CFD hedging

[Ardyne]

Hold 200 seek shares from ages back. a shares issue allows me to buy 1924 shares at $2.60. Currently trading at $3.80.

Was going to short cfd them at 3.80(if Its allowed) and sell my issued shares when I receive them. Am I missing something here or is this almost money for nothing??

 

[johnnyg]

You assume that the price of the share is going to stay @ $3.80 after the placement @ $2.60? It seems not as you want to hedge your original holding.

 

[skc]

Hold 200 seek shares from ages back. a shares issue allows me to buy 1924 shares at $2.60. Currently trading at $3.80.

Was going to short cfd them at 3.80(if Its allowed) and sell my issued shares when I receive them. Am I missing something here or is this almost money for nothing??

Your approach is correct. It is not so much hedging, but simply locking in the profits from the discounted share placement price.

Just remeber to cover your CFD shorts (i.e. buy back) when you sell the newly issued shares.

Another thing to note is whether you are guaranteed the amount of shares you've applied for. If not, then you might end up with a net short if the 1924 shares were scaled back.

 

[beamstas]

Hold 200 seek shares from ages back. a shares issue allows me to buy 1924 shares at $2.60. Currently trading at $3.80.

Was going to short cfd them at 3.80(if Its allowed) and sell my issued shares when I receive them. Am I missing something here or is this almost money for nothing??

yes

 

[kam75]

Hold 200 seek shares from ages back. a shares issue allows me to buy 1924 shares at $2.60. Currently trading at $3.80.

Was going to short cfd them at 3.80(if Its allowed) and sell my issued shares when I receive them. Am I missing something here or is this almost money for nothing??

Just make sure you place a protective stop on your CFDs and get out if they go against you. SEK is in a uptrend so you may want to have a think about the o'l saying "the trend's ya friend" .

 

[beamstas]

Just make sure you place a protective stop on your CFDs and get out if they go against you. SEK is in a uptrend so you may want to have a think about the o'l saying "the trend's ya friend" .

What?
Do you even know what hedging is?
He already holds the shares LONG

 

[Ardyne]

thanks guys. Especially for the potential pitfalls.

 

[skc]

thanks guys. Especially for the potential pitfalls.

Just make sure you ignore post #5. Didn't seem like Kam understood your situation at all.

 

[Ardyne]

I was actually thinking of going long on the $2.60 and placing a conditional (?) short order in at say $3.70 so if it keeps heading up...great . if it drops then the short will be opened for me. I understand a gap down might burn me a little but I'd be prety unlucky I reckon. Knowing my luck they'd call in administrators after the long entry

 

[johnnyg]

Am I missing something here or is this almost money for nothing??

Looking very strong Ardyne!

 

[Ardyne]

looking quite good hey. Its weird, the shares I couldn't have given a crap about is turning into one of my more successful endevours. I'm sort of trailing the short order up with it so instead of the entry being $3.80, i've made it $4.05. I'll give it a chart tonight and see if I can spot a good support level. I cant really assume I'm going to be allocated the whole 1924 shares yet so going short will be a little tricky. we'll see what I get.

Now just waiting for anz.

 

[dracula]

Hi Ardyne,

How did you go with ANZ? Did you short sell any while waiting for the new shares?
I was expecting a scale back and only shorted 250 shares @ $16.40
But I am now fully hedged until Tue morning

dracula

 

[Ardyne]

Only just saw the reply. Sorry Drac..
Because I borrowed the $15,000 for the 1042 shares I bought a $17.00 put out till May 10 for $2.54. (They were trading at $17.00 or close to at the time).
Meaning that $17 - $14.40 = $2.6 which is now guaranteed so it leaves me with a no/Low risk trade if you include Dividends and interest to be paid on the $15000 till MAY 10.

So yes I did hedge but not with CFD's.

P.S My option account "Talks" to my margin account so I can never get margin called on the $15,000 as long as I have the put

 

[skyQuake]

Only just saw the reply. Sorry Drac..
Because I borrowed the $15,000 for the 1042 shares I bought a $17.00 put out till May 10 for $2.54. (They were trading at $17.00 or close to at the time).
Meaning that $17 - $14.40 = $2.6 which is now guaranteed so it leaves me with a no/Low risk trade if you include Dividends and interest to be paid on the $15000 till MAY 10.

So yes I did hedge but not with CFD's.

P.S My option account "Talks" to my margin account so I can never get margin called on the $15,000 as long as I have the put

Well done.

Out of curiosity, was there a $14.40 call at/around the same time expiry as the SPP? That would have been nice too.

 

[Ardyne]

Not sure but if you borrow money to buy shares its always good to have some sort of hedge I beleive.

I did consider doing what you posted but what I did fits in with what I do all the time. I borrow money..hedge and roll puts up and down along the way to expiry this just saved me a roll up from $14.40 to $17.00.

 

[skyQuake]

Not sure but if you borrow money to buy shares its always good to have some sort of hedge I beleive.

I did consider doing what you posted but what I did fits in with what I do all the time. I borrow money..hedge and roll puts up and down along the way to expiry this just saved me a roll up from $14.40 to $17.00.

Ahh, I meant that you could have possibly sold the call @ $14.40 with exp on SPP date, would that have been less brokerage than rolling the puts?

 

[Ardyne]

oops, I'll put my reading glasses on.

I'm not 100% sure I know what you mean. I think you mean Collecting the Call premium instead of selling the shares when the SPP shares are delivered. If so.. Sure you could as long as you can live with the obligations of early exercise or ANZ tanking to say $12.00.

P.S I am far from an options expert

 

[skyQuake]

oops, I'll put my reading glasses on.

I'm not 100% sure I know what you mean. I think you mean Collecting the Call premium instead of selling the shares when the SPP shares are delivered. If so.. Sure you could as long as you can live with the obligations of early exercise or ANZ tanking to say $12.00.

P.S I am far from an options expert

Cheers, forgot the fact that its an ITM option, would be screwed if it tanks to $12
maybe one of the options traders can enlighten me on a better method.

 

[dracula]

Only just saw the reply. Sorry Drac..
Because I borrowed the $15,000 for the 1042 shares I bought a $17.00 put out till May 10 for $2.54. (They were trading at $17.00 or close to at the time).
Meaning that $17 - $14.40 = $2.6 which is now guaranteed so it leaves me with a no/Low risk trade if you include Dividends and interest to be paid on the $15000 till MAY 10.

So yes I did hedge but not with CFD's.

P.S My option account "Talks" to my margin account so I can never get margin called on the $15,000 as long as I have the put

Excellent.
It is now a risk free trade