate-related risk in Cleveland, Columbus, Milwaukee, Indianapolis, Minneapolis, Detroit, and Kansas City, Mo.

These cities fared much better than the national average. Across all new U.S. listings, Zillow found that more than half (55.5%) faced a major risk of extreme heat, and about one-third faced a major risk of extreme wind exposure.

About 16.7%, 13%, and 12.8% of new listings faced major climate risks related to wildfires, air quality, and flooding, respectively.

Unlike many regions where multiple climate threats overlap, the Midwest benefits from natural geographic advantages that mitigate certain risks. Though it remains a hotspot for tornados, the Midwest’s cooler climate and distance from ocean coastlines make it less inclined to experience severe weather events such as heat waves and wildfires.

Why Climate Risk Matters for Homebuyers 

For buyers, climate risks can be costly in unexpected ways. High-risk homes often require additional insurance policies, face stricter lending requirements, and could see fluctuating property values.

Zillow’s research shows that over 80% of prospective homebuyers now factor climate risks into their decision-making, and for good reason. In 2024, only about $140 billion of the $320 billion of losses attributable to natural disasters were covered by insurers—meaning nearly 60% of losses were not.

If you’re considering a move, here’s what to keep in mind:

Do Your Research

Before you buy a home prone to adverse weather events, make sure you’ve done your research to understand the home’s condition and whether any safety upgrades—such as storm panels for flood protection—have been put in place.

A professional home inspection can help reveal issues you may have overlooked, especially in important areas such as drainage systems and the foundation.

Factor in Insurance Costs

Homes in high-risk areas often require flood, wildfire, or wind insurance that adds to your long-term expenses even if your home escapes disaster.

Check with your mortgage lender to see if the home comes with any additional requirements for insurance, and consider options outside of private providers. The Federal Emergency Management Agency, for example, offers flood insurance through the National Flood Insurance Program, and some states also offer special types of insurance.

Consider Property Value

Long-term home value trends are increasingly tied to climate risk.

Historically, homebuyers have prioritized affordability and quality of life, leading to rapid growth in Sun Belt states like Florida and California. But, rising insurance costs and frequent natural disasters in these areas are changing migration patterns, pushing buyers toward regions with more climate stability.

As a result, properties in low-risk areas like the Midwest may see stronger demand and more stable long-term value, while homes in high-risk zones could become more expensive to insure and harder to sell.

Warning

Climate change could wipe out an estimated $1.5 trillion in U.S. home values over the next 30 years, according to climate nonprofit First Street.

The Bottom Line 

Climate risk is reshaping where Americans want to live and what they’re willing to pay for a home. If you’re looking to avoid these risks, Midwest cities like Cleveland, Columbus, and Minneapolis are good options for your new home, according to research from Zillow.

These cities boast a lower exposure to floods, wildfires, and extreme heat than other parts of the country.

While no location is completely risk-free, understanding how climate risks affect insurance, home values, and long-term affordability will help you make a more informed homebuying decision—one that could save you money and give you peace of mind for decades to come.

Reviewed by JeFreda R. Brown

Real estate investment trusts (REITs) own a basket of properties, ranging from malls to movie theaters, apartment buildings to office parks, and hotels to hospitals. A REIT may specialize in a certain real estate sector, or it may diversify into a variety of property types.

Investing in REITs is appealing for several reasons, especially for income-oriented investors. And while there are risks for the REIT market as a whole, over the long term, REITs have proven to be winners. 

Key Takeaways

• REITs provide investors with access to real estate without them having to own property. This brings liquidity, steady income, and growth potential.
• Selecting a successful REIT involves understanding economic trends and market conditions.
• Well-managed REITs stay ahead of trends and invest in high-demand locations, such as urban retail.

What to Look for in a REIT

For retail investors, REITs hold several advantages over investing in real estate itself. First of all, your investment is liquid. You can buy and sell shares of REITs, which trade like stocks on an exchange. Shares of REITs have low investment minimums, as well; investing directly in an actual property often requires a much more sizable commitment.

REITs generate income from the rents and leases of the properties they own. The majority (90%) of a REIT’s taxable income must be returned to shareholders in the form of dividends. As a result, investors often rely on REITs as providers of a steady cash flow, though the shares can also appreciate in value if the real estate holdings do.

When you’re ready to invest in a REIT, look for growth in earnings, which stems from higher revenues (higher occupancy rates and increasing rents), lower costs, and new business opportunities. It’s also imperative that you research the management team that oversees the REIT’s properties. A good management team will have the ability to upgrade the facilities and enhance the services of an underutilized building, increasing demand.

REIT Caveats

It’s important that you don’t think of REITs as an investment asset in themselves. You need to look at industry trends prior to determining what type of REIT is best for your portfolio.

For instance, mall traffic has been declining due to the increased popularity of online shopping and the decline of suburban neighborhoods (this is the first time since the 1920s that urban growth has outpaced suburban growth). So, REITs that are exposed strictly or heavily to malls will present more risk than those investing in other sorts of real estate.

