Easiest Ways to Short the Market

[MichaelD]

Yep, my fault for a fuzzy answer - I was referring to long term trend following of shares. Futures/currencies are a different ball game.

 

[Kauri]

And another gotcha with CFD providers is that if the underlying goes into a trading halt, you'll have to pony up 100% of the margin.

Are you sure, I have been through several trading halts and never had to pony up anything??

 

[MichaelD]

Are you sure, I have been through several trading halts and never had to pony up anything??

It's in the PDS for IG Markets for stocks you've shorted that they may margin call you to 100% if the stock goes into a trading halt.

 

[Kauri]

It's in the PDS for IG Markets for stocks you've shorted that they may margin call you to 100% if the stock goes into a trading halt.

Is that under the Suspension and Insolvency clause, or maybe the Force Majeure clause???? Below is all I could find.

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We will specify the margin percentage required on your CFD at the time that you open the CFD. However, we
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reserve the right to alter that percentage during the time that the CFD remains open (including, for example, under
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volatile market conditions; see section 5.15). In extreme conditions or situations percentage or per-contract margin
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requirements higher than those shown in the Contract Details may apply. This happened in the market crash of
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October 1987, the Kobe earthquake of 1995 and the aftermath of 11 September 2001. It could also occur if, for
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example, the company to which a share CFD relates goes into receivership or insolvency. If any such event should
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occur, and we increase the required margin levels as a result, we will take steps to notify you if you already have an
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open CFD, or, if you wish to open a new CFD. We will notify you if we change the margin percentage on an open
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CFD, and the further amount of money required from you to keep the CFD open.
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[MichaelD]

Below is all I could find.

I wonder if this was one of the recent modifications to their PDS as I'm sure I read specific mention of "up to 100% of the value of the position" in their PDS - what you're quoting is much more vague that what I remember reading.

 

[Broadway]

I'm new to shares as well, but it seems to me that the best way to make money consistently with common shares on an intraday session is by shorting.

There seems to be plenty of days where you get long steady downward fades that represent a very easy ride to get on and watch it fall all day long.

On the other hand, shares seem to rise in one of only 2 ways, both really hard to catch and/or predict. Either by gapping up overnight or by climbing so fast intraday that unless you have some computer software that alerts you to a stock about to take off, then I usually miss it or it mostly doesn't cover brokerage. Stocks that rise for a long time at 45' are rare intraday, and usually only when the all ords is having a gradual up day as well. Definately rare on a down day.

On that point, if anyone does know of something like an intraday RSI trendcatcher program that works real time with an ASX monitoring program, could they mention something here please. (thats for intraday trading, not end of day.)

Back to shorting common shares. I am looking into the shorting method mentioned at the TraderDealer site called 'securities lending'. I dont fully understand it yet but they have a relationship with Opes that allows you to short the market over any time frame at a cost of $50 plus the in and out fee of $33 each. ($116 total) So you probably want to be trading with at least 30k. This means the share has to decline at least 0.38 % (if you use 30k) before you start making money, which to me doesnt seem too hard, given the long declines I see on some intraday stocks.

The other advantage is the 'no up tick rule' which can be a cause of short squeezes I believe. ( I think this is where the price starts rising and shorters cant exit their trade because they need a down tick to do it. Can be a costly rule apparently.)

CFDs I guess are another option, you can go long or short on these, but I think the real killer with these is the interest rates that really wipe your initial capital in the long run.

So i'm looking into TraderDealer/Opes, currently their application process is a little more complicated than the website would have you believe. Apparently the shorting is executed through the same common webiress program that alot of brokers allow clients to trade with. And you just need to open a macquarie CMT account that holds the funds while you trade and gives you about 5.5% interest while your money sits in the account.

So hopefully this info can help some other beginners like me.

ps. I dont work for trader dealer or opes, if the question arises. I will keep this forum informed of how it all goes if people want to know.

Happy trading.

 

[nizar]

This is one of the main reasons I moved to trade stocks in the Evil Empire.

Want to short a stock? Just press sell. Brokerage is still < $0.01 per share.

Re recalling shares: Has not happened to me, but has happened that shortable shares to borrow are not available.... even happened on QQQQ once. But is quite rare really.

Wayne,

With IB can you go short just as easily as you go long?
Do you know if you can you short all the stocks in s&p500?
Or is it fairly restrictive over there as well...?

With an easier to short market and such cheap brokerage, i think i may be joining you soon in the Evil Empire.

 

[professor_frink]

Wayne,

With IB can you go short just as easily as you go long?
Do you know if you can you short all the stocks in s&p500?
Or is it fairly restrictive over there as well...?

With an easier to short market and such cheap brokerage, i think i may be joining you soon in the Evil Empire.

Evening Nizar,

IB have stated that they do have plans to offer the ASX at some stage(I haven't heard of a timetable for this yet). If they can offer anything close to the kind of shorting ability/ brokerage rate that they offer for the US market, you may not need to be make the move. Might be something to look into.

 

[nizar]

Evening Nizar,

IB have stated that they do have plans to offer the ASX at some stage(I haven't heard of a timetable for this yet). If they can offer anything close to the kind of shorting ability/ brokerage rate that they offer for the US market, you may not need to be make the move. Might be something to look into.

Thanks Prof.
I'll look into it.
Either way looks like ill be signing upto IB.

 

[wayneL]

Wayne,

With IB can you go short just as easily as you go long?

Yes, as simple as pressing the "sell" button. You just need to have the "margin" account.

Do you know if you can you short all the stocks in s&p500?
Or is it fairly restrictive over there as well...?

Here is a list of shortable stock http://www.interactivebrokers.com/e...cntry=usa&tag=United States&ib_entity=llc&ln= (make sure you have plenty of bandwidth, the list goes on forever ) In practise, I never even check and rarely strike one you can't short. Occasionally you'll run into one that's not available at that point, but rare.

With an easier to short market and such cheap brokerage, i think i may be joining you soon in the Evil Empire.

Be aware of exchange rate risk which can be a factor.

Cheers

 

[nizar]

Be aware of exchange rate risk which can be a factor.

Cheers

Oh damn... never thought of that...

If AUD/USD achieves parity in a few years, then that wouldnt be all too good for a portfolio is US dollars... Hmm...

 

[wayneL]

Oh damn... never thought of that...

If AUD/USD achieves parity in a few years, then that wouldnt be all too good for a portfolio is US dollars... Hmm...

You can hedge buy buying back your AUD via forex or currency futures... or actively trading the moves