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Online Share Trading

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Holding Futures longterm

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Not applicable
Can an economics fundi plse expl why SSFs are only used for short term trading.Apart from the risk, what are the cost vs return implications in holding long term SSFs..Thks.
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13 REPLIES 13
djw
Regular Contributor
You have to pay interest on the borrowed amount - so basically becomes a loan
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gleamin
Contributor
Hi Guys, I may be wrong, but as far as i know there is no interest charge on the "borrowed amount" but rather you earn interest on your initial margin. with the R60 per trade cost it proves to be much more efficient than CFD's imo. I hold SSF's on a medium term basis and have been doing pretty well.
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jack12
Super Contributor
IMO Ssf interest is factored into the matrix (difficult to see as it depends on the time the ssf is held, also the reason why the MTM is different to the underlying) and Cfd it is a separate event payable daily (but MTM equals the underlying) Ssf is a longer term instrument Cfd a very much shorter time frame instrument.
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Not applicable
Gleamin, look under help and education - go to the futures pricing and you will find the costing of SSF's spelt out including the interest cost.
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StanleyB
Contributor
Gleamin - Dream on. The 9.5% interest charge on the "borrowed amount" of SSF's may not be explicitely shown but it is definitely there in the daily variation margin. Std CFD's are slightly cheaper than SSF's at 0.35% vs 0.4%. SSF's & CFD's are both for short term trading. Incidentally yesterday I did a comparison on SOLcfd that I was long on from 18 Nov to 6 Jan. On this timescale the interest cost had cought up with the lower transaction costs of not buying the actual shares. In my opinion, plan on holding SSF's or CFD's for maximum 1 to 2 months. If it continues to trend in ones favour, the time can then be extended OMO
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Quakedog
Super Contributor
Farmer Brown, its because they eat so good!! hehe. SSF interest on exposure amount charged up front and SSF's expire (So they can nail you again with costs!!!Wahoo!). CFD interest on exposure amount charged daily and does not expire. Now where's my chicken!!!
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Not applicable
Thks StanleyB and Quakedog, I finally got it.Hey, Quakedog; you can't have a chicken till you got an egg.
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Not applicable
Currently I only play CFD's....cannot see the advantage of SSF anymore. Yes there is holding cost. But create an excell spreadsheet, on which you can change the days of holding so that it work out interest, also the cost of buying and selling. This way you will be able to see what the effect of different costs and ones decision will be informed when to exit. if you hold the CFD or SSF for a month or six months or more... Help to let me have longer view...My aim 25% a year...on initial margin...so 2% per month, 12.5% in six months etc. With gearing means can even devide this than with 5 or 6. So will see if this will work in long term... SO Far so good....
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EkisDoep
Frequent Contributor
This discussion is very interesting. I have been trading SSF's and CF's. Perhaps I should have a closer look at the costs. But if StanleyB finds that after 1.5 months the CFD costs outweigh their advantage, would it then not be better to use an SSF for it's full term?
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dbm
Frequent Contributor
I am a long term investor. I have been investing in SSF's for over 2 years. Going long and short. I have been holding and rolling over. I have 10% of my portfolio in cash and SSF's. I dont worry about interest rates. I run a virtual portfolio on my SSF's. The profit and loss on a daily basis is what its all about, and when I have banked sufficent funds I then buy more shares. The daily net profit/loss has worked well for me while the market is rising.
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Not applicable
The SSF and the CFD interest rate is the same to my knowledge, and remember the 9.5% is over a year. So to buy R 10 000.00 Marign, and 6X Gearing...you buy a stock of R 100.00. Thus R 60 000.00. If the stock goes up with R6, to R106...you sell actually the stock for R 63 600. So even if you keep the CFD 1/2 the year the interest is R 2850.00..plus transaction costs.... Monthly carrying cost R 475.00 extra each month... Selling this in 2 Months you still make 20% on your margin of R 