Or take hotels. To invest in a REIT that focuses on them is to invest in the travel industry. While the industry may be doing well at a given moment, hotels have the potential to be hit by reduced business travel as companies look for ways to cut costs, and web conferencing becomes more common.

In terms of general economic trends, low inflation and lack of wage growth—such as the U.S. has experienced in the 2000s—often limit growth potential for REITs, since they put a damper on rent increases. Even so, REITs have been performing well in the face of these headwinds.

Note

Some REITs focus on niche properties, such as manufactured home communities and RV parks, which can perform well in economic downturns and inflationary periods.

A Far-Thinking REIT

The key is to be forward-looking. For example, millennials favor urban living over suburban living, a trend that has led to the aforementioned decline in suburban mall traffic and an increase in street retail (urban shopping strips anchored by a grocery or other major retailer). One REIT spotted the trend early and has set itself up accordingly.

Acadia Realty Trust (AKR) focuses on urban areas with high barriers to entry that are supply-constrained and highly populated. It also takes the approach of not falling in love with one particular retailer, because a popular retailer today might not be a popular retailer tomorrow. Instead, it invests in a street, block, or building, allowing it always to make adjustments so popular retailers are in place.

What Is a REIT?

A real estate investment trust (REIT) is a company that owns and operates income-generating properties, such as offices, hotels, apartment buildings, and shopping centers. Investors looking to gain exposure to the real estate market without having to buy property can buy shares of REITs like they would stock, and in return receive income, which is derived from the rental income of the properties or the profits of the REIT. REITs are required by law to pay out at least 90% of their income to shareholders.

What Are the Disadvantages of REITs?

REITs make investing in real estate fairly easy but do come with some disadvantages. When interest rates rise, their prices tend to drop because investors can get higher returns from safer investments, like bonds. Additionally, when rates rise, borrowing costs are higher, making it more costly for REITs to buy or develop properties, possibly reducing profits. REIT dividends are also taxed as ordinary income as opposed to capital gains, making them slightly tax-inefficient. Lastly, as an investor, you have no control over the properties or management decisions made by the REIT.

How Can I Invest in a REIT?

You can invest in REITs as you would invest in stocks. To invest in a REIT, open a brokerage account, such as Fidelity or E*Trade, fund your account, and select the publicly traded REIT you would like to purchase. You can also choose to invest in REIT mutual funds or exchange-traded funds (ETFs).

The Bottom Line

REITs allow for a hassle-free way of investing in property without needing to own the property. This brings benefits such as low-cost entry, liquidity, steady income, and the potential for growth.

To successfully benefit from REITs, investors need to understand industry trends, the economic climate, and the management quality of the REIT. Certain retail sectors, such as malls and hotels, face higher risks, while urban retail may be more stable. As with any investment, understanding the complexities is essential to making the right long-term bet.

As of the date this article was written, the author does not own AKR.

Reviewed by Samantha Silberstein

In the financial world, the Black-Scholes and the binomial option valuation models are two of the most important concepts in modern financial theory. Both are used to value an option, and each has its own advantages and disadvantages.

Some of the basic advantages of using the binomial model are:

• A multiple-period view
• Transparency
• Ability to incorporate probabilities

Let’s explore the advantages of using the binomial model instead of the Black-Scholes model and provide some basic steps to develop the model and explain how it is used. 

Key Takeaways

• The binomial model provides a multi-period view of the underlying asset price as well as the price of the option.
• The binomial model can also be used for projects or investments with a high degree of uncertainty, resource allocation decisions, and projects with multiple periods.
• While both the Black-Scholes model and the binomial model can be used to value options, the binomial model has a broader range of applications.

Multiple-Period View

The binomial model provides a multi-period view of the underlying asset price as well as the price of the option. In contrast to the Black-Scholes model, which provides a numerical result based on inputs, the binomial model allows for the calculation of the asset and the option for multiple periods along with the range of possible results for each period (see below).

The advantage of this multi-period view is that the user can visualize the change in asset price from period to period and evaluate the option based on decisions made at different points in time. For a U.S-based option, which can be exercised at any time before the expiration date, the binomial model can provide insight as to when exercising the option may be advisable and when it should be held for longer periods. By looking at the binomial tree of values, a trader can determine in advance when a decision on an exercise may occur. If the option has a positive value, there is the possibility of exercise whereas, if the option has a value less than zero, it should be held for longer periods.

Transparency

Closely related to the multi-period review is the ability of the binomial model to provide transparency into the underlying value of the asset and the option as time progresses. The Black-Scholes model has five inputs:

1. The risk-free rate
2. The exercise price
3. The current price of the asset
4. Time to maturity
5. The implied volatility of the asset price

When these data points are entered into a Black-Scholes model, the model calculates a value for the option, but the impacts of these factors are not revealed on a period-to-period basis. With the binomial model, a trader can see the change in the underlying asset price from period to period and the corresponding change in the option price. 

Incorporating Probabilities

The basic method of calculating the binomial options model is to use the same probability each period for success and failure until the option expires. However, a trader can incorporate different probabilities for each period based on new information obtained as time passes.

