CFDs
- Thread starter eggnog
- Start date
Theres a new listed CFD product on the market issued by ABN AMRO called the MINIs which don't require a margin account that you have to usually set-up with CFD providers. You can go long and short without all the hassals of stock borrowing and theres an embedded stop loss level. Anyone used these before?
yes, I have used CFD quite extensively, so much so that I don't really buy real shares anymore.
the good thing about CFD is that you can use all kinds of strategy you believe that works for you (like what u've just mentioned). For me, I use CFD as if it's real shares, rather than thinking it as a leverage tool. E.g. I can afford to buy 5000 worth of BHP and ready to risk 200 loss, but instead of pulling that 5000 out of my home loan and buy it thru commsec, I put say 500 into CFD account and buy 5000 worth of BHP position, with the extra 300 as margin call buffer. That way I have the best world of real exposure to BHP and leverage.
Something to bear in mind when trading index. Marketmakers such as CMC and IG can screw you up by adjusting the index in their favour, and deliberately trigger your stop loss order, so be careful. I can't recommend "xjo" thread on hotcopper more on trading. There are a few gurus there who certainly know what they're talking about
Good luck!
the good thing about CFD is that you can use all kinds of strategy you believe that works for you (like what u've just mentioned). For me, I use CFD as if it's real shares, rather than thinking it as a leverage tool. E.g. I can afford to buy 5000 worth of BHP and ready to risk 200 loss, but instead of pulling that 5000 out of my home loan and buy it thru commsec, I put say 500 into CFD account and buy 5000 worth of BHP position, with the extra 300 as margin call buffer. That way I have the best world of real exposure to BHP and leverage.
Something to bear in mind when trading index. Marketmakers such as CMC and IG can screw you up by adjusting the index in their favour, and deliberately trigger your stop loss order, so be careful. I can't recommend "xjo" thread on hotcopper more on trading. There are a few gurus there who certainly know what they're talking about
Good luck!
I'm aware of that product, haven't used it b4, but I'm sure gurus in hotcopper will be able to help u out
thanks feihong
Do you use stop losses/guaranteed stop losses. What strategies do you have in place to help limit your risk exposure - thats why i'm looking at put options, in case the shares tank.
Also, what broker are you using. I've just opened an IG Markets account and looking at there IR it says 3.5% above RBA cash rate. At current markets that would make an interest repayment rate of 10% (cash rate = 6.5%) pa on the total value of the position held.
ie: say you bought $5000 BHP with only $500. Then interest is calculated at 10% on the $5000 or is it 10% on $4500
which one would be correct.
Do you use stop losses/guaranteed stop losses. What strategies do you have in place to help limit your risk exposure - thats why i'm looking at put options, in case the shares tank.
Also, what broker are you using. I've just opened an IG Markets account and looking at there IR it says 3.5% above RBA cash rate. At current markets that would make an interest repayment rate of 10% (cash rate = 6.5%) pa on the total value of the position held.
ie: say you bought $5000 BHP with only $500. Then interest is calculated at 10% on the $5000 or is it 10% on $4500
which one would be correct.
Thats what they use I think from memory.
OK, after many hours researching I've come up with the following CFD + PUT Option strategy. I've tried to include all the fees involved and also tried to make a calculator at the end so I can run some sensitivity analysis to see my P/L at certain exit prices. Would love it if anybody can critisize it and tell me of any errors.
Its a very basic strategy of buying Long CFDs with complementary PUT Options. The theory is if the share price goes below the BUY price the options are exercised and I get most of my money back.
Its a very basic strategy of buying Long CFDs with complementary PUT Options. The theory is if the share price goes below the BUY price the options are exercised and I get most of my money back.
Very comprehensive spreadsheet, well done
Is the option premium based on the most conservative scenario? Aussie options are not that liquid, so you may have to take that into account. I've also noticed that u didn't allow for any dividend.. I'd say 2% dividend should be quite conservative. With liquidity in mind, try out this strategy with US market and see if it works out well.To buy 100 BHP through my provider, nom val $4458 would require $223 margin and interest payment of $1.17/day. If the price of BHP goes up, so does the daily interest and it will increase as interest is capitalised. There would be $10 brokerage and 2.2 cent spread on both buy/sell.
Cheers guys. The figures are as close to what etrade offers for Options and IG Market offers for CFDs. I've designed it so that before I buy a position I go to etrade and check the Bid/Ask & exercise dates for options and place all the details on the spreadsheet. This way I can screen a lot of stocks in little time and easily make a decision on wether currect prices justify a buy.
Georges what kind of risk strategies have you placed in your CFD trading system - when would you sell out, buy in, time held in position, etc.
And if anyone wants to use my calculator feel free to adjust it to your needs. Currently making another spreadsheet for stoploss with rest of money sitting in offset account. Then gonna compare the returns on both strategies and see which is better.
Georges what kind of risk strategies have you placed in your CFD trading system - when would you sell out, buy in, time held in position, etc.
And if anyone wants to use my calculator feel free to adjust it to your needs. Currently making another spreadsheet for stoploss with rest of money sitting in offset account. Then gonna compare the returns on both strategies and see which is better.
Interesting strategy with long shares and then buy put option to cover downside. I would imagine an at the money put would be quite expensive, even a longer dated one. Certainly raises your break even point. Good strategy if theres going to be volatility, otherwise your equity just gets eroded - through interest cost on holding the underlying shares with the CFD and time decay on the put option. Free money for the CFD providers and guys who sold you the option.
This MINI product looks interesting. Theres a free stop loss embedded in the product so I assume you don't lose your shirt. Interest margin on longs charged at 3% so 9.5% all up with the interest cost capitalised onto the loan/strike price. On the MINI shorts, theres a 3.5% rebate on the sold position just as if I was short selling but no hassals you get with MBL and Commsec when short selling from a retail perspective.
This MINI product looks interesting. Theres a free stop loss embedded in the product so I assume you don't lose your shirt. Interest margin on longs charged at 3% so 9.5% all up with the interest cost capitalised onto the loan/strike price. On the MINI shorts, theres a 3.5% rebate on the sold position just as if I was short selling but no hassals you get with MBL and Commsec when short selling from a retail perspective.
