Financial Spread Betting And Short-Selling Shares
May0
Spread betting shares has certain advantages over traditional shares dealing. Two of the advantages are that because you are trading on margin you benefit from increased leverage and your profits are free of tax in the UK. Conversely, when you buy shares through traditional channels you do benefit from having rights as a shareholder.
Spread betting shares has another advantage which is that it is just as easy to go ‘long’ (buy) or ‘short’ (sell).
{Short-Selling Shares}
When you go short on a share in traditional shares trading many traders see this as almost betting against the general upward trend of the market.
Short-selling shares the traditional way can be a lengthy process. It involves borrowing shares from an existing company shareholder, selling them and then buying them back at a lower price than which you sold them and thus making a profit.
If an investor sells shares that they have not yet borrowed this is called ‘naked’ short-selling. Many see going short as unnatural, and this is why in times of economic recession the practice can cause controversy. Germany recently introduced a ban on ‘naked’ short selling on shares in its top financial institutions, credit default swaps and government bonds.
It was a bold move designed to help stabilise the financial markets and stop investors from speculating that the condition of many troubled European economies will worsen. It was interesting to note that many leading European countries did not introduce similar bans.
Unfortunately, in the short-term at least, the move had the opposite effect as leading share indexes fell around the world. Analysts and investors worried that placing restrictions on traders was not really the answer to the problems, that Germany might be protecting its banks and that the move was more evidence of a deep-rooted divide in the eurozone on many levels.
It will be interesting to see if the markets settle quickly after this announcement. When you spread bet on shares or any other financial instrument, because it does not involve physically owning the share or instrument it’s up to you to decide whether you think a company’s share price or financial instrument will rise or fall.
The process is simple, you ‘buy’ (go long) if you think the share price will rise and ‘sell’ (go short) if you think it likely to fall.
It’s important to note that while profits can be magnified, so too can losses so always make sure you understand the risks involved.
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Forex robots are turning up the heat
Oct0
There are so many fx trading buy/sell robots on the advertise that guiding your approach owing to the advice can be overwhelming. I imply from all those claims how can you be sure which one is the best?
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Only decide on the most excellent trade systems
Oct0
It is trouble-free to fall for promoting gimmicks that say they have the unsurpassed foreign exchange rules trading.
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Track Write down
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Investigate Drawdowns
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Buy/sell Timeframe
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There are a lot of fx trading trade scams nowadays
Oct0
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Futures Options and Spreads
Jul0
Please only use these future option examples for educational purposes.
Paper trade them.
I normally write about spread options. Today I want to first take a look at a futures spread. Let’s look at a natural gas/heating oil spread. This is buying one natural gas futures and selling one heating oil futures.
Below are daily, weekly and monthly charts:
Daily
http://deltaneutraltrading.com/062709.bmp
Weekly
http://deltaneutraltrading.com/062709b.bmp
Monthly
http://deltaneutraltrading.com/062709c.bmp
You can trade this as a spread using options. You do not have to just buy and sell the futures. You can buy a call and buy a put instead so you are limited in your potential loss. Even though futures spreads can have less risk, there is still the possibility of unlimited losses.
With buying options, you are limiting the risks. You no longer have unlimited loss potential. But the problem is that you are buying premium. So instead of just buying options, you can buy and sell credit spreads.
For example, from looking at the above chart, we can buy an at the money natural gas call option and sell a natural gas out of the money call. Then we sell an at the money heating oil call option and buy an out of the money heating oil option. We expect the natural gas futures to rise in comparison to the heating oil futures because of the chart.
I go over these types of option spreads in my course. And I look at some market combinations that you might not have thought of. Don’t just use these for the obvious spread markets like, wheat/corn, t-bond/t-note. There are other market combinations for spreads and other ways to come up with the option spreads. You can create a spread using more than one market instead of just two markets. You can also create option combinations that are not typical credit or debit spreads. Think outside the box with commodities options.
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