In the Money? ITM Binaries and the Best Time To Trade Them

In a previous article, it was covered what an At The Money (ATM) binary is, it’s advantages and disadvantages, and when the best times are to trade it. In this article, we will cover what it means for a binary to be In the Money, (ITM) and the best time to trade an ITM binary. Learning and understanding the moneyness of binaries can help you better choose the right priced binary for your trading system. The better you understand the rules of your system, and more importantly, why they are the rules, the better you will choose the right binary for your trade.

When you trade a binary option you are answering a yes or no statement. For example, the binary US 500 (Sep) >1953.0 (4:15PM) is asking, “Will the underlying market Emini S&P 500 be above 1953.0 at 4:15PM?” If you buy the binary, you are saying “Yes, it will be”, and if you sell it you are saying, “No, its going to be at 1953.0 or below 1953.0 at 4:15PM.”

With an ITM binary, the underlying market is already above that strike. It’s already above 1953.0. Therefore, not only are you paying for time value, like an ATM binary has, you are also paying for intrinsic value. For example, if you bought a Nadex binary ITM for $70, it’s higher priced than an ATM binary which would be around $50. It’s higher priced, because the market is already above the strike and now has a higher probability that it will expire ITM. To give you an idea of what that $70 represents, the first $50 is time premium and the next $20 is the real value of the binary, or the intrinsic value. If it were only $50, it wouldn’t be an ITM binary; it would be an ATM binary worth around $50 of time value.

Your probability percentage goes up with ITM binaries.

Obviously, this is an advantage as it is already ITM so the market doesn’t have to move for the binary to become profitable. It can stay where it is, or even move against your trade slightly and still be profitable. The only thing needed to profit is time decay or time to go by, and for the underlying market to remain ITM, above the strike, or to continue to move up in your favor. ITM binary option prices typically move slower; slower to your profit target but also slower moving should it go against your trade, which makes managing risk less challenging than an ATM priced binary.

You can control that risk with exiting early at any time to manage loss. This is possible with Nadex binaries which is unlike any international binary brokers where it’s not possible to exit early.

Nadex allows you to enter and exit at any time as long as there is a buyer or seller for the other side. Nadex binaries are worth $100. You can see on the buy and sell trade tickets below, when buying, the ask or offer amount (right side of the trade ticket) is what you pay to enter the trade and that is your total possible risk. The difference between your entry price and $100 is your total possible profit.

When you sell, the bid amount (left side) for the binary becomes your possible profit, and the difference between $100 and the bid price is your total possible loss as well as the amount you pay to enter the trade. On the Apex Binary Scanner, you can see that same strike with the profit and loss possibilities. The market has moved a little since the screenshots of the tickets, but with the binary scanner you are able to easily compare all of the binaries for that expiration and their possible risk/reward.

To view image click HERE

If the advantage of being ITM is higher probability, then the disadvantage is the higher price that comes with it. With the higher price, the profit potential becomes more limited. However, you should be taking profits anyway.

In addition, since it’s already ITM, typically price will move slower, thereby moving slower to your profit target. Paying more to enter the trade means you take on more total risk than an ATM or an Out of the Money, (OTM) binary. As mentioned before though, you can exit at any time and limit this risk, making the payout more than reasonable with Nadex.

You can learn how to not take a full loss, using the Apex Binary Scanner and other tools provided by Apex Investing. That way you can still keep your risk reward ratio to a 1:1.

For example, if you buy an ITM binary for $70 and you have a take profit set for $25, taking profit when the price reaches $95, you also need an exit strategy, in case the price moves against you. Since you know the price will be around $50 when the underlying reaches the strike, you can plan to exit if the Nadex indicative reaches the strike.

Then you are exiting at or close to $50 with around a $20 loss. That’s giving you a trade with a 70% probability of expiring ITM, and you still have a 1:1 risk reward ratio or a little better than 1:1! All this is possible with Nadex binaries and utilizing some of Apex Investing’s tools.

Going back to really knowing and understanding the “why” of your rules for your strategy, consider what you anticipate the market is going to do. If you are buying or selling a binary and you think the market has made its expected move, and there isn’t too much time left to decay until expiration, then an ITM binary would be a good choice.

It’s higher probability already being ITM, there isn’t a whole lot of time left for the market to move, but you won’t need it to; your binary is already ITM.

To learn more about how to trade binary options in-depth and for binary options signals, trading strategies, tools and trade rooms see ApexInvesting.com.

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: apexin

Axel Merk: Time to Take ‘Chips Off the Table’

Inflated asset prices, investor complacency and brewing crisis that could trip up the current happy equilibrium are the backdrop for Axel Merk’s warning that it is time for investors to start “taking chips off the table.”

But the key difficulty for the Merk Investments founder and portfolio manager in his latest investment analysis is where to hide in an environment in which “instability may be the new normal.”

To answer that question, Merk first locates tracks the market’s current state as one of complacency — which is the third of three states in a market crisis.

Typically, he says, equity markets sell off in a crisis; as that crisis evolves, markets tend to differentiate: For example, when Cyprus blew up, Spanish bonds were undisturbed. In the third and current stage of a crisis, risk seems manageable.

“When a Portuguese company didn’t pay its loans on time, the markets barely blinked,” Merk writes.

It is at this stage that pundits typically advise not to sell but rather to buy the dips.

And this approach is vindicated by central bank easy-money policies that have the effect of compressing risk premiums.

European Central Bank chief “Mario Draghi has promised to do ‘whatever it takes.’ So why shouldn’t investors chase yields in the weaker Eurozone countries?” Merk asks.

The currency portfolio manager similarly critiques Fed chair Janet Yellen, whom he assesses as having “all but promised … to be late in raising rates.” What’s more, he thinks any nominal rate increases will be meaningless, because of inflation, such that he expects real rates to remain the same.

The trouble lurking in this low rate, high complacency environment is the danger that risk premia will suddenly and unexpectedly rise.

