Shorting penny stocks with CFDs?

[yonnie]

hello guys,

have never traded a cfd in my life, so I need a bit of guidance here.........

with some cfd providers you can trade cfd`s in all ASX quoted stocks including the penny stocks.

if you buy a cfd on a penny stock for $ 10,000 you need that 10k in the account before you buy, because the margin is 100%.

now I sell a cfd on 1 million shares of EIO @ 1 cent = $ 10,000

how much money would I need in my account before I can sell that cfd?

with some providers you can trade physical stocks and cfd`s.

now I sold that cfd on EIO shares for 10k.

with another broker (because I dont need the money in the account when I place the order) I bought 1 million shares of EIO @ 0.9 cents and I transfer those shares to the cfd provider to square the deal for a profit of $ 1,000.

is this possible or is there a better way?

thanks for any input

 

[TabJockey]

Re: Shorting penny stocks with cfd`s

hello guys,

have never traded a cfd in my life, so I need a bit of guidance here.........

with some cfd providers you can trade cfd`s in all ASX quoted stocks including the penny stocks.

if you buy a cfd on a penny stock for $ 10,000 you need that 10k in the account before you buy, because the margin is 100%.

now I sell a cfd on 1 million shares of EIO @ 1 cent = $ 10,000

how much money would I need in my account before I can sell that cfd?

with some providers you can trade physical stocks and cfd`s.

now I sold that cfd on EIO shares for 10k.

with another broker (because I dont need the money in the account when I place the order) I bought 1 million shares of EIO @ 0.9 cents and I transfer those shares to the cfd provider to square the deal for a profit of $ 1,000.

is this possible or is there a better way?

thanks for any input

Go to the casino, same outcome, more fun, better chixxx.

 

[skc]

Re: Shorting penny stocks with cfd`s

hello guys,

have never traded a cfd in my life, so I need a bit of guidance here.........

with some cfd providers you can trade cfd`s in all ASX quoted stocks including the penny stocks.

if you buy a cfd on a penny stock for $ 10,000 you need that 10k in the account before you buy, because the margin is 100%.

now I sell a cfd on 1 million shares of EIO @ 1 cent = $ 10,000

how much money would I need in my account before I can sell that cfd?

with some providers you can trade physical stocks and cfd`s.

now I sold that cfd on EIO shares for 10k.

with another broker (because I dont need the money in the account when I place the order) I bought 1 million shares of EIO @ 0.9 cents and I transfer those shares to the cfd provider to square the deal for a profit of $ 1,000.

is this possible or is there a better way?

thanks for any input

Here's a list of products and their margins from CMC.

http://www.cmcmarkets.com.au/static/documents/cfd/cmc_markets_product_schedule.pdf

EIO is not even on the list for long let alone short. Do let us know if you find a CFD provider who let you short such penny stock.

With the short you will need the same margin as your long. So probably 100%.

You will not be able to transfer your shares to your CFD provider to 'square things off'. They simply don't work that way unless you have some special prior arrangement.

And after you shorted EIO at 1c, and still queueing at 0.9c to buy, the shares took off leaving your order in the queue. You could be left more exposed than you would like...

 

[TabJockey]

Re: Shorting penny stocks with cfd`s

Penny stocks being not outstandingly liquid securities most of the time, wouldnt you be worried they would gap up on you, before you could get out?

Highly leveraged shorts on illiquid and volatile penny stocks sounds extreme to me.

 

[yonnie]

Re: Shorting penny stocks with cfd`s

Here's a list of products and their margins from CMC.

http://www.cmcmarkets.com.au/static/documents/cfd/cmc_markets_product_schedule.pdf

EIO is not even on the list for long let alone short. Do let us know if you find a CFD provider who let you short such penny stock.

Marketech and I think First Prudential have cfd`s on all ASX stocks, so you can buy cfd`s on pennies like EIO. I dont know if it is possible to short the pennies as well.

 

[yonnie]

Re: Shorting penny stocks with cfd`s

Penny stocks being not outstandingly liquid securities most of the time, wouldnt you be worried they would gap up on you, before you could get out?
Highly leveraged shorts on illiquid and volatile penny stocks sounds extreme to me.

What do you think of NWT, 182,000,000 on the buy side and 80,000,000 on the sell......and where is the high leverage if the margin is 100%?

 

[skyQuake]

Re: Shorting penny stocks with cfd`s

What do you think of NWT, 182,000,000 on the buy side and 80,000,000 on the sell......and where is the high leverage if the margin is 100%?

If you place a sell/short order at 0.007 you wont get filled till all the orders in front of you are done.

Similarly, you wont be able to buy at 0.006 till all those 182 mil shares in front are done too.

 

[Trembling Hand]

Re: Shorting penny stocks with cfd`s

What do you think of NWT, 182,000,000 on the buy side and 80,000,000 on the sell......and where is the high leverage if the margin is 100%?

If you are short you are leveraged to infinity by the fact the share price can go up an unknown amount.