Options, ASX CFDs, futures, minis... which one?

[RazzaDazzla]

Am looking to get into some trading. I have previously traded ETOs quite unsucesfully and with a bit of a scare.

I was mainly writing credit spreads (Selling say a $10.00 call and buying a $10.50 call as protection) and vice versa with puts. Whilst not winning many and having no money management stratergy what so ever, the following happened;
I was in a RIO position some 5+ years ago and they announced a share buy back. As I had sold a call, I was liable for basically the balance of the value of this buyback. I still remember when my broker called me up telling me I was up for about a $50K loss! As a uni student at the time, i laughed, then cried, then rolled into the fetal position.

A letter latter to the broking firm (blah blah, I pay for full service brokerage, and I was never warned about this buy back) they covered my buy back obligations.

Anyway, I am looking to get back into some trading with about $10-$20k in my war chest.

So what product/market should I choose?
Options - I had been frustrated previsouly with lack of liquidity and the feeling of being taken advantage of by Market makers. Whilst i realise their benefits with selling calls over stocks, buying puts for protection etc, are they worth trading?

ASX CFDs - I beleive these to be more 'transparent' then other CFDs offerd by other providers. I've read a few threds about stops being hit out of the blue, and other 'funny' goings on. So I beleive if I chose CFDs, these would be the way to go.

Futures - I have only just began my readings on futures, but beleive that this really is a day trading, whatch the screens second by second kind of sport.

Mini CFDs - I was all excited when I first read about ABN AMro minis, however I beleive that the spread between bid and ask can be a bit 'funny' at times. Also, as it is a 'warrant' product, I beelive it truly is only intended to benefit the issuer (ABN AMro).

I am looking into getting a margin loan facility (I have another thread enquriing about this) but this would be more of a long term adventure.

If anyone has had experience with some or all of these afore mentioned trading instruments, I'd love to know your words of wisdom, hear your stories, etc.

Cheers
Ryan

 

[DennisTheTrader]

.....I still remember when my broker called me up telling me I was up for about a $50K loss! As a uni student at the time, i laughed, then cried, then rolled into the fetal position.
A letter latter to the broking firm (blah blah, I pay for full service brokerage, and I was never warned about this buy back) they covered my buy back obligations...

haha! Lucky you were covered!

I can only comment on CFD’s and Options since I don’t have experience in the others you mentioned.

I prefer CFD's. With options, I dont like that fact that even if the stock price hits your target, the option price would still depend on the market makers who are also trying to make money on the spreads. ...this was an extra variable I could do without. Whereas CFD's uses the stock price and thats it.

Unless your trading style takes advantage of the time decay of the option contracts, then I personally prefer CFDs for simple directional trades (buy when i'm bullish, sell when i'm bearish).

Just be aware of the unlimited loss potentional of CFD's (like writing options contracts as you did). However this can be controlled using Guaranteed Stops.

 

[RazzaDazzla]

haha! Lucky you were covered!

I can only comment on CFD’s and Options since I don’t have experience in the others you mentioned.

I prefer CFD's. With options, I dont like that fact that even if the stock price hits your target, the option price would still depend on the market makers who are also trying to make money on the spreads. ...this was an extra variable I could do without. Whereas CFD's uses the stock price and thats it.

Unless your trading style takes advantage of the time decay of the option contracts, then I personally prefer CFDs for simple directional trades (buy when i'm bullish, sell when i'm bearish).

Just be aware of the unlimited loss potentional of CFD's (like writing options contracts as you did). However this can be controlled using Guaranteed Stops.

Dennis,

Yeah, I was equally frustrated with that lack of liquidity in options. Though I agree, they are probably best used for writing and utiliisng time decay.

Do you trade ASX CFDs? Do they have guaranteed stops?

Can you point me to some reading on how these guaranteed stops actually do work?

Also, do Interactive Brokers allow trading of ASX CFDs?

Cheers
Ryan

 

[The_Snowman]

I suggest you go to the first, the biggest and the best CFD broker on the net and open a demo account at
IG Markets
They have all the answers to your questions, all your educational needs..... check it out..........

 

[RazzaDazzla]

they trade ASX CFDs?

I like the idea of IB as it appears as a 'one stop shop' for all my equity needs.

 

[The_Snowman]

they trade ASX CFDs?

I like the idea of IB as it appears as a 'one stop shop' for all my equity needs.

Your call, end of thread..........

 

[RazzaDazzla]

so do they trad ASX CFDs?

end of thread...

(pfft what was that?)

 

[DennisTheTrader]

Dennis,
Do you trade ASX CFDs? Do they have guaranteed stops?

Can you point me to some reading on how these guaranteed stops actually do work?