For example, there may be a 50/50 chance that the underlying asset price can increase or decrease by 30 percent in one period. For the second period, however, the probability that the underlying asset price will increase may grow to 70/30. For example, if an investor is evaluating an oil well, that investor is not sure what the value of that oil well is, but there is a 50/50 chance that the price will go up. If oil prices go up in Period 1 making the oil well more valuable and the market fundamentals now point to continued increases in oil prices, the probability of further appreciation in price may now be 70 percent. The binomial model allows for this flexibility; the Black-Scholes model does not.

Developing the Model

The simplest binomial model will have two expected returns whose probabilities add up to 100 percent. In our example, there are two possible outcomes for the oil well at each point in time. A more complex version could have three or more different outcomes, each of which is given a probability of occurrence.

To calculate the returns per period starting from time zero (now), we must make a determination of the value of the underlying asset one period from now. In this example, we assume the following:

• Price of underlying asset (P) : $500
• Call option exercise price (K) : $600
• Risk-free rate for the period: 1 percent
• Price change each period: 30 percent up or down

The price of the underlying asset is $500 and, in Period 1, it can either be worth $650 or $350. That would be the equivalent of a 30 percent increase or decrease in one period. Since the exercise price of the call options we are holding is $600, if the underlying asset ends up being less than $600, the value of the call option would be zero. On the other hand, if the underlying asset exceeds the exercise price of $600, the value of the call option would be the difference between the price of the underlying asset and the exercise price. The formula for this calculation is [max(P-K),0]. 

$begin{aligned} &max{left[left(P-Kright),0right]}\ \ &textbf{where:}\ &P=text{Price of underlying asset} \ &K=text{Call option exercise price} \ end{aligned}$​max[(P−K),0]where:P=Price of underlying assetK=Call option exercise price​

Assume there is a 50 percent chance of going up and a 50 percent chance of going down. Using the Period 1 values as an example, this is calculated as

$begin{aligned} &max{left[left($650-$600right),0right]}*0.5+max{left[left($ 350-$ 600right),0right]}*0.5\ & = $ 50 * 0.5 + $ 0 = $ 25\ end{aligned}$​max[($650−$600),0]∗0.5+max[($350−$600),0]∗0.5=$50∗0.5+$0=$25​

To get the current value of the call option we need to discount the $25 in Period 1 back to Period 0, which is

$$25/left(1+1$$25/(1+1%)=$24.75

You can now see that if the probabilities are altered, the expected value of the underlying asset will also change. If the probability should be changed, it can also be changed for each subsequent period and does not necessarily have to remain the same throughout.

The binomial model can be extended easily to multiple periods. Although the Black-Scholes model can calculate the result of an extended expiration date, the binomial model extends the decision points to multiple periods.

Uses for the Binomial Model

In addition to its use as a method for calculating the value of an option, the binomial model can also be used for projects or investments with a high degree of uncertainty, capital-budgeting and resource-allocation decisions, and projects with multiple periods or an embedded option to either continue or abandon the project at certain points in time.

One simple example is a project that entails drilling for oil. The uncertainty of this type of project is whether the land being drilled has any oil at all, the amount of oil that can be drilled, if the oil is found, and the price at which the oil can be sold once extracted. 

The binomial option model can assist in making decisions at each point of the oil drilling project. For example, assume we decide to drill, but the oil well will only be profitable if we find enough oil and the price of oil exceeds a certain amount. It will take one full period to determine how much oil we can extract as well as the price of oil at that point in time. After the first period (one year, for example), we can decide based on these two data points whether to continue to drill or abandon the project. These decisions can be continuously made until a point is reached where there is no value to drilling, at which time the well will be abandoned.

The Bottom Line

The binomial model gives a more detailed view by allowing multi-period views of the underlying asset price and the price of the option for multiple periods as well as the range of possible results for each period. While both the Black-Scholes model and the binomial model can be used to value options, the binomial model has a broader range of applications, is more intuitive, and is easier to use.

Fact checked by Suzanne Kvilhaug
Reviewed by Gordon Scott

You may have heard about iron condors, a popular option strategy used by professional money managers and individual investors. Let’s begin by discussing what an iron condor is, and then how you can benefit from learning how to trade them.

Key Takeaways

• An iron condor is an options strategy that involves four different contracts.
• An iron condor represents a ‘market neutral’ trade, which means there is no inherent bullish or bearish bias.
• This options strategy also allows you to own positions with limited risk and a high probability of success.

What Is an Iron Condor?

Some of the key features of the iron condor strategy include:

• An iron condor spread is constructed by selling one call spread and one put spread (same expiration day) on the same underlying instrument.
• All four options are typically out-of-the-money (although it is not a strict requirement).
• The call spread and put spread are of equal width. Thus, if the strike prices of the two call options are 10 points apart, then the two puts should also be 10 points apart. Note that it doesn’t matter how far apart the calls and puts are from each other.
• Most often, the underlying asset is one of the broad-based market indexes, such as SPX, NDX or RUT. But many investors choose to own iron condor positions on individual stocks or smaller indexes.
• When you sell the call and put spreads, you are buying the iron condor. The cash collected represents the maximum profit for the position.
• It represents a ‘market neutral’ trade, meaning there is no inherent bullish or bearish bias.