And while the source of this shift could be as subtle as a change of perception (“the glass is suddenly half empty”) or a result of the Fed seeking to engineer an exit, Merk devotes much of his analysis to growing social and geopolitical disorder.

In the social sphere, central bank easy-money policies are destroying society’s social fabric because asset holders are benefiting disproportionately, thus enlarging the wealth gap.

“I would argue policies of the Fed have a far greater impact on wealth distribution than the policies of Republicans or Democrats,” writes Merk. “Those that know how to deal with easy money, such as hedge funds, can do great in this environment; however, those that don’t know how to deal with debt easily fall through the cracks, unable to recover.”

The result is a deep erosion in purchasing power that fuels populist movements such as the Tea Party and Occupy Wall Street; Japanese Prime Minister Shinzo Abe’s populist policies; uprisings in the Middle East; and the ascendency of populist parties in Europe of late.

In this light, Ukraine’s essential problem is its inability to balance its books, thus turning initially to Russia and now to the European Union for subsidies.

Noting that World War II was preceded by the Great Depression, Merk says that “the aftermath of a credit bust is a fertile environment for the sort of dynamics that can lead to armed conflict. Russia has an interest in an unstable Ukraine; Japan might ramp up military spending to boost domestic growth, to name but two sources of instability.”

While not predicting World War III, Merk continues that “the U.S., a superpower no longer able to finance all of its commitments, is not exactly a source of stability, either: the biggest threat to U.S. national security may not be China or Russia, it’s the national debt.”

Merk is pessimistic about the possibility of dealing with the debt through entitlement reform in an environment of rising populism, for which reason he is convinced that real rates will have to remain low lest U.S. debt servicing costs rise by $1 trillion or more a year with a rise in rates.

So with asset prices at or near record levels and volatility at record lows, combined with rising world and domestic instability, investors should try to steer their portfolios away from risk.

Merk thinks bonds will be among the worst performers in the coming decade, and besides, are too risky to short because of the requirement to pay interest; he does not see the dollar as a safe haven with real interest rates in negative territory; and buying equities now means coming “late to the party.”

Investing in gold makes sense, he says, “as low to negative real interest rates may make the shiny metal that pays no interest (but cannot be easily ‘printed’) a formidable asset.”

Investors might also “diversify to baskets of currerncies” and “possibly be tactical in an effort to stay a step ahead as currency wars may be raging.” 

---

Related on ThinkAdvisor:

Ladenburg Thalmann Financial Services (NYSEMKT:LTS): Heavy, Durable Insider Buying

Insider buying sagged last week with just 46 companies reporting records of buyers. Considering all the worry about trading near a top, it's not surprising to see boardroom buyers back off the buying.

Ahh, but any worries over price levels didn't stop multiple insiders at Ladenburg Thalmann Financial Services (NYSEMKT:LTS) from continuing their buying spree. For the last two years, insiders have been gobbling up shares of the broker.

Ladenburg Thalmann Financial Services provides brokerage and advisory, investment banking, equity research, institutional sales and trading, asset management, and trust services. The company operates through two segments, Independent Brokerage and Advisory Services, and Ladenburg.

[Related -Top Insider Buy Stocks: OPK, LTS, NTS, ZTR]

Since March 2013, LTS insider bought 3.157 million shares of Ladenburg Thalmann, starting at $1.38. They have been buying ever since, despite the price more than doubling.

The latest wave has two directors, Phillip Frost, Md. and Saul Gilinski buy a combined 530,085 shares for a total investment of $1,841,200 (dollar cost average of $3.47) since the start of July.

Both men have been accumulating the stock. Gilinski added 396,474 shares to his portfolio since March 2013, staring at $1.63. Meanwhile, Frost has been at it for almost two years, purchasing a whopping 2.03 million shares since August 2012. He began buying at $1.37.

Apparently, these gentlemen believe in the merits of LTS.

[Related -3 Stocks With Heavy Insider Buying In November]

Perhaps, being undervalued versus its peers is why the pair continues to support Ladenburg Thalmann shares. The average broker trades at 2.41 times sales while LTS' price-to-sales (P/S) ratio stands at 0.91, which is the financial company's five-year average.

For 2015, analysts forecast revenue growth of 5.5% to $909.29 million. If Wall Street values LTS at its half-decade norm of 0.91 sales, then shares would lift by 5.5%. That's easy math right?

However, prior to April 2012, the broker tended to trade between 1 and 1.25 times sales. The current trend line is headed in that direction, again. With a P/S ratio of 1, Ladenburg Thalmann would trade at five bucks on the dot, using 2015's consensus revenue estimate.

Overall: The P/S trend for Ladenburg Thalmann Financial Services (NYSEMKT:LTS) suggests that LTS could get back to trading at one times sales in the next year or so. If that's the case, Frost, Gilinski and shareholders stand to make 42.86% from here should the stock hit $5. 

3 Stocks Rising on Big Volume

DELAFIELD, Wis. (Stockpickr) -- Professional traders running mutual funds and hedge funds don't just look at a stock's price moves; they also track big changes in volume activity. Often when above-average volume moves into an equity, it precedes a large spike in volatility.

 

 

Major moves in volume can signal unusual activity, such as insider buying or selling -- or buying or selling by "superinvestors."

 

Unusual volume can also be a major signal that hedge funds and momentum traders are piling into a stock ahead of a catalyst. These types of traders like to get in well before a large spike, so it's always a smart move to monitor unusual volume. That said, remember to combine trend and price action with unusual volume. Put them all together to help you decipher the next big trend for any stock.

 

 

With that in mind, let's take a look at several stocks rising on unusual volume recently.

 

Anacor Pharmaceuticals

 

Anacor Pharmaceuticals (ANAC), a biopharmaceutical company, focuses on discovering, developing and commercializing novel small-molecule therapeutics derived from its boron chemistry platform. This stock closed up 6.6% to $16.90 in Monday's trading session.

