CFD's

[BoburUncle]

What is the ideal time period to hold a CFD if you set a target to reach? E.g: Standard Bank recommended in April to short PIK at 4176c for a target of 3400c. PIK is now on 3762c 5 months later. Doesn't time decay affect your profit if you hold ot for so long?

[prancing_horse]

There is no ideal time frame on holding CFDs, but with interest rates being as low as they are, one can hold them longer than in the past where interest rates were far higher.I find I get the best return between 30 and 60 days, especially if you pick up a dividend (taxable on CFDs) during the holding period.Last year I held GND for 4 month for an increases of R4 a share, last week I bought and sold CLS for R2.10 per share profit and only held them 3 days.I suggest pick no more than 15 liquid shares and get to know their movements, making money then becomes a little easier.

[#3]

Draw up a spreadsheet/schedule adding your interest each day and compare that with your target.

[WES]

Interest is 8 %. Under "trading reports" you can get a daily, monthly, current tax year profit and loss detail report in any case. There is no time decay as in warrant and there is not roll over as in SSF or 100 shares per contract as in SSF. i think it is a great product. It is a geared instrument of course, so there is risk involved.

[SimonPB]

no time decay but you do get cost of carry .. either way a derivative has a cost associated with it due to the loan nature of the product ..

[BoburUncle]

Ok, so unless you have a pretty strong postion on a CFD, you can end up losing money due to the interest?

[SimonPB]

sure, and that applies for any derivative .. time is always against you ..

[BoburUncle]

great thanks

[Pluto]

If you are shorting with a CFD as in the case outlined with PIK - you get paid interest

[#10]

Rule of thumb - you are looking at a cost of roughly 0.025% per day on the total exposure (i.e. the mark-to-market value of your holdings).

[BoburUncle]

Thanks guys. One thing I have learnt is you have to be very vigilant when trading CFD's.

[WES]

Please help me here.....CFD are not only for trading, it can be used for investment purposes too, especially when you are in a low interest period as we are in now. Investing in SOL or EXX using CDF's for example, could be very profitable holding for the next say, six to twelve months ?

[SimonPB]

profitable for who ?? your broker or you ?? I do not believe deriavatives can be used for investing .. not ever ..

[Preston]

investing or trading Simon?

[SimonPB]

err, as I wrote it ..

[SimonPB]

err, as I wrote it ..

[Preston]

why so touchy Shirley?

[Preston]

why so touchy Shirley?

[SimonPB]

just confused as to which part of the word investing you didn't understand .. maybe I typed it too fast ??

[Russ]

Hee hee,good stuff!