Iron Condor Positions, Step by Step

To illustrate the necessary components or steps in buying an iron condor, take the following two hypothetical examples:

To buy 10 XYZ Oct 85/95/110/120 iron condors:

• Sell 10 XYZ Oct 110 calls
• Buy 10 XYZ Oct 120 calls
• Sell 10 XYZ Oct 95 puts
• Buy 10 XYZ Oct 85 puts

To buy three ABCD Feb 700/720/820/840 iron condors:

• Sell three ABCD Feb 820 calls
• Buy three ABCD Feb 840 calls
• Sell three ABCD Feb 720 puts
• Buy three ABCD Feb 700 puts

How Do Iron Condors Make/Lose Money?

When you own an iron condor, it’s your hope that the underlying index or security remains in a relatively narrow trading range from the time you open the position until the options expire. When expiration arrives, if all options are out-of-the-money, they expire devoid of worth and you keep every penny (minus commissions) you collected when buying the iron condor. Don’t expect that ideal situation to occur every time, but it will happen.

Sometimes it’s preferable to sacrifice the last few nickels or dimes of potential profit and close the position before expiration arrives. This allows you to lock in a good profit and eliminate the risk of losses. The ability to manage risk is an essential skill for all traders, especially ones employing this strategy.

The markets are not always so accommodating, and the prices of underlying indexes or securities can be volatile. When that happens, the underlying asset (XYZ or ABCD in the previous examples) may undergo a significant price change. Because that’s not good for your position (or pocketbook), there are two important pieces of information you must understand:

• How much you can lose; and
• What you can do when the market misbehaves.

Maximum Loss Potential

When you sell 10-point spreads (as with XYZ), the worst-case scenario occurs when XYZ moves so far that both calls or puts are in the money (XYZ is above 120 or below 85) when expiration arrives. In that scenario, the spread is worth the maximum amount, or 100 times the difference between the strike prices. In this example, that’s 100 x $10 = $1,000.

Because you purchased 10 iron condors, the worst that can happen is that you are forced to pay $10,000 to cover (close) the position. If the stock continues to move further, it won’t affect you further. The fact that you own the 120 call (or 85 put) protects you from further losses because the spread can never be worth more than the difference between the strikes.

Loss Buffer in Premiums

There’s some better news: Remember, you collect a cash premium when buying the position, and that cushions losses. Assume you collect $250 for each iron condor. Subtract that $250 from the $1,000 maximum, and the result represents the most you can lose per iron condor. That’s $750 in this example.

Note: If you continue to hold the position until the options expire, you can only lose money on either the call spread or the put spread; they cannot both be in-the-money at the same time.

Depending on which options (and underlying assets) you choose to buy and sell, a few different circumstances can come about:

• The probability of loss can be reduced, but reward potential is also reduced (choose further out-of-the-money options).
• Reward potential can be increased, but the probability of earning that reward is reduced (choose options that are less far out-of-the-money).
• Finding options that fit your comfort zone may involve a bit of trial and error. Stick with indexes or sectors that you understand very well.

Introduction to Risk Management

The iron condor may be a limited-risk strategy, but that doesn’t mean you should do nothing and watch your money disappear when things don’t go your way. Although it’s important to your long-term success to understand how to manage risk when trading iron condors, a thorough discussion of risk management is beyond the scope of this article.

Just as you don’t always earn the maximum profit when the trade is profitable (because you close before expiration), you often lose less than the maximum when the position moves against you. There are several reasons that this might occur:

• You may decide to close early to prevent larger losses.
• XYZ may reverse direction, allowing you to earn the maximum profit.
• XYZ may not move all the way to 120. If XYZ’s price at expiration (settlement price) is 112, then the 110 call is in-the-money by two points and is worth only $200. When you buy back that option (the other three options expire without worth), you may still have earned a small profit – $50 in this scenario.

Practice Trading in a Paper-Trading Account

If this strategy sounds appealing, consider opening a paper-trading account with your broker, even if you are an experienced trader. The idea is to gain experience without placing any money at risk. Choose two or three different underlying assets, or choose a single one using different expiration months and strike prices. You’ll see how different iron condor positions perform as time passes and markets move.

The major objective of paper trading is to discover whether iron condors suit you and your trading style. It’s important to own positions within your comfort zone. When the risk and reward of a position allow you to be worry-free, that’s ideal. When your comfort zone is violated, it’s time to modify your portfolio to eliminate the positions that concern you.

The Bottom Line

Iron condors allow you to invest in the stock market with a neutral bias, something that many traders find quite comfortable. This options strategy also allows you to own positions with limited risk and a high probability of success.

Fact checked by Vikki Velasquez

The labor market is strong and competitive, with millions actively looking for work. But simply sending out your resume in this tough labor market may not help you stand out. Experts say getting yourself noticed by potential employers requires the development of these much-needed skills while you execute your search.

You should have both soft and hard skills to get noticed, including attention to detail, communication, and strong tech skills.