 

Monday's Volume: 2.22 million

Three-Month Average Volume: 425,667

Volume % Change: 412%

 

From a technical perspective, ANAC gapped sharply higher here back above both its 50-day moving average of $15.97 and its 200-day moving average of $16.50 with monster upside volume. This stock recently formed a double bottom chart pattern at $14.95 to $15.11. Since tagging that bottom, shares of ANAC have started to rip higher and move within range of triggering a big breakout trade. That trade will hit if ANAC manages to take out Monday's intraday high of $17.03 to $17.62 and then once it clears more near-term overhead resistance at $18.73 with high volume.

 

Traders should now look for long-biased trades in ANAC as long as it's trending above Monday's intraday low of $16.15 and then once it sustains a move or close above those breakout levels with volume that hits near or above 425,667 shares. If that breakout kicks off soon, then ANAC will set up to re-test or possibly take out its next major overhead resistance levels at $21.27 to $23.07.

 

Imax

 

Imax (IMAX), together with its subsidiaries, operates as an entertainment technology company specializing in motion picture technologies and presentations worldwide. This stock closed up 2.8% at $25.31 in Monday's trading session.

 

Monday's Volume: 916,000

Three-Month Average Volume: 494,841

Volume % Change: 84%

 

From a technical perspective, Imax gapped notably higher here with above-above volume. This stock has been downtrending for the last few weeks, with shares moving lower from its high of $26.68 to its recent 52-week low of $24.01. During that move, shares of IMAX have been consistently making lower highs and lower lows, which is bearish technical price action. That move pushed shares of IMAX into oversold territory, since its relative strength index reading recently dipped below 30. That said, shares of IMAX are now starting to bounce off its 52-week low and off oversold levels with strong upside volume.

 

Traders should now look for long-biased trades in IMAX as long as it's trending above Monday's intraday low of $24.85 or above its 52-week low of $24.01 and then once it sustains a move or close above Monday's intraday high of $25.44 to around $26 with volume that this near or above 494,841 shares. If that move starts soon, then IMAX will set up to re-test or possibly take out its next major overhead resistance levels at its 50-day moving average of $26.48 to its 200-day moving average of $27.51, or even $28 to around $29.

 

Cameco

 

Cameco (CCJ) produces and sells uranium worldwide. This stock closed up 4.2% at $21.28 in Monday's trading session.

 

Monday's Volume: 4.89 million

Three-Month Average Volume: 1.70 million

Volume % Change: 160%

 

From a technical perspective, CCJ trended sharply higher here back above its 200-day moving average of $20.60 with strong upside volume. This stock recently broke out above some near-term overhead resistance levels at $20.10 to $20.18 with strong upside volume flows. Market players should now look for a continuation move to the upside in the short-term if CCJ manages to clear Monday's intraday high of $21.29 with high volume.

 

Traders should now look for long-biased trades in CCJ as long as it's trending above Monday's low of $20.40 or above its 50-day moving average of $19.63 and then once it sustains a move or close above $21.29 with volume that hits near or above 1.70 million shares. If we get that move soon, then CCJ will set up to re-test or possibly take out its next major overhead resistance levels at $23.48 to $24.85, or even $25.59.

 

To see more stocks rising on unusual volume, check out the Stocks Rising on Unusual Volume portfolio on Stockpickr.

 

-- Written by Roberto Pedone in Delafield, Wis.

 

RELATED LINKS:

 

>>4 Hot Stocks to Trade (or Not)

 

>>5 Stocks Ready for Breakouts

 

>>5 Stocks Ready to Pay You More

 

Follow Stockpickr on Twitter and become a fan on Facebook.

 

At the time of publication, author had no positions in stocks mentioned.

 

Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.

5 Stock Under $10 Making Big Moves

DELAFIELD, Wis. (Stockpickr) -- At Stockpickr, we track daily portfolios of stocks that are the biggest percentage gainers and the biggest percentage losers.

>>5 Stocks Set to Soar on Bullish Earnings

Stocks that are making large moves such as these are favorites among short-term traders because they can jump into these names and try to capture some of that massive volatility. Stocks that are making big-percentage moves either up or down are usually in play because their sector is becoming attractive or they have a major fundamental catalyst such as a recent earnings release. Sometimes stocks making big moves have been hit with an analyst upgrade or an analyst downgrade.

Regardless of the reason behind it, when a stock makes a large-percentage move, it is often just the start of a new major trend -- a trend that can lead to huge profits. If you time your trade correctly, combining technical indicators with fundamental trends, discipline and sound money management, you will be well on your way to investment success.

>>5 Rocket Stocks to Buy for Summer Gains

With that in mind, let's take a closer look at a several stocks under $10 that are making large moves to the upside.

Wave Systems

Wave Systems (WAVX) develops, produces and markets products for hardware-based digital security in the U.S. and internationally. This stock closed up 5.4% to $1.56 in Tuesday's trading session.

Tuesday's Range: $1.46-$1.62

52-Week Range: $0.69-$2.32

Tuesday's Volume: 2.45 million

Three-Month Average Volume: 1.54 million

From a technical perspective, WAVX ripped sharply higher here right above some near-term support at around $1.40 with strong upside volume flows. This stock recently broke out to the upside of its recent range, which saw the stock trend between $1.35 on the downside and right around $1.50 on the upside. Market players should now look for a continuation move to the upside in the short-term if WAVX manages to take out Tuesday's intraday high of $1.62 to some more near-term overhead resistance at $1.63 with high volume.

Traders should now look for long-biased trades in WAVX as long as it's trending above Tuesday's intraday low of $1.46 or above more support at $1.35 and then once it sustains a move or close above $1.62 to $1.63 with volume that hits near or above 1.54 million shares. If that move gets started soon, then WAVX will set up to re-test or possibly take out its next major overhead resistance level at $1.90. Any high-volume move above $1.90 will then give WAVX a chance to re-fill some of its previous gap-down-day zone from June that started at $2.30.

