What ate the Advantages of options over share CFDs ?
Advantages of options over share CFDs ?
- Thread starter rogerlacerda
- Start date
If you are a US-based trader, you are not allowed CFDs. But you can trade options.
OP is in Brasil - CFDs and options have been available both OTC and exchange-traded. The ASX briefly listed CFDs to remain competitive with its option listings, although they eventually delisted the CFD's. As has been mentioned they are not currently allowed for retail investors in the US market. One factor that has made CFD's attractive is that in many places where they are offered they can be bought on margin(options in the US aren't marginable and don't generate any SMA - but they can REDUCE THE SMA requirement if they are bought as a hedge in a portfolio margin account). Generally where CFDs have developed a following a good deal of the demand has come from the desire to gain additional leverage or simply to avoid listed option requirements and suitability. Additionally, where they have been made available they have often had a material marketing budget with the OTC dealers investing heavily to develop a market. There are a handful of other differences especially with the way the borrow/lend is handled.
To your original question - in most markets, it's the leverage difference.
To your original question - in most markets, it's the leverage difference.
- Downside risk is defined
- Exchange traded as compared to OTC
- Can do spreads / covered calls etc to generate income
- Can be used as hedge and exchange will recognize the hedge for cross margin
- can help you to stay in the position even if original position goes against you for a while
But be aware of Time decay and more complex maths
CFD is just like buying or short selling shares with bigger leverage than 50:50
I appreciate the answers, but in Brazil we speak portuguese...a secret code lol
cheers
Well at least I am glad to see you learned now how to spell it correctly. With a Z.
Funny thing is I happen to be in Brazil (Rio) at the moment. Speaking of which, it's time to put down the cell phone before it gets robbed... kkkk
According to me , the biggest advantage in case of options is the flexibility that they provide and the wide range of options strategies. CFDs are relatively rigid. Also, with options it is possible to hold two opposite positions simultaneously, so adjusting a profit for yourself becomes easier.
- Unlike CFDs ,Options provide an opportunity for future ownership at today’s price. If tomorrow’s price are more than today’s your options are as good as cash in the bank assuming you execute them and bank the difference before market reverses.
- As compared to CFDs options have a much lower trading cost.
- Lack of financing cost is a major advantage for long term which are to be held long term as compared to CFDs which have a lot of funding charges attached to them .