Key Takeaways

• Millions of people are actively seeking employment, making the job market strong and competitive.
• Employers are focusing on skills-based hiring over traditional qualifications.
• Focus on how you can bring attention to detail, communication skills, the ability to work independently and with a team, and adaptability to potential employers.
• Tech skills are becoming a priority for many employers.
• Know who you are and tailor your resume to the job postings that catch your eye.

Job Hunting in 2025

Job seekers faced many challenges finding work in 2024, due largely to a weak global economy and general labor shortages across the board. Experts suggest this trend is likely to continue in 2025 as employers are still struggling to find and hire professionals.

“Skilled workers remain in high demand as companies ramp up their efforts to secure top talent,” Noelle Stagias, senior director at KForce. Even with high demand, she suggested, the talent pool continues to dog employers.

The ratio of unemployed individuals to job openings was 1 to 0.9, according to the Society for Human Resource Management’s (SHRM’s) January 2025 labor market report. As many as 22% of unemployed professionals carry over their job search from 2024 into 2025, while 28% say they’re giving up because of the tough labor market climate.

With so many challenges, it’s important to set yourself apart to get noticed among other job seekers in a demanding job market. But how do you do that?

Note

If you’re looking for work, you’re not alone. According to the U.S. Bureau of Labor Statistics (BLS), 5.5 million people actively sought employment in the United States in January 2025.

Focus on These Skills

According to research, as many as 95% of hiring employers are prioritizing skills-based hiring over traditional qualifications. That’s why it’s important for anyone looking for a new position to focus on soft and hard skills.

“There are a few key skills that companies in every industry are looking for: attention to detail, strong communication, ability to work both independently and in a team, and being coachable and adaptable,” according to Stagias. “These skills have always been desirable, and they stand out even more in the hybrid and remote world. Companies want employees who are proactive and can hit the ground running.”

With the rise in artificial intelligence (AI) and technology, it’s also a good idea to bring strong tech skills to the table. Be sure you’re prepared with knowledge of a new program if a job posting calls for it. Not only does it show employers that you’re willing to learn new programs, but it also demonstrates that you’re willing to adapt.

Stagias, who focuses on recruiting in finance and accounting, said hiring managers look for candidates who “present themselves as well-rounded, committed, and adaptable” and prove they can grow with the company. Review your resume to make sure it fits with the jobs you’re applying to so you can speak about it “in detail and bring (your) experience to life in an interview.”

Important

Don’t forget to start your job search by knowing who you are as a professional. Understand what you bring to a potential employer, and look for positions that match your skill set.

10 Fastest-Growing Occupations and How Much They Earn

The U.S. Bureau of Labor Statistics tracks employment by sector, and by 2033, they predict these industries will have the highest employee demand. That’s contrasted with their current median annual wage. The jobs list is dominated by medical and technology fields.

1. Home health and personal care aides: $33,530 per year
2. Software developers: $132,270 per year
3. Medical and health services managers: $110,680 per year
4. Nurse practitioners: $126,260 per year
5. Computer and information systems managers: $169,510 per year
6. Substance abuse, behavioral disorder, and mental health counselors: $53,710 per year
7. Industrial machinery mechanics: $61,420 per year
8. Data scientists: $108,020 per year
9. Information security analysts: $120,360 per year
10. Personal financial advisors: $99,580 per year

The Bottom Line

Despite the high demand for skilled workers, companies aren’t hiring just anyone. If you don’t have the skills they’re looking for, your job search could be for naught. Focusing on your soft and hard skills and tailoring your resume to the positions you’re applying to can help you get noticed.

Although your skills will set you apart from the pack, Stagias also says employers still want to see the “tried and true measures”. Notably, you bring a strong job history and demonstrate how you’ve taken on responsibility over time.

Reviewed by Khadija Khartit

How Do BitTorrent Sites Make Money?

BitTorrent sites act as hubs where internet visitors download, share, and search for torrent files. A torrent file is the colloquial name for a peer-to-peer computer tracker to share large digital files, sometimes known as metadata files. BitTorrent sites primarily stream TV shows, movies, music, and other media data.

File hosts can make money through advertising revenue generated by the site. Others can make money by distributing malware. Most uploaders do not make any money.

Key Takeaways

• BitTorrent sites don’t generally make much money, but when they do, it is often in the form of ad revenue.
• Some malware uploaders who prey on the BitTorrent-seeking public may make significant income.
• BitTorrent sites tend to operate at a net loss, and many even need donations to stay in business.

Understanding How BitTorrent Sites Make Money

Not Much Money

Most BitTorrent sites do not make much money. Despite some claims by bombastic uploaders—Kim Dotcom famously showed expensive luxury cars and houses when boasting about torrent income—there is very little evidence that BitTorrent websites produce much income.

One study found that really good BitTorrent plugging can generate up to $200 per day for a website. The study further found that a very small percentage of users generated roughly 66% of content on such sites.

Types of Torrent Uploaders

The vast majority of files shared through BitTorrent sites are done out of communal altruism. For example, a listener who really enjoys a song may decide to share it as an experience for others. Other data may be uploaded to gauge public reaction. This type of file share still brings in advertising revenue to the website, but those individual contributors do not see any revenue.