Whiting USA Trust I

Whiting USA Trust I (WHX), a REIT, closed up 1.3% to $2.22 in Tuesday's trading session.

Tuesday's Range: $2.19-$2.22

52-Week Range: $1.72-$6.33

Tuesday's Volume: 135,000

Three-Month Average Volume: 292,545

From a technical perspective, WHX trended modestly higher here right above its 50-day moving average of $2.12 with lighter-than-average volume. This stock has been trending sideways and consolidating for the last month, with shares moving between $1.95 on the downside and $2.25 on the upside. Shares of WHX are now starting to move within range of triggering a near-term breakout trade above the upper-end of its recent sideways trading chart pattern. That trade will hit if WHX manages to take out some key near-term overhead resistance levels at $2.23 to $2.25 with high volume.

Traders should now look for long-biased trades in WHX as long as it's trending above some key near-term support levels at $2.11 or at $1.95 and then once it sustains a move or close above those breakout levels with volume that hits near or above 292,545 shares. If that breakout starts soon, then WHX will set up to re-test or possibly take out its next major overhead resistance levels at $2.60 to $2.80, or even its 200-day moving average of $3.31.

Bona Film Group

Bona Film Group (BONA), through its subsidiaries, operates as a film distributor in the People's Republic of China and internationally. This stock closed up 4.3% to $6.91 in Tuesday's trading session.

Tuesday's Range: $6.60-$7.08

52-Week Range: $4.13-$8.92

Tuesday's Volume: 553,000

Three-Month Average Volume: 132,674

From a technical perspective, BONA ripped sharply higher here and broke out above some near-term overhead resistance at $6.80 with above-average volume. Market players should now look for a continuation move to the upside in the short-term if BONA manages to clear Tuesday's intraday high of $7.08 with high volume.

Traders should now look for long-biased trades in BONA as long as it's trending above some key near-term support levels at $6.50 or at $6.25 and then once it sustains a move or close above $7.08 with volume that hits near or above 132,674 shares. If that move begins soon, then BONA will set up to re-test or possibly take out its next major overhead resistance levels at $7.50 to $8, or even its 52-week high at $8.92.

Plug Power

Plug Power (PLUG), an alternative energy technology provider, is engaged in the design, development, manufacture and commercialization of fuel cell systems for the industrial off-road markets worldwide. This stock closed up 16% to $4.85 in Tuesday's trading session.

Tuesday's Range: $4.58-$4.99

52-Week Range: $0.34-$11.72

Thursday's Volume: 43.40 million

Three-Month Average Volume: 18.45 million

From a technical perspective, PLUG gapped sharply higher here back above its 50-day moving average of $4.32 with monster upside volume. This move briefly pushed shares of PLUG into breakout territory, since the stock flirted with some near-term overhead resistance at $4.87. Shares of PLUG tagged an intraday high of $4.99, before closing just below that level at $4.85. Market players should now look for a continuation move to the upside in the short-term if PLUG manages to clear Tuesday's intraday high of $4.99 to some more key overhead resistance at $5.25 with high volume.

Traders should now look for long-biased trades in PLUG as long as it's trending above Tuesday's intraday high of $4.99 and then once it sustains a move or close above $4.99 to $5.25 with volume that hits near or above 18.45 million shares. If that move gets underway soon, then PLUG will set up to re-test or possibly take out its next major overhead resistance levels at $6 to $6.50.

FuelCell Energy

FuelCell Energy (FCEL), together with its subsidiaries, designs, manufactures, sells, installs, operates and services stationary fuel cell power plants for distributed baseload power generation. This stock closed up 3.2% to $2.22 in Tuesday's trading session.

Tuesday's Range: $2.20-$2.28

52-Week Range: $1.12-$4.74

Tuesday's Volume: 7.62 million

Three-Month Average Volume: 6.22 million

From a technical perspective, FCEL gapped up notably higher here with strong upside volume flows. This move briefly pushed shares of FCEL back above its 50-day moving average of $2.23, since the stock tagged an intraday high of $2.28. Shares of FCEL closed just below that level at $2.22 and just above its daily low of $2.20. Market players should now look for a continuation move to the upside in the short-term if FCEL manages to take out some key near-term overhead resistance at $2.30 with high volume.

Traders should now look for long-biased trades in FCEL as long as it's trending above Tuesday's low of $2.20 or above some more near-term support at $2.10 and then once it sustains a move or close above $2.30 with volume that hits near or above 7.62 million shares. If that move gets started soon, then FCEL will set up to re-test or possibly take out its next major overhead resistance levels at $2.47 to $2.63, or even $2.81 to $2.94.

To see more stocks that are making notable moves higher, check out the Stocks Under $10 Moving Higher portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.

RELATED LINKS:

>>3 Big-Volume Stocks to Trade for Breakouts

>>5 Toxic Stocks You Need to Sell in July

>>4 Big Stocks to Trade on M&A News

Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including

CNBC.com and Forbes.com.

You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.

