Contracts for Difference

H

hcubed

Hi Everyone,

Can anyone help me with a few questions in regard to CFD trading?

Example 1.

Lets sat you purchased 1000 Telstra shares @ $4.35, I can purchase through CMC this amount for $217.50 (5%).

Now the shares go down to $4.28 overnight, how much would I have lost? Now if I want to hold on to the shares for a few days because I believe they will go up, what are the costs involved in doing that?
 
You would have lost $70. 7c per share x 1000.

You also lose the interest on the position which is about 7.5% pa calculated for the period you hold the position.

$4350 x 7.5% is $326.25 per year which is $1.15 per day.

That's assuming your interest rate is 7.5%. Obviously if it is higher you would be paying more.

Runningbear
 
Would you please talk a little more about Hyperfeed data? Where can I get such data? What's the cost like?

I've been watching money flows for several stock on Bloomberg for a while. Now I'd like to download such data to do some statistical analysis and see if it's not hard to catch the divergence between money flow and price changes. This could be the topic of my final project at Haas, Berkeley.

TIA,

Jon
 
Quote from hcubed:

Hi Everyone,

Can anyone help me with a few questions in regard to CFD trading?

Example 1.

Lets sat you purchased 1000 Telstra shares @ $4.35, I can purchase through CMC this amount for $217.50 (5%).

Now the shares go down to $4.28 overnight, how much would I have lost? Now if I want to hold on to the shares for a few days because I believe they will go up, what are the costs involved in doing that?
More...

Interesting that you should mention CFDs, I first bumped into that myself this week after seeing an advertisement for Shorecan on ROB TV. I found the concept interesting, but a few things made me quite leery, one being that they allowed huge amounts of margin (95% specifically). Great way to make money very rapidly if you are correct, but also blow out your account in a hurry if you are wrong. Also worth noting that they of course hold you fully liable for losses.

Also, when I looked at their account application forms, it appeared that in order to qualify to trade with them, you needed either $200,000/yr annual income or greater than $1,000,000 net work. Yikes for the latter, and the former is sort of unrealistic for me right now. :)

I also didn't really like the fact that CFDs weren't available on all of the traded stocks. In particular, I like to trade in techs, and there weren't that many techs on their available CFD list, at least not ones that I was very familiar with. As well, I didn't see any mention of insurance via CIPF on their website.
 
Go to cmcgroup.com.au and have a look, you see thats the part I don't understand "Losing everything" because you can put a guaranteed stop/loss on the stock?

Or am I wrong?

Cheers

Hans
 
You can use heaps of leverage but you can also take small positions so essentially you can match your risk to your account size.

5% margin is great for spreads though where the risk is greatly reduced when you a simultaniously long and short.

Obviously maxing out your account on 20 to 1 margin is suicide. The leverage is not there for that purpose.


Runningbear
 
I spoke with the Toronto Shorcan Rep a few weeks ago, who was a great help, and the short way in ( CFDs being great for shorts, with the lack of a margin issue which is the problem in typical brokerage accounts) is that in Canada you take the CSA course, to become a certified investment advisor. Once you do this, you have effectively taken the back way in, and ShorCan will open the account with $2000 which you can trade with. There is no minimum, i.e one can trade one share at a time If one wants to.

CFDs offer a guaranteed stop which is 5% away from the market. What I have been told is stick to your position size model without leverage when you enter into these contracts, the advantage is you can trade several different equities at once, advantageous during SHORT season. As for determining losses, I'm assuming you lose the money inside that 5% stop as you would in a normal trade, but you lose it for a leveraged amount. Unless you have really good stop placement, in an ideal market, keep your position size the same as a non-leveraged account.

Dont trade bigger size in any one position just because you have leverage.

I'm going to take the CSA Course myself, and then open an account with them sometime in 2005.
 
Do you know the URL for CSA?

Sorry but could you give me an example of all of the below, as being a newbie I need more info lol.

CFDs offer a guaranteed stop which is 5% away from the market. What I have been told is stick to your position size model without leverage when you enter into these contracts, the advantage is you can trade several different equities at once, advantageous during SHORT season. As for determining losses, I'm assuming you lose the money inside that 5% stop as you would in a normal trade, but you lose it for a leveraged amount. Unless you have really good stop placement, in an ideal market, keep your position size the same as a non-leveraged account.

Dont trade bigger size in any one position just because you have leverage.

I'm going to take the CSA Course myself, and then open an account with them sometime in 2005.
 
Quote from psytrade:

I spoke with the Toronto Shorcan Rep a few weeks ago, who was a great help, and the short way in ( CFDs being great for shorts, with the lack of a margin issue which is the problem in typical brokerage accounts) is that in Canada you take the CSA course, to become a certified investment advisor. Once you do this, you have effectively taken the back way in, and ShorCan will open the account with $2000 which you can trade with. There is no minimum, i.e one can trade one share at a time If one wants to.

CFDs offer a guaranteed stop which is 5% away from the market. What I have been told is stick to your position size model without leverage when you enter into these contracts, the advantage is you can trade several different equities at once, advantageous during SHORT season. As for determining losses, I'm assuming you lose the money inside that 5% stop as you would in a normal trade, but you lose it for a leveraged amount. Unless you have really good stop placement, in an ideal market, keep your position size the same as a non-leveraged account.

Dont trade bigger size in any one position just because you have leverage.

I'm going to take the CSA Course myself, and then open an account with them sometime in 2005.
More...

Wouldn't that approach mean that your costs would rise significantly when trading equities through other brokerages, since you would no longer qualify as a "non-professional" individual? (e.g. quote stream costs)
 
https://www.csi.ca/student/en_ca/courses/financial/csc.xhtml

Shorcan Index is here http://www.shorcanindex.com/ You can enquire and then set yourself up with a demo account. This should give you a better idea as to whether CFDs are good for you.

And Chagi, you don't have to tell your data provider that your a professional by designation if you don't want, but you need to do so to get a shorcan account in Canada. They have software that is like a level II but for the available CFDs listed.
 
You must log in or register to reply here.
Back
Top