Stock Market Strategies using Fundamental Analysis – With Special Reference to Stock Option

Abstract

To a fundamentalist, the market price of a stock tends to move towards its“real value” or “intrinsic value”. If the “intrinsic/real value” of a stock is above the current market price, the investor would purchase the stock because he knows that the stock price would rise and move towardsits “intrinsic or real value” If the intrinsic value of a stock was below the market price, the investor would sell the stock because he knows that the stock price is going to fall and come closer to its intrinsic value. All this seems simple. Now the next obvious question is how do you find outwhat the intrinsic value of a company is? Once know this, onewill be able to compare this price to the market price of the company and decide whether you want to buy it (or sell it if you already own that stock).To start finding out the intrinsic value, the fundamentalist analyzer makes an examination of the current and future overall health of the economy as a whole. After analyzed the overall economy, onehave to analyze firm theyare interested in. They should analyze factors that give the firm a competitive advantage in itssector such as management experience, history of performance, growth potential, low cost producer, brand name etc. Find out as much as possible about the company and their products. Fundamental Stock Analysis is typically more closely tied to buy and hold investors, whereby day traders use solely technical analysis and most swing traders use both fundamental and technical stock analysis. Technical analysis is specifically important for swing traders with a very short time horizon (that is, a couple of days or just a few weeks). Most swing trading software uses only technical analysis but the Stock nodneural network uses a blended custom recipe of both technical’s and fundamentals. Stock fundamental analysis can answer questions that are beyond the scope of technical analysis, such as “Why is this security price moving?” Hence, the present study focuses on stock market strategies using fundamental analysis with special reference to stock option and study based on secondary sources of data collection.