Fresh Data Suggest Economy Firing on All Cylinders

Toby Talbot/AP WASHINGTON -- A gauge of U.S. consumer spending rose solidly in June, in the latest indication that the economy ended the second quarter on a stronger footing. That momentum appeared to have carried into the third quarter, with another report Tuesday showing factory activity in New York state expanded sharply in July. "This is not a fragile economy," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York. "The consumer continues to play their part in moving the economy forward." Core sales, which strip out automobiles, gasoline, building materials and food services, increased 0.6 percent last month after rising an upwardly revised 0.2 percent in May, the Commerce Department said. Core sales, which correspond most closely with the consumer spending component of gross domestic product, were previously reported as being flat in May. Economists had expected them to rise 0.5 percent in June. The report added to signs of the economy's strengthening fundamentals, which could buoy optimism the recovery is on a self-sustaining path, after output contracted sharply in the first quarter. Federal Reserve Chair Janet Yellen told lawmakers the economy continued to improve, but noted that the recovery wasn't yet complete because of still-high unemployment. Yellen, however, cautioned the U.S. central bank could raise interest rates sooner and more rapidly than currently envisioned if the labor market continued to improve faster than anticipated by policymakers. Labor market conditions are firming, with the unemployment rate falling to a near six year-low of 6.1 percent in June and job growth exceeding 200,000 for a fifth straight month. Prices for U.S. Treasury debt fell on the economic data and Yellen's interest rate comments, while the dollar gained against a basket of currencies. U.S. stocks traded lower. June's gains and May's upward revision to core retail sales suggested a pickup in consumer spending in the second quarter after growing at its slowest pace in more than four years in the first quarter because of weak healthcare consumption. Forecasting firm Macroeconomic Advisers raised its second-quarter GDP growth forecast by three-tenths of a percentage point to a 3 percent annual pace. Goldman Sachs (GS) upped its estimate for the quarter by two-tenths to a 3.4 percent rate. Upbeat Outlook A surprise drop in receipts for automobiles, however, held overall retail sales to a 0.2 percent increase in June after advancing 0.5 percent the prior month. "Consumers will likely gain more confidence to spend as the job market improves and summer travel season hits full swing," said Randy Hopper, credit cards vice president at Navy Federal Credit Union in Vienna, Virginia. "We are optimistic that the second half of the year will deliver stronger sales growth." From employment to manufacturing, the economy appears to be firing on nearly all cylinders, with even housing regaining its footing after slumping in late 2013 following a run-up in mortgage rates. Growth estimates for the second quarter top a 3 percent annual rate. In another report, the New York Fed said its Empire State general business conditions index jumped to 25.60 this month, the highest since April 2010, from 19.28 in June. New orders edged up, while factory employment and shipments surged. There were also signs of inflation pressures, with measures of both prices received and paid by manufacturers rising in July. Overall retail sales in June were restrained by a 0.3 percent fall in receipts at auto dealerships. The decline is surprising given automakers reported a surge in motor vehicle sales in June. Auto sales had increased 0.8 percent in May. Excluding autos, sales grew 0.4 percent after rising by the same margin in May. There were increases in sales at non-store retailers, which include online sales, as sales at clothing retailers. Receipts at sporting goods shops rose as did those at electronics and appliances stores. But sales at building materials and garden equipment suppliers fell 1 percent. -. Most of us spend a ton of time researching our options when we first sign up for a plan or policy, then forget all about it and make monthly payments like a robot. But this can cost you.

David Herro Comments on Richemont

Richemont (XSWX:CFR), the world's second-largest luxury goods firm, was the top contributor for the quarter, returning 10%. Shares reacted positively to fiscal year 2013 earnings, in addition to an increase in the fiscal year 2014 dividend of 40%. Additionally, Richemont saw 6% organic growth in April, or 8% excluding the slowdown in Japan, following the increase in consumption tax. Globally, the jewelry division continues to perform well, as jewelry sales have increased by double digits over last year. Management continues to invest in its jewelry manufacturing capacity due to its very bullish view of the business's long-term growth prospects from global wealth creation. We believe Richemont has a high-quality inventory of brands and is led by one of the best management teams with which we invest.

From David Herro (Trades, Portfolio)'s Oakmark International Fund Second Quarter 2014 Letter.

Also check out: David Herro Undervalued Stocks David Herro Top Growth Companies David Herro High Yield stocks, and Stocks that David Herro keeps buying

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We've Examined These Huge Winners Up Close

It was August 13, 1902, and upstate New York's A.B. Bouvier found himself far from civilization - in Ontario, Canada's Mine Centre district. He was there to check out some mining property. And as he recounted in two letters to a friend of his - a woman named Emma - the trip hadn't been an easy one.

The two letters are part of a small group of historic documents that I've amassed through the years. The two scrawl-covered pages tell quite a story. And the collector I got the notes from filled in some of the other details.

The first letter tells of a trip across Lake Superior - one that left everyone on the boat (except Bouvier) feeling seasick.

"Lots of the passengers were so sick they could not get up," Bouvier wrote. "I managed to get to breakfast and that was all."

The rolling and pitching Great Lakes boat trip turned out to be the easiest part of his journey north of the border. It illustrates the hard work involved with locating an opportunity.

The lake steamer got Bouvier to the Mine Centre Hotel. But it didn't get him to his objective: the Log Cabin Gold & Copper Co. As the second of his two letters describes, this second leg of his journey was equal parts adventure and sheer terror.

Dear Emma:

We arrived at the mine 12 miles from Mine Centre [tonight]. We came in a small boat those 12 miles which would only carry 3. It was not over two feet wide and [we] had to get in the bottom to keep it from tipping over. This country is all timberland for miles and plenty of small lakes and rivers. No roads. And the only way out is up and down the streams in a boat in the summer and on the ice in the winter. Have a good place to stay at the mine and quite good board (food) but do not want it forever. I do not think I can be home much before Aug. 28 or 30.

Yours truly;

A.B. Bouvier

History - at least not the history that I have - doesn't tell us whether Bouvier invested in the mining project... or, if he did, how that mining project worked out.

But in an era when mining swindles were one of the more popular strategies for separating folks from their hard-earned greenbacks, the two letters do seem to show that Bouvier was a sharp guy... what we'd probably refer to as an "informed investor" in the financial parlance of today.

The Art of Due Diligence

I'm not exaggerating about the proliferation of mining scams, and the risks associated with investing in miners in general - especially so-called "junior miners." Growing up I often heard my grandparents - my Dad's folks - make whispered references to a Canadian gold miner they'd invested in... references that were usually accompanied by some wishful-thinking-type comments to the effect that the shares "could still be valuable... someday."

When my Dad and I cleared out their house to get it ready for sale in 2007, we found the share certificates. And we did our own "due diligence."

Sure enough... they were worthless. As my Dad, William Patalon Jr., recalled yesterday, when the mine was dug there wasn't enough gold to warrant further operation.