Also, do Interactive Brokers allow trading of ASX CFDs?

Cheers
Ryan

Hi Ryan

Guaranteed Stops is when you pay a small fee which allows you to exit the trade at a set price. Eg. You go long at $20 and set the guaranteed stop at $19. So even if the stock drops to $3, it automatically sells it off at $19

To be honest I dont know the difference between CFD's and ASX CFD's. But I agree with snowman, just signup to IG Market's demo account, read their turorials about guaranteed stops, etc and more importantly place some trades.

You'll be suprised how easy it is just by playing around in the demo.

 

[mazzatelli1000]

haha! Lucky you were covered!

With options, I dont like that fact that even if the stock price hits your target, the option price would still depend on the market makers who are also trying to make money on the spreads. ...this was an extra variable I could do without.

Unless your trading style takes advantage of the time decay of the option contracts....

Totally concur with lack of liquidity in Oz market.

Even when taking advantage of time decay, in trying to close out, there is not enough liquidity. I have been left to watch the short option value go up.

So i only trade US options, but even there, there can be liquidity issues for certain stock/ETF's.

Been having a look at options surrounding the Kospi though.......

 

[RazzaDazzla]

I signed up for my Demo IG markets account.

Looks ok.

Stupid question, but how do I trade CFDs in the demo account? I can see indicies, commodoties, shares etc on the list on the left, but no CFDs?

Also, can you trade ASX CFDs on IG markets?

 

[rossw]

Been having a look at options surrounding the Kospi though.......

Most liquid options market in the world...

 

[The_Snowman]

I signed up for my Demo IG markets account.

Looks ok.

Stupid question, but how do I trade CFDs in the demo account? I can see indicies, commodoties, shares etc on the list on the left, but no CFDs?

Also, can you trade ASX CFDs on IG markets?

I don't understand the question; do you mean CFD's on the stock ASX or the CFD's that trade on the ASX? I think the ASX has their own brand of CFD's, which they claim are better (?) but you can trade 1,000's of CFD's with IG, not to mention currency, indices, oil, gold - you name it. Also, you can trade the AUS 200 CASH 200 Index for 0.25 per point, while you are learning, with no transaction fees on index trading!! Have a look at today.........

 

[The_Snowman]

I signed up for my Demo IG markets account.

Looks ok.

Stupid question, but how do I trade CFDs in the demo account? I can see indicies, commodoties, shares etc on the list on the left, but no CFDs?

Also, can you trade ASX CFDs on IG markets?

O, I forgot, the "shares" you see on the left, they are not shares, they are the CFD's on the shares, guess there is no better way to do it!

 

[lasty]

CFD's arent allowed in the US so IB cant do them.
www.Kineticsecurities.com.au do CFD's, Stocks, Options, Futures.

One stop shop so check them out !

 

[acedrum]

I signed up for my Demo IG markets account.

Looks ok.

Stupid question, but how do I trade CFDs in the demo account? I can see indicies, commodoties, shares etc on the list on the left, but no CFDs?

Also, can you trade ASX CFDs on IG markets?

If you trade ANYTHING at all in the list on the left you are trading a CFD (contract for difference).

 

[mazzatelli1000]

Most liquid options market in the world...

Hey Ross,

Its something I have heard/seen alot...but havent met anyone yet whose had first hand experience trading them.

Have you at all?? Just wondering --- would be great to hear some war stories!!

 

[The_Snowman]

CFD's arent allowed in the US so IB cant do them.
www.Kineticsecurities.com.au do CFD's, Stocks, Options, Futures.

One stop shop so check them out !

I did, and it looks like you need several dealing platforms and the data cost is high, much prefer IG Markets

 

[The_Snowman]

they trade ASX CFDs?

I like the idea of IB as it appears as a 'one stop shop' for all my equity needs.

CFD's arent allowed in the US so IB cant do them.
www.Kineticsecurities.com.au do CFD's, Stocks, Options, Futures.

One stop shop so check them out !

So much for that idea, Razza......... are you still here????

 

[lasty]

Hi Snowman,

Kinetic securities white label IG markets platform. Its called CFD Centurion.
So no difference there with CFD's.
Kinetic white label IB's platform called Global Trader.
They also provide ASX Stocks and Options.
In other words one stop shop.

 

[professor_frink]

So much for that idea, Razza......... are you still here????

They do offer shares on margin, so do pretty well the same job as CFD's(unless of course you need an insane amount of leverage that comes with a CFD, which nobody does).

And they actually offer access to a real market where you won't be trading against your broker. The FX side of IB is also an ECN, far superior to the MM model offered by CFD providers.

Suprised that you can even try and compare the 2