Malware—the combination of viruses and adware or spam—is rampant on BitTorrent sites. Malware is primarily designed to promote piracy, identify theft, forced cryptocurrency mining, and illicit online material, such as pornography. These few individuals who distribute malware are sometimes well-compensated for their efforts, although that is not the purpose of a BitTorrent site.

A small subset of uploaders, similar to malware distributors, upload fake movies or CDs hoping to receive codec fees before getting caught. Again, these are a minority of uploaders.

Most of the moneymakers upload or establish websites and own the content that generates ad revenue. This is not normally a big income earner, but major websites with thousands of files can generate a lot of clicks. The income is based on click-through rates and site visits.

Advertising Revenue

The ultimate driver of BitTorrent income is advertising revenue, just as with the vast majority of for-profit web 2.0 sites. Another finding of the aforementioned study found that the advertising revenue for BitTorrents tends to be modest and often produces a net loss compared with hosting costs, which is why even some relatively major BitTorrent sites rely on donation drives for some portion of their revenue.

On the whole, torrent websites are generally not established to produce large amounts of money; rather, these are forums for peers to share information and media with an online community.

What Is the Most Popular BitTorrent Site?

The world’s most popular site that uses BitTorrent protocol is The Pirate Bay. The Pirate Bay is a file-sharing website that allows the distribution of very large files such as those containing movies and electronic games. It has been shut down several times, and its founders have been tried and convicted in Sweden on charges of promoting copyright infringement. However, the site is still active as of 2025.

How Much Is BitTorrent Worth?

BitTorrent’s market capitalization was estimated at around $1.18 billion in November 2024. While BitTorrent is traditionally considered a large player in the file-sharing market, its market cap also has to do with entering the cryptocurrency market.

When Did BitTorrent Branch into Cryptocurrency?

In 2018, the nonprofit Tron Foundation (now the Tron Decentralized Autonomous Organization) purchased BitTorrent. Ownership introduced a BitTorrent token cryptocurrency, BTT, in 2019 with the goal of expanding its protocol and incentivizing network participants. Tron also has its own native token, TRX.

The Bottom Line

Most BitTorrent sites make money through advertising revenue, while others profit by distributing malware, and some may even seek donations.

While the BitTorrent file-sharing protocol and software are usually free of malware and viruses, the files shared may not be. Always download from trustworthy sources, and use reliable antivirus software to scan downloaded files for potential threats. One final note of caution: Although BitTorrent itself is legal, using it to share copyrighted material is not.

Reviewed by Julius Mansa

Initial public offerings (IPOs) have become one of the most exciting events on Wall Street after the dot-com heyday created more paper millionaires than at any other time in history. Even though IPOs continue, many small investors are instead beginning to discover the vast opportunities available in delistings, which are the opposite type of transaction.

Key Takeaways

• Delistings offer vast opportunities for small investors.
• Companies voluntarily delist their stock from stock exchanges to privatize or move to over-the-counter (OTC) markets, or an exchange forces a company to delist itself because it fails to meet the exchange’s listing requirements.
• Reasons for delisting can include capital savings, a strategic move, or regulatory concerns.
• The best profit opportunities are found in companies that voluntarily delist to go private and cash out their shareholders.
• Investors can find delisting opportunities in filings on the Securities and Exchange Commission’s EDGAR database.

How Do Delistings Work?

Delistings occur when companies decide to delist their stock from stock exchanges in a move to privatize or simply move to the over-the-counter (OTC) markets.

This process occurs in one of two ways:

1. Voluntary Delistings: These occur when a company decides that it would like to purchase all of its shares or move to an OTC market while in full compliance with the exchanges. Usually, these are the types of delistings that investors should carefully watch.
2. Forced Delistings: These occur when a company is forced to delist itself from an exchange because it fails to meet the listing requirements mandated by the exchange. Typically, companies are notified 30 days before being delisted. Share prices may plunge as a result.

Advantages and Disadvantages of Voluntary Delisting

Companies may decide to deregister for a variety of reasons that can be either good or bad for shareholders.

A few of the most common reasons include:

• Capital Savings: The costs of being a publicly traded company are substantial and are occasionally difficult to justify with a low market capitalization, especially after Sarbanes-Oxley laws called for increased disclosures. As a result, deregistering can save a company millions and reward shareholders with a higher net income and earnings per share (EPS).
• Strategic Move: Company shares may be trading below intrinsic value, compelling the company to acquire its own shares as a strategic move. This typically results in shareholders being rewarded with substantial returns over the short term.
• Regulatory Concerns: Stock exchanges such as Nasdaq and the New York Stock Exchange (NYSE) have minimum requirements for companies to remain listed. If a company does not meet those requirements, it may be forced to delist itself. Causes for delisting may include failure to file timely financial reports, lower-than-required stock price, or insufficient market capitalization. In the end, companies can have a clear bottom-line incentive for delisting their stock from public exchanges—it’s not necessarily a bad thing!