My grandfather, William Sr., was a tough-as-nails railroad man, a machinist with the Lehigh Valley Railroad. And both he and my grandmother, "Grandma Anna," were true products of the Great Depression... meaning they were usually conservative and cautious when it came to finance. Right to the ends of their lives, they both avoided debt like it was Satan incarnate and would always pay cash for a new car or other purchase.

So it had to be one heck of a "salesman" who induced them to wriggle out of this cautious financial mindset to plunk part of their savings down on a mine they'd never seen and really knew nothing about.

That family story is part of the reason I was so taken with Bouvier's story. Unlike my grandparents, you see, Bouvier went to see for himself.

But the two historic letters struck a second chord with me: That whole "go and see for ourselves" mindset reminded me of similar stories that two of our own guys here at Money Map Press have related to me.

I'm talking about Energy Advantage Editor Dr. Kent Moors, our resident oil-and-gas expert, and Real Asset Returns Editor Peter Krauth, who focuses on natural resources ranging from natural gas to silver and gold.

Kent is one of the top energy experts in the world, in fact, and is always on the go - visiting government ministries, big and small companies, and even physical drilling sites... all for the purpose of "seeing for himself."

That resolve to conduct such careful due diligence has really paid off for Money Map Press subscribers - he has a stunning record as a stock-picker.

Indeed, several of his recommendations to Private Briefing subscribers have doubled or better.

And his understanding of new regulations giving Main Street investors easier access to "real" oil field investments recently paid off - and paid off big. A special project of just that type in the Eagle Ford/Austin Chalk area of Texas - which he'd personally scouted - struck oil with the first well the team drilled.

"You know, Bill, as the story you shared about your grandparents underscores, investors all too often don't understand the natural-resource-type investments they're making," Kent told me during a visit to my office here in Baltimore this week.

"That's particularly true with energy-drilling projects. Too often, investors are given insufficient information, are forced to finance projects with vague objectives, and are liable for additional funding if things go wrong. What's more, they are usually the last ones to get paid. But none of that is true with the projects that I select. I insist that our projects be the most transparent ever offered and provide for an early payback. And a big reason for that is that, well, I physically visit the locations... many times... and am as familiar with the project as anyone on the drilling/exploration team. It's a proven formula - it's one that works time and again - which is why I follow it without deviation."

(Kent and I had a long talk during his visit here, and he shared some stunning observations and gave me several promising recommendations. I'll be sharing all of this with you very soon - and will soon also have information on his next "Main Street investor" drilling project.)

The advantage of "seeing for yourself" holds just as true for gold. And as yesterday's gold-price surge underscores, this is a perfect time to talk about the "yellow metal" - and the companies that mine it.

We Have "Liftoff"

Gold for August delivery jumped recently $41.40 an ounce, or 3.3%, to settle at $1,314.10 on the Comex division of the New York Mercantile Exchange (NYMEX). That's the highest level since April 14, says FactSet Research.

The reason: Gold investors are starting to appreciate that "retail price inflation will become an issue in the U.S. economy," Brien Lundin, editor of the Gold Newsletter, told MarketWatch.

That may be a surprise to the masses, but it's not a surprise here: We've been telling you for months that inflation was taking hold in the food, real estate rental, and medical sectors - and have shown you specific ways to protect yourself and profit.

But U.S. promises to elevate its involvement in Iraq and some overly "dovish" comments by the U.S. Federal Reserve this week seem to have acted as a call to arms on the inflation-investment front.

U.S. President Barack Obama said recently that he was ordering 300 military advisors to Iraq because of escalating violence. Fed chair Janet Yellen has refused to be specific on when the central bank would boost interest rates above their current level near zero.

Yellen has gone out of her way to underscore that no "mechanical formula" exists to specify when rates should rise. And she dismissed speculation that the central bank might boost rates because inflation seemed to be accelerating. Her reasoning: Inflationary data is "noisy," meaning it's worthless to act upon.

Because continued low rates in the face of a strengthening economy would accelerate inflation, Yellen's confirmation that rates would remain low is bullish for gold prices.

And it's an environment that's really bullish for gold miners.

In fact, mining stocks - which have been pounded since peaking in mid-March - have been on fire this month.

The Market Vectors Junior Gold Miners ETF (NYSE: GDXJ), the second-largest exchange-traded fund that invests in gold miners, is already up 17% this month. And the Market Vectors Gold Miners ETF (NYSE: GDX), the largest gold miners ETF by assets, is up 16%.

But there are several specific miners that we like - including one whose properties Peter has "seen for himself."

A Major and a Minor Miner

Our favorite big-cap miner is Goldcorp Inc. (USA) (NYSE: GG), a stock that we've repeatedly - and thoroughly - researched. In fact, it's the focus of the Private Briefing special research report "The Savviest Gold Miner on Earth."

The Vancouver-based Goldcorp is one of the industry's best-run miners. It also has perhaps the strongest finances. Last year, Cowen & Co. stress-tested several of the biggest mining companies and cited Goldcorp as one of the two strongest major miners on Earth. In fact, the Cowen stress test concluded that Goldcorp would remain profitable - even in the face of a $200-an-ounce plunge in gold prices.

Goldcorp and the other gold miner "appear to be able to withstand a severe gold-price decline and still achieve positive earnings," the Cowen analysts concluded.

Analysts currently have a $31 consensus target price on Goldcorp. But the "high-water mark" estimate is $39 - 42% above current levels.

And one of our favorite "juniors" - meaning, by definition, it's a speculative company - is the Winnemucca, Nev.-based Paramount Gold and Silver Corp. (NYSEMKT: PZG). It's an exploration-stage miner with projects in northern Nevada and Chihuahua, Mexico.

Paramount's shares were up 9.9% yesterday - part of the broad updraft in mining shares.

