The following information herein does not represent the
policy of any bank or financial institution and is not intended to be, and must not be construed to be, a solicitation of investment funds or a securities offering.
Short (Finance) or short selling/shorting:
In finance, short selling or "shorting" is the practice of selling securities the seller does not then own, in the hope of repurchasing them later at a lower price.
More Information: (Taken from Wikipedia)
http://en.wikipedia.org/wiki/Short_selling
In fact there is a very good option on the Investment Market for Money Market Funds, Hedge Funds included particular Investors located in Europe or worldiwde (what will not included the US) to "hedge" their Share Portfolios included intraday if the Stock Market do have a "bearish" situation what in fact is very actually and will not conclude until 2009.
CFD's (Contract for Difference)
A contract for difference (or CFD) is a contract between two parties, buyer and seller, stipulating that the seller will pay to the buyer the difference between the current value of an asset and its value at contract time. (If the difference is negative, then the buyer pays instead to the seller.) For example, when applied to equities, such a contract is an equity derivative that allows investors to speculate on share price movements, without the need for ownership of the underlying shares.
Contracts for difference allow investors to take long or short positions, and unlike futures contracts have no fixed expiry date or contract size. Trades are conducted on a leveraged basis with margins typically ranging from 1% to 30% of the notional value for CFDs on leading equities.
(Taken from Wikipedia)
By meaning:
Shares Portfolios can be "hedged" (Secured) against "bearish" Stock Market with Margen Trade Position.
There are almost 7.000 Contracts available on the International Stock Market that included NYSE, NASDAQ (Blue Chip as others), German, Spain, UK, France, Swiss, Italy, Austria, Japan, Hong Kong and Australia.
Example in British Pounds
1. ABC Corp is trading at 1599/1600 and you think the price is going to
fall in value.
2. You decide to sell ABC corp CFDs at 1599.
3. You decide to trade 1000 shares. You sell 1000 CFDs at 1599 giving you a position size of £15990. 1000 x 1599 = £15990
4. Commission charge of 8 basis points. A basis point is 1/100th of a percent. £15990 x 0.08%=£12.72
5. Your margin requirement for ABC Corp is 5% therefore £799.50
6. Two days later you see that ABC Corp has fallen to 1578/1579p
7. Therefore you choose to buy CFDs in ABC Corp at 1579 and realise your profit. The commission charge of 8 basis points also applies to the closure of the trade, equaling £12.63
8. You sold at 1599 and bought at 1579 which means ABC Corp fell by 20 pence. 20 pence x 1000 CFDs = £200 revenue.
9. You held the CFD position for two days, and because you went short you were effectively loaning us money so you receive two nights financing charge. This is how you calculate the financing you will receive;
£15990 (value of the position) x Libor - 3% (which in this instance = 2%) /365 (number of days in the year) x 2 (number of days position is held)
= £1.75
10. Therefore you add the financing payment to the revenue, and deduct the commission charges and realise a profit of £176.33
Margen Call: 799.50
Profit: 176.33 or 22.05%
If the Trader would do shorting with pyisical share price of 1599 he would have a lost of 20 pence a Share x 1.000 Shares = 200 Punds.
CFD's Trading Market is like FX Market a High Risk Fact for Investors. But and if this risk will be included as also SL Limits this may a good options.
Online Accounts are able to open with 2.500 EURO (included through well know Banking Institutes) up to Private Banking Account with minimum 250.000 EURO.
Hope that this information will help.
DDrep
