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Salient features
� A CFD is a tradable instrument that mirrors the movements of the asset underlying it. It allows for profits or losses to be realized when the underlying asset moves in relation to the position taken, but the actual underlying asset is never owned. Essentially, it is a contract between the client and the broker.
� Ownership � Risk
� https://masnetsvc.mas.gov.sg/FID.html
Cost of trading
� Commission per trade
� Daily financing
� Dividends
� Data fee
� http://www.ig.com/sg/shares-cfd-details
3 key CFD strategies
� Long positions (substitute for contra-trading*)
� Sell positions (substitute for naked shorting, share borrowing)
� Hedging for risk protection (long stock, short CFDs)
� http://portal.iocbc.com/help-and-support/share-borrowing.html
� https://www.phillip.com.sg/stocks-a-shares/shares-borrowing-and-lending.html
� http://sgmarketwatch.com/2011/04/what-is-singapore-contra-trading/
� http://www.straitstimes.com/business/new-sgx-trading-rules-what-you-need-to-know
Hedge
� 100% hedge i.e. go to neutral
� Partial hedge
� Part of a plan e.g. ownership, dividend, collateral etc.
Own stock, sell CFD to go neutral
� Mr Tan owns 10,000 shares of XYZ.
� When XYZ was trading at $30, he monetized it by using it as a collateral and received $24 per share.
� With 240k in hand, he made down payment for a new condominium.
� He expect XYZ shares to be stable, that he continues to receive yearly dividends of around 2.5%.
� His life was in shambles when XYZ fell to $10 in a financial crisis.
Alternate timeline: 100% hedge
� Sensing a crisis, Tan sold 10,000 XYZ CFDs at $28. He lost $2 per share on his stocks.
� But when XYZ fell to $10, his $18 dollar gain per CFD offset corresponding stock losses.
� He was ‘neutral’.
� When XYZ reversed to $12 per share, Tan sense a recovery and closed his CFDs at $16 gain.
� His XYZ exposure to market risks is now $12.
Danger Signs You Risk Ignoring
� 12 blue chips with new 52-week lows � Genting Singapore, Global Logistic � Golden Agri, Hutchison Port � Jardine C & C, Jardine Strategic � Keppel Corp, Noble Group � Sembcorp, Sembmarine � SIA Engineering, Starhub
Trend is over (http://bit.ly/8bluechips)
� BN4 Keppel Corp – TL from 1998 broke last year.
� CC3 Starhub – TL from 2005 broken in May 2 this year.
� J36 Jardine Matheson – TL 1998 - 2015.
� J37 Jardine Strategic – TL 2003 - 2015.
� S51 Sembmarine – TL 2001 – 2014.
� U96 Sembcorp - TL 2002 – 2014.
� E5H Golden Agri - TL 2002 – 2013.
� C6L Singapore Airlines - TL1998 – 2013. Same TL November 2014 – May 2015.
Price falling with high volume
� A17U Ascendas REIT
� BN4 Keppel Corp
� C07 Jardine C & C
� C09 City Development
� MC0 Global Logistics
� N21 Noble
� O39 OCBC
� U96 Sembcorp - TL 2002 – 2014.
This is the best time now speculate on a direction or to apply protection to portfolio
If market is that bad should I stay away?
Strategies for bear market
1. Start with a list of stocks that have short CFDs avail. https://www.ig.com/sg/shares-cfd-details
2. Identify sectors that are already trending down
3. Sell into biggest losers after they have retraced
4. Rotational play
5. Do not do counter trend
6. Time with broad market sentiment based on STI
Strategies for bear market 1. Scan for 52-week highs and lows
2. Scan for high volume
3. https://www.ig.com/sg/ig-market-screener
4. http://www.sharesinv.com/prices/top-52-week-low/
5. https://www.google.com/finance?ei=-6nRVbm6Hs2kugTQ7YTIAw#stockscreener
6. http://www.investing.com/charts/stocks-charts
Best stocks for CFD trading
1. Blue chips, market darlings
2. Liquidity, availability of scrip, fast-moving
3. Responsive to market sentiments, story-driven
4. Trading at $1 - $10 region
5. Has made new 52-week high or 52-week low
6. Belongs to growing/troubled sector
Buy strongest sell weakest - stocks
1. http://www.ftse.com/products/indices/SGX-ST
2. http://www.ftse.com/Analytics/FactSheets/Home/FactSheet/ProductRegions/OTHER/1/ASIA/1
Buy strongest sell weakest - sectors
1. http://www.ftse.com/products/indices/SGX-ST
2. http://bit.ly/FTST-factsheets
STI 1-year heatmap (http://bit.ly/sgxheatmap)
‘All sectors’ 1 month performance ‘Financials’ 1 day performance
Within sector – which stock is weakest?
‘Financials’ 3 month performance ‘Financials’ 1 day performance
9-point crash guide (http://bit.ly/9crashguide)
1. 10% corrections in the stock market are healthy and nothing to worry about.
2. 15% corrections might even be labeled ‘oversold’.
3. Be very worried if market crosses 20% mark. Bad markets go into a tailspin worsened by margin calls and forced selling.
4. Illiquid stocks may gap down repeatedly due to absence of quotes.
5. Steep rallies can still happen in the bear market.
6. Don’t fall in love with any particular stock. Be quick to cut losses and never average down.
7. Price may drop on low volume but price drops on high volume are almost certainly bad. Never catch a falling knife.
8. A crisis is a good opportunity. Always have a reserve. Some of the most successful old-timers in the stock market did not trade. They made their money buying generational lows.
For individuals who sign up account today 3 Shenton Way #25-02 Shenton House (S) 068805
Register: [email protected] or SMS 8298 6982
IG platform training 27 August 7pm – 9pm
CFD trading for SGX listed stocks in Singapore Monday 17 August 2015 7 – 9.30pm
3 Shenton Way #25-02 Shenton House (S) 068805 Register: [email protected] or SMS 8298 6982
$40 per pax
The end