Despite the risks, we like Paramount - and for one simple reason: We know the company. You see, back in August 2012 Peter went and "saw for himself" when he visited the company's "Sleeper Gold Project" in Nevada.

The visit made a lasting - and positive - impression.

"It was quite a trip, Bill," Peter told me. "Nevada is the sixth-largest gold-producing region in the world, with 12% of annual worldwide gold production, and some 80% of all U.S. gold production. I went to Winnemucca, a not-so-sleepy town of about 7,000, where Paramount Gold and Silver has a field office."

The Sleeper Project - a former AMAX Gold open-pit mine property acquired by Paramount back in 2010 - is located roughly 25 miles from Winnemucca, Nev., off a main highway. AMAX had operated Sleeper as a high-grade project for 13 years, ending in 1996.

According to Peter, Paramount viewed the property as one that could be reopened and produce cash flow - while also allowing the company to explore the surrounding area in the belief there might be comparable resources still to be discovered.

Since acquiring Sleeper, PZG has added two large land packages, "Dunes" and "Mimi." Today, Sleeper consists of 2,750 claims covering 47,500 acres reaching south to the Newmont Mining Corp. (NYSE: NEM) "Sandman" project. Sleeper is now a 20-square-mile project in one of the most prolific mining districts on the planet.

"Project manager and consulting geologist Nancy Wolverson gave me a complete tour of the property, which has great access to roads, power lines, and water," Peter recounted. "Sleeper is really exciting in that it once was a high-grade producer with production records that show that not even half of the gold mined there has been recovered."

Some of the old dumps that had been tested were shown to hold about 54 million tons of above-ground ore. The company budgeted $6.3 million on exploration at Sleeper and was pushing forward with a 7,000-meter drill program with two rigs by the end of 2012.

According to a company "Preliminary Economic Assessment" (PEA), the Sleeper project had a "net present value" (NPV) of $695 million - nearly double the company's $358 million market cap back then.

A PEA is a detailed mining project plan that describes mining and processing methods, rates of production, capital and operating costs, cash flows at specified metal prices, rates of return, mine life, and net present values (NPVs) at different discount rates.

In short, it's a way to value the project - and, by extension, the company that operates it.

Paramount has other projects too. After viewing the property and talking with the company, studying the PEA and considering the miner's other projects, Peter conservatively estimated Paramount's value at $1 billion. That estimate, of course, was based upon the prevailing gold price of $1,670 an ounce at the time.

The massive subsequent sell-off in the gold market really slowed things down for junior miners.

But Peter's visit to the mining site gave him an insight on the company that few other experts possessed.

And that made it much easier to assess recent announcements Paramount made about its other property - its San Miguel project in northern Mexico.

According to Paramount, independent consultants are nearing completion of a new resource estimate for its 100%-owned San Miguel project. And that would soon be followed by a revised PEA for San Miguel.

"We are eager to see the results of the updated resource and mine plans for San Miguel," said Paramount CEO Christopher Crupi. "We anticipate they will demonstrate the potential for a strong, economically rewarding project at current metal prices."

Analysts currently have a one-year target price of $1.88 a share on Paramount. That's 69% above yesterday's closing price of $1.11. Back on April 9, HC Wainwright initiated coverage on Paramount with a "Buy" rating and a $2.30 price target.

The company's shares have a 52-week range of 78 cents to $1.72. As of Wednesday, the stock's 50-day moving average was $1.04 and its 200-day moving average $1.13. Approximately 11.1% of the shares of the company are short-sold.

Paramount's last earnings report was issued May 20. The company reported a net loss of 3 cents a share - 2 cents more than the Wall Street consensus. Analysts expect the company to lose 7 cents a share during the current fiscal year.

But because Peter "went and saw" for himself, Paramount is more than just a collection of numbers. It's a company he understands intimately, and can mentally take apart, analyze, and reassemble.

And he likes what he sees.

"In late May, Bill, Paramount announced excellent recoveries from leaching tests on ore from its San Miguel (Mexico) project," Peter told me yesterday evening. "Although the silver recoveries are relatively low, it's not a surprise, and certainly not a deal breaker. In fact, the company expects to recover up to 94% of the gold, and concluded that using 'heap leaching' to recover the metals is feasible. This is a pretty big deal, since this technology is rather low cost and, therefore, allows for better profit margins. As well, it could allow a lot more material to be considered 'economic,' potentially boosting the project's value in a significant way."

Looking forward, "PZG expects to announce a new NI 43-101 compliant resource estimate for its San Miguel project, then follow up with a revised Preliminary Economic Assessment (PEA)," Peter continued. "I expect we'll see a lot of resources move up in quality from inferred and indicated, thanks to the latest drilling results."

The bottom line is a bullish one - because he's seen so much of the company's operations firsthand.

"Thanks to my earlier analyses - and my highly beneficial personal visit - I have to say that I'm really excited to track this company," Peter concluded. "Paramount just keeps improving its projects and does superb work confirming the serious potential of its projects. In junior mining, that's a formula for success."

And we're certain that A.B. Bouvier would have approved.

United Continental’s ‘Sustainable’ Improvements Lifts Airline Stocks

The market may be sinking, but airline stocks are flying after United Continental (UAL) supplied an encouraging update, helping to boost the likes of Delta Air Lines (DAL) and American Airlines (AAL), as well.

Getty Images

Following yesterday’s close, United Continental said that passenger revenue per available seat mile, or PRASM, increased by 3.5% during the second quarter, above the top-end of 3% from its previous forecast. Stifel’s Joseph DeNardi and Sawyer McKelvey explain why the market is pleased with United Continental’s update:

United's guidance for 2Q reflects an improved outlook for revenue and cost performance with consolidated PRASM expected to increase 3.5% y/y (compared to prior guidance of 1% – 3%) driven by better than expected results from the Domestic and Pacific regions. The positive trends on the Pacific are encouraging, and we expect this trend to continue into 3Q before softening somewhat in 4Q as seasonal demand softens. In addition, we believe United's domestic revenue performance was solid and a clear improvement from 1Q results. The company's outlook for unit costs in 2Q improved as well with guidance now for CASM-ex to be flat y/y. While some of the improvement to the 2Q outlook is due to certain costs shifting into the 2H, we believe a portion of the savings is the result of the company's focus on improving its cost structure and should be more sustainable.