How to Profit from Delistings

Delistings may make sense for companies, but how can the average investor take advantage of the situation? Well, the best opportunities are found in companies that voluntarily delist to go private and cash out their shareholders. Typically, this is because management is confident that the company is undervalued or could save substantial money by operating as a private enterprise. These efforts to cash out shareholders can often yield substantial returns to investors willing to do a little homework.

The key to this strategy is finding instances where tiny companies are trying to “cheat” the U.S. Securities and Exchange Commission (SEC). The SEC mandates that companies file paperwork if they choose to go private, but can avoid the extra efforts if they have fewer than 300 shareholders. Consequently, small companies often issue large reverse stock splits to reduce their number of shareholders and pay off the remaining shareholders holding less than that amount with cash compensation.

Fortunately, many institutional investors avoid these stocks due to the lack of liquidity and risk associated with these deals. However, small shareholders can often net a handsome profit from the strategy.

For example, let’s say company XYZ issued a 600:1 reverse stock split and then repurchased its shares at $5. Incredibly, shares traded at $4.24, well below the repurchase price after the stock split. This occurred despite the plan to privatize, which was being considered as a result of the stock’s lack of liquidity and the fact that it wasn’t covered heavily by any institutions. Not many individual investors would turn down nearly 18% gains in a matter of weeks!

Shareholders may also find other opportunities in obscure payoffs offered in privatization deals. Sometimes, companies will offer rights offerings, warrants, bonds, convertible securities, or preferred stock to entice shareholders to tender their shares in a move to privatize. Unfortunately, many of these offers are restricted to larger shareholders who are able to bargain more effectively.

Finding Opportunities

All significant corporate events must be recorded in filings with the SEC. As a result, investors can quickly find delisting opportunities in SEC filings that are publicly available through SEC’s EDGAR (Electronic Data Gathering, Analysis, and Retrieval) database.

Delistings are found in three types of SEC filings:

• 8-K Current Events: 8-K filings tell investors when and why the company is delisting and are often the first public notification of such intent. This includes the initial announcements of stock splits, which may be a precursor to privatization in smaller companies.
• Schedule 14A Proxy Statements: Proxy statements enable shareholders to vote on whether to go through with delisting (if it is voluntary). This usually occurs during a going-private transaction and may also be the first public notification of such intent.
• S-1/F-1 Registration Statements: These filings detail any new securities being issued as a result of delisting, which may include preferred stock, bonds, warrants, or securities in the private company being formed as a result.

What Is Delisting?

Delisting is the removal of a listed security from a stock exchange. The delisting of a security can be voluntary or involuntary and usually results when a company ceases operations, declares bankruptcy, merges, does not meet listing requirements, or seeks to become private.

Do the U.S. Stock Exchanges Publish Pending Delistings?

Yes. Nasdaq publishes a list of pending suspensions or delistings, and the New York Stock Exchange (NYSE) publishes a list of pending delistings.

How Can an S&P 500 Delisting Differ from Other Exchanges?

The S&P 500 Index is a market-capitalization-weighted index of 500 leading publicly traded companies in the United States. While companies can be voluntarily or involuntarily delisted for the same reasons discussed above, the index also adapts to changes in the market by adding companies that better reflect the economic landscape and removing those that no longer meet the criteria. This is to maintain the S&P 500’s status of representing the largest and most influential companies in the U.S. economy.

The Bottom Line

In the end, delistings can provide profitable investment opportunities or lose major money for shareholders. Everything depends on the motivations behind the privatization, the size of the company, and the terms of the offer.

Investors willing to put in the time and effort to find and research opportunities may uncover some gems for their portfolios that can perform extremely well in the short term.

Fact checked by Katharine Beer
Reviewed by Thomas Brock

As a financial advisor, it is your fiduciary responsibility to keep an eye on your client’s investments and be on the lookout for investments that might fail. Learn how to determine if a company is on the verge of bankruptcy or headed for some serious financial difficulties. It’s also a snap to learn how to analyze earnings as well.

Key Takeaways

• Financial specialists place a close eye on a company’s income and cash flows for signs of financial trouble.
• A company that consistently spends more than it brings in, or pays a large share of its income to service debt, could be in financial trouble.
• A sudden change in management or auditing firms could also hint at financial difficulty.

Dwindling Cash or Losses

Companies that lose money quarter after quarter burn through their cash fast. Be sure to review the company’s balance sheet and its cash flow statement to determine how the cash is being spent. Also, compare the current cash flows and cash holdings with the same period in the prior year to determine if there’s a trend.

If the company is burning through cash because of increases in investing activities, it might mean the company is investing in its future. However, if on the cash flow statement, the company is consuming cash in its operating activities as shown by a negative cash from operations, it might be a concern. Also, watch for large increases in cash because the company has sold long term assets which are reflected as cash inflows from investing activities. If they have done this, they have sold a revenue generating asset for short-term cash injections, but future cash flows may be weaker.

Companies should also have retained earnings, which is the money left over after earning a profit for a period. Effectively, RE is the savings account for corporations that accumulate profits over time to be used to reinvest back into the company, issue dividends, or buy back stock. If RE is not increasing or nonexistent, in the absence of dividends and buybacks, the company is either not profitable or barely getting by.

