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CFD is an "instrument" for you to buy on an underlying stock without having to take delivery of it.
At the same time it offers a chance for you to short the market without having to deliver the underlying shares.
Both buying and selling positions are liquidated by an opposite action. That means, you buy CFD on xyz co. shares, you sell it to complete the contract. You sell CFD on xyz co. shares, you buy the CFD to settle the contract.
Unlike share transactions where say you own some shares because of IPO or a gift from your family, you can sell the shares and take the money without having to have a buy position. You are not short in this situation, you just liquidate the shares you own.
CFD is just a contract offered by institutions, mostly a brokerage house, eg. Phillip Securities. It is an acronym of "Contract of Difference" and it does not come from the stock exchange and thus not covered by its stock trading rules, although it ties with the stock price prevailing at any point of time.. It is your contract with your broker. That means if you sell a CFD of 10,000 "shares" based on the mother share of XYZ, you buy back the CFD anytime as long you have the margin acceptable to the brokers.
Somehow CFD is not very popular with investors because there is still an avenue for short selling or "long positions" in the main market. I tried CFDs before but it had not been very encouraging owing to the administrative fees you are paying and the spread of buy and sell that usually works against you.
Coolsurfer ( Date: 28-Sep-2008 14:05) Posted:
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today pepers stated stated that SGX will wieve penalties, if there is good reason for the unnowingly naked shorting.
Henceforth, less pressure of the shortiests liao. Cheers.
Any idea if the new shorting rules affect CFD trade, ie using CFD to short?
The penalty for ss will put a stop to the one lotter shortist who comes and "kacheow" to depress the share offer price. If kena caught short, it is not worth the while now unless the one lot is part of his borrowed shares.
AK opine that short term investment is the game now loh, looking at the gloomy market, owing to sub-prime n credit crunch.
On the other hand, FD, with merely 1 % interest, also not attractive leh.
Vested long term on SIA, SPC & SGX but doing short term for fun as well loh.
Morning long SGX 6.37, will not keep over weekends.
Wah if there is no more shortist in the stock market, the Margin Players could now push the Market in one direction towards their goal..............Good for the market hor? Or simply, a 'lesser' Market? Cheers!
Rite left_bug, short term movement of the Market is extremely difficult to predict! A qoute from Warren Buffett :
"The noise level in the stk market rises. TV commentors, Financial Writers, Analysts and market strategists are overtaking each other to get the investors' attention. At the same time, individual investors immersed in chatrooms & message boards are exchanging questionable and often misleading tips. Yet, dispite all these available info, investors find it increasingly difficult to profit. Stk px skyrocket with little reason, then plummet just as quickly, and peoplewho have turned to investing for their children's education and their own retiring income frightened. Sometimes, there appear to be no rhyme or reason to the market, only folly."
unquote. Cheers!
If impose all these bans on short selling, margin, and etc. Stock market will be less exciting. If you are a long term investor, why worry about short sell unless you are in dire need of cash.
While I am against both covered shorting through using somebody else shares to do the covering, and naked shorting without regards to covering the position at the end of the day, the fine of $1000 is unthinkable and almost "crazy" to me.
Furthermore in a situation where a naked short is being subjected to buy-in, it is not clear who is the end beneficiaries in particular to the case of China Hongx. Does SGX buy from the market queue or it is filled from the shares pools which might have created for this buy-in action. It would be interesting to know. Any insider, please?
loyfem88, that was for short selling - ie selling short without covering the short position to buy back on due date. I'm for the ban on naked shorting. But to ban shorting totally, you've to consider banning margin buyings too. One buys in hope of the sh/px drops, the other buys in hope of the sh/px rises. Cheers!
Just saw a mail from remisier that there is a min penalty of $1000 for short selling. Thank God for that....
Some short sellers don't borrow scripts to sell, that is why they are caught.
Some smart short sellers borrow scripts to sell and thereby is doing a reverse of investing. They actually are gambling. They should go to the casinos or speculate in commodities or currencies and not stocks. The stock market is a place for investments and then divestment at an appropriate time. The rights of divestment must belong to the original investor and to not someone else who have no rights to that investment.
It is like robbing somebody of his rights against his will. At an election, if I refuse to go voting, you should not do it for me. That is the analogy that I believe shorting on borrowed stocks should not be allowed.
The strong man finds no difficulties in walking the hills, but a normal healthy person might find difficulties. If you pit them to a fight, you should give them a level ground to do it. That is disparity in the stock market.
Farmer is right. 1) S/S within the same day is allowed - beside triggering a buy-in, it also helps to prevent runaway down trend.
2) S/Selling with borrowed scripts is quite similar to Credit Cards - you've a contract to fulfill on due date.
The different between the two is 1) has the ready cash to cover the shorts, 2) has the trust of the Broker to finance his shorts and may induce him to sell more (of course, within his credit limits just like credit cards).
Short Sellers are not criminals - they're just Traders acting on their own decisions based on their researches and strategies. As in any strategy, it works for one and may not work for others.
As you've just seen, Shortist could also lose money.
Stock px movements is never the same as walking up and down a hill. If it is that simple, investing in the stock Market is so much simpler as you're in controll how fast to move up and down :) Cheers!
With the SGX infos I read so far, they're not banning ss like westerners do, but try to regulate it. They impost heavy fine for n-s in a way to discourage it BUT if one is confident and dertermine, he can still get around it and do it. The rest of the ss within the same day and on borrowed shares are still permitted.
What's your interpretation on ban on short selling?
It seems to me that if you cover your short within the day, it is still allowed? Reason being that it will not trigger SGX buy-in, and therefore will not incur the $1000 penalty and other fees?
I am not sure if I interpreted it correctly... what do you think? Please provide your view, thanks!
No leh! He's already a murderer, unless you wanna join him into the gallow? Oh ..it could turn out to be the same person....shortist who lost 1m + Yishun murderer???
sure, must confirm. if for the case of the idiot man who killed 3 persons lately, I will throw him off the parapet wall, instead.
Farmer ( Date: 23-Sep-2008 10:53) Posted:
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no buyers.
left_bug ( Date: 23-Sep-2008 10:54) Posted:
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Do u mean to say without the bad guys throwing stones, one would not fall into a manhole or something? Just curious that's all.
Without short sellers, how to get stock at lower price?