We are increasing our 2014 estimate to $4.10 from $3.85 based primarily on an improved outlook for 2Q though we suspect there may be some upside to our outlook for 3Q and 4Q depending on unit cost trends in 2H14.

United Continental’s report came after Southwest Airlines (LUV) and American Airlines released positive reports of their own, helping to arrest the group’s slide.

Shares of United Continental have jumped 7.1% to $42.90, while American Airlines has gained 1.4% to $42.59 and Delta Air Lines has risen 0.8% to $37.26. Southwest Airlines has dipped 0.3% to $27.14.

Alcoa Kicks Off Earnings Season In Style With Strong Results

If you were looking for positive economic signs, one of America's oldest companies has a spot of good news for you.

On Tuesday afternoon, Alcoa Alcoa kicked off the second-quarter earnings season with strong results. They beat Wall Street's expectations across the board, with earnings per share of $0.18 and revenue of $5.84 billion this past quarter.

Analysts expected the massive aluminum producer to post earnings per share of $0.12, up from $0.07 it posted a year ago. Sales were expected to fall 3% to $5.7 billion. Wall Street was also looking for continued improvement in Alcoa's margins.

Alcoa has been one of the market's top performers recently. Shares are up nearly 40% year to date and over 85% from a year ago. While competition and slow growth in emerging markets have hampered demand for aluminum even while supply increases, investors hope for higher demand from automakers and the aerospace and defense industries. Components for Ford's new aluminum-bodied F-150 present a tantalizing opportunity for Alcoa to push higher-margin products over its bread-and-butter basic commodity metals.

Alcoa stock was up about 0.5% during the day's trading and jumped another 1.5% after hours.

Analysts aren't expecting much in the second quarter even as the US economy rebounds. S&P 500 earnings are only projected to grow 2.9% from last year, down from a 5.5% projection in March.

Follow Brian on Facebook and Twitter.

More companies bail on U.S. for lower taxes

In the past 10 years, 47 companies have relocated overseas for lower tax rates. That compares to only 29 in the previous 20 years. NEW YORK (CNNMoney) More companies than ever are abandoning the U.S. for nations with lower taxes.

A new analysis found 47 companies have relocated to home bases overseas to take advantage of lower rates in the past 10 years through a merger process known as inversion.

To qualify for the lower taxes, a company must do more than simply set up shop overseas and change its address. It must first merge with a company in the lower-tax country and then either do at least a quarter of its business overseas or give the owners of the foreign company at least one-fifth ownership of the newly merged company.

Only 29 companies used the inversion process during the previous two decades, according to the Congressional Research Service analysis.

Lawmakers and regulators have tightened the requirements over the years after high-profile companies like Fruit of the Loom, Seagate and Tyco shifted some or all of their business to places like the Cayman Islands and Bermuda.

But with the trend seemingly on the rise, some say it is time for yet more stringent requirements. Among them is Rep. Sander Levin, a senior Democrat whose office distributed the CMS report.

  Pfizer CEO grilled over pharma deal

Inversion can yield significant tax savings. One of the most recent deals, for example, shifts medical device giant Medtronic (MDT) from Minneapolis to Ireland, where it acquired rival Covidien. Ireland's corporate tax rate of 12.5%! is significantly lower than the top U.S. rate of 35%. Pfizer (PFE) recently pursued a similar deal with its British pharmaceutical rival AstraZeneca (AZN).

Alibaba IPO Survey: Unclear How Many U.S. Investors Will Buy

The fate of Alibaba Group Holding Ltd.’s initial public offering could hinge on whether the Chinese Internet behemoth can get U.S. buyers who have not yet invested in Chinese stocks clamoring for shares.

As of now, it’s still unclear whether these buyers can be convinced, according to a survey of more than 300 institutional investors conducted by the ConvergEx Group.

The survey shows widespread optimism about the fate of Alibaba’s business model and its potential performance as a publicly-traded stock, yet that optimism didn’t translate into plans to buy into the company.

Fewer than half–or 43%–of those surveyed say they plan to buy shares of the company, even though 64% see Alibaba as a good long-term investment. 88% of those surveyed expect the stock to appreciate in the first month of trading.

Fund managers who have not yet invested in Chinese stocks appear to be the least likely to buy Alibaba. Only 38% of those fund managers said they would buy Alibaba’s stock compared to 60% of fund managers who have already purchased shares of Chinese companies.

Attracting interest from these non-traditional buyers is likely to be the biggest challenge for Alibaba’s underwriters and key to any short-term or long-term pop in its price.

“The challenge of an IPO is creating that illusion of scarcity,” said Nicholas Colas, ConvergEx Group’s chief market strategist. “To do that in a deal of this size, you need to get those equity investors who haven’t invested in Chinese equities on board.”

Alibaba is expected to raise more than $20 billion, which would make it one of the largest offerings ever.

Chinese companies have returned to the U.S. to debut after a near standstill on such deals following accounting frauds at a handful of Chinese companies, including timber company Sino-Forest Corp.

Beyond the memory of such turmoil at Chinese companies, a U.S. government commission recently  gave U.S. investors another reason to think twice before buying Chinese I.P.O.s, specifically noting that there could be "major risks" stemming from the unusual legal structure of Alibaba and other Chinese companies. Chinese companies have typically employed corporate governance structures used to get around restrictions by the Chinese government on foreign ownership of businesses.

The Chinese e-retailer dwarfs its U.S. rivals. According to the WSJ, Alibaba’s online transactions last year were one-third larger than all of the combined value of sales at both Amazon.com Inc.(AMZN) and eBay Inc.(EBAY)