Important

The U.S. WARN Act requires companies of 100 or more employees to file a public notice 60 days before any mass layoff that affects 50 or more workers.

Interest Payments in Question

A company’s income statement will show what it pays to service its debt. Can the company keep losing money and still have enough left to make interest payments? Do the current revenue increases generate enough income to service the company’s debt?

There are metrics and ratios that measure a company’s ability to cover its debt obligations.

The interest coverage ratio, for instance, indicates how well a company’s earnings can cover its interest expenses. Analysts typically look for a ratio greater than 1.5x.

The current ratio (or cash ratio) is another calculation that aids in determining a company’s ability to pay short-term debt obligations. It is calculated by dividing current assets by current liabilities. A ratio higher than one indicates that a company will have a high chance of being able to pay off its debt, whereas, a ratio of less than one indicates that a company will not be able to pay off its debt. The acid-test ratio can also be used, the difference being its exclusion of inventory and prepaid accounts from current assets.

Switching Auditors

All public companies must have their books audited by an outside accounting firm. And while it is not uncommon for companies to switch firms from time to time, abrupt dismissal of an auditor or accounting firm for no apparent reason should raise red flags. It is usually a sign that there is a disagreement over how to book revenue or conflict with members of the management team. Neither is a good sign.

Also, review the auditor’s report which is included in the company’s annual report (the 10-K). Auditors are required to provide a report which concludes whether the information was presented fairly, and accurately describes the company’s financial status, at least to the best of their knowledge. However, if an auditor questions whether the company has the ability to continue “as a going concern” or notes some other discrepancy in accounting practices, specifically how it books revenue, that should also serve as a serious warning sign.

Dividend Cut

Companies that reduce, or eliminate, their dividend payments to shareholders are not necessarily on the verge of bankruptcy. However, when companies go through tough times, dividends are usually one of the first items to go. Management is not likely to cut a dividend unless it’s absolutely necessary since any cut is likely to send the company’s stock price down significantly. As a result, view any dividend cuts or the elimination of a dividend as a sign that difficult times lie ahead.

It’s important to consider other supporting evidence in determining whether a dividend cut is signaling dark times for a company. Namely, watch for declining or variable profitability, the dividend yield when compared to other companies in the same industry, and negative free cash flow. Wise investors are also cautious; make sure that your dividend is not at risk.

Important

Companies that trade on the stock market are required to publish information on their revenues, cash flows, and assets, and liabilities. These disclosures can help determine if the company is in financial trouble.

Top Management Defections

Typically, when things are heading seriously downhill for a company, senior members of the management team leave to take a job at a different company. In the meantime, current employees with less seniority will take the senior executives’ places. If management defections are steady, it’s seldom good news.

Big Insider Selling

The smart money investors, meaning institutional and executive holders of the stock, typically dump their shares ahead of a bankruptcy filing or really difficult times. Be on the lookout for insider selling.

However, during the normal course of business, some insiders may sell the stock from time to time. Essentially, you should pay attention to unusually large or frequent transactions, particularly those that occur in or around the time negative news is released.

Selling Flagship Products

If you were going through some tough times, you would probably tap your savings. And when you went through that, you would probably consider selling some of your assets to raise money. But you wouldn’t sell your personal mementos unless you had to. Well, the same logic applies to a company. So, if you see the company selling off a major division or product line in order to raise cash, watch out!

Cuts in Perks

Companies will seek to make deep cuts in their health benefits, pension plans, or other perks during difficult times. Deep and sudden cuts, particularly when they take place in conjunction with any of the other above-mentioned issues are a sign that trouble may lie ahead.

What Are the Warning Signs of a Corporate Bankruptcy?

There are several metrics you can watch to determine if a company may be headed towards bankruptcy. One of the most important is the current ratio—the value of the company’s assets compared to its liabilities. Debt levels and cash flows are also important signals, since a high debt level may make it difficult for the company to grow over time. If a company repeatedly fails to meet its debt or other financial obligations, it may be facing serious cash flow constraints.

What Are the Warning Signs of a Layoff?

Companies typically lay off workers when they expect a downturn or a cash crunch. They may also conduct layoffs to eliminate redundancies after an acquisition, or due to offshoring. At the level of individual workers, a sudden change in responsibilities or oversight could be a sign that management is preparing to lay off some employees. If a U.S. company has more than 100 employees, it must file a public notice 60 days before performing any mass layoff.

What Do You Do If You Get Laid Off?

The first thing to do after a layoff is to learn your rights. Check your employee handbook and contract (if you have one) to see if there are any required procedures for termination, including the payment of sick leave and time off. Your company may ask you to sign some paperwork—do not sign unless you have a clear understanding of your rights. Companies may sometimes ask for a non-disclosure agreement as an incentive for a severance payment, but they cannot require it, or withhold final payment for any reason. Finally, the last thing to do after a layoff is to file for unemployment.

The Bottom Line

It is not uncommon for companies to hit bumps in the road and have to tighten their belts. However, if a company is tightening that belt excessively, or if more than one of the above scenarios occurs, beware. Watch for these items to be in a news release or the annual prospectus.