Buying shares with money you dont have...

[jono1887]

I've been thinking about this recently. With the T+3 system, all my trades made on a single day are settled at the same time 3 days later.

Say hypothetically, i bought stock $100K of stock XXX on open, and sold an hour later getting $102K, this trade would be settled 3 days later and my account would just be credited 2K right? So what i'm trying to find out is if I could make this trade without having the $100K in the first place - say I only had $20K. I know this is risky, but considering the massive increases during open of alot of resource stocks this week... i think its possible to reap a few K profits.

I do realise the risk involved if the price moved the opposite direction, but is this possible???

 

[jono1887]

* I was going to try this with FMG this morning. So relieved that I didn't... opened at 4.48 and is now 4.20... i would have lost $6k

 

[Timmy]

Has been known to have been done a few times - depends on your relationship with your broker.

Or you could just trade DMA CFDs using the leverage allowed by the provider.

 

[Krusty the Klown]

You wouldn't be able to make the initial trade without sufficient available funds in your account would you?

 

[Krusty the Klown]

Has been known to have been done a few times - depends on your relationship with your broker.

Can you please post back here if it works Jono?

 

[cutz]

I've been thinking about this recently. With the T+3 system, all my trades made on a single day are settled at the same time 3 days later.

Say hypothetically, i bought stock $100K of stock XXX on open, and sold an hour later getting $102K, this trade would be settled 3 days later and my account would just be credited 2K right? So what i'm trying to find out is if I could make this trade without having the $100K in the first place - say I only had $20K. I know this is risky, but considering the massive increases during open of alot of resource stocks this week... i think its possible to reap a few K profits.

I do realise the risk involved if the price moved the opposite direction, but is this possible???

I assume you're with commsec, i think they give you an initial credit limit of 25K.

 

[jono1887]

You wouldn't be able to make the initial trade without sufficient available funds in your account would you?

Well with comsec you have to accounts, one for settling the trades and the other is the high interest one. So whenever i make a trade, theres actually no money in the settlement account, I transfer it from the high interest one on the settlement date.

Can you please post back here if it works Jono?

I dont think i want to try after watching it today... its very risky! especially considering you only have 1 day for it to recover, you dont really have the option to hold it and ride it out.

I assume you're with commsec, i think they give you an initial credit limit of 25K.

yes im with comsec, not sure about this credit limit, the largest trade ive made is only about 24k so its still under if that's the case.

 

[Prospector]

You cant do it with NAB online. Has saved me a couple of times when I almost used the wrong entity (I trade in 3 different ones)

 

[jono1887]

You cant do it with NAB online. Has saved me a couple of times when I almost used the wrong entity (I trade in 3 different ones)

what do you mean by 3 entities? 3 different brokers or 3 different names/accounts?

 

[jono1887]

ok, ive tried it and the order couldn't go through.. i need to place a deposit of some kind if i want to make a trade that large. has anyone been successful doing this with another broker?

 

[Kez180]

I have done this about 10 times with commsec....

Your purchasing limit is automatically adjusted based on the assets you hold with CBA/Commsec...

It is basically leveraging massively without the loan process...

It is really nothing short of gambling... I Did it a couple of times during the OMG days of the credit crisis ie as the USA was voting on the 700 Billion bail out etc...

What I was doing is using the ~$2000 worth of other shares I had as the stop loss value so I was buying about $11,000 of a share at open, or shortly after depending on how the market was looking, I'd be trying to hit over corrections...

Ie the market fell 2% on one day, I put a low order in to buy a couple of shares near close and hope that there was a panic sell at the end of the day.

This worked a couple of times, but it went bad once and I lost all of my collateral, I had forgotten to pull an order I had placed late friday, I only realised it was in market monday at about 2 o'clock... It took me down to about $500 in shares the gf banned me after that and I haven't traded since...

 

[cutz]

ok, ive tried it and the order couldn't go through.. i need to place a deposit of some kind if i want to make a trade that large. has anyone been successful doing this with another broker?

So how big was your attemped trade, >25K ?

 

[jono1887]

So how big was your attemped trade, >25K ?

100k, with 18k in the account

 

[Kez180]

So how big was your attemped trade, >25K ?

Lol if you have to trade with money you don't have anything over 25k is a bad idea anyway...

I wonder what they would do if a uni student somehow managed to lose $100,000 with no tangible assets and **** all income...

 

[jono1887]

This worked a couple of times, but it went bad once and I lost all of my collateral, I had forgotten to pull an order I had placed late friday, I only realised it was in market monday at about 2 o'clock... It took me down to about $500 in shares the gf banned me after that and I haven't traded since...

How much over your actual funds were you trading? eg say you had 5k, were you trading 100% more - 10k?

how much did you end up loosing? I was actually thinking of not in between days but just in the first 10 minutes of trading where the large fluctuations happen.

LOL, the gf banned you? sounds like you have an overpower gf ::
unless you blew the funds for your wedding or something....

 

[MichaelD]

This seems to be a good idea on the surface, but here's the catches;

1. It falls apart if the stock you've just bought goes into a trading halt.
2. It falls apart if you make a trading error (eg forget that the market is closing early today because of a public holiday the next day and thus end up holding an extra day).
3. It falls apart if the trade changes status (eg goes Ex-Dividend)

You then need the full amount of the trade available in your account on T+3 to settle.

I can assure you from extensive experience trading this way that these glitches happen far more often than you think - around about 1 in 30 of my trades are affected in this way.

There are two major differences with my trading, though;
1. I have a positive expectancy trading plan. i.e. I'm not gambling.
2. I have cash stashed away ready to transfer to the trading account in a hurry if needed.

Oh, and from your other comments in this thread - don't confuse brains for a bull market.

 

[nunthewiser]

hi guys . what a great idea , buying shares with other ppls money

just a quick querie........... what ya gunna do if that stocks goes into a TRADING HALT!.u got the money to cover settlement ?

just trade with your own cash , dont be silly

no offence intended

 

[cutz]

100k, with 18k in the account

OK,

I'm not surprised, definitely not enough collateral.

In your case i suspect 43K would be your limit but i'm not 100% on this, i don't day trade stocks through commsec.

 

[jono1887]

Lol if you have to trade with money you don't have anything over 25k is a bad idea anyway...

I wonder what they would do if a uni student somehow managed to lose $100,000 with no tangible assets and **** all income...

its not like the stocks i trade (large cap resources) are gonna go bust or fall over 30% in day so its really the bank thats risking anything, its mostly me and my capital

 

[nunthewiser]

LOL ...seems micheald had covered it while i was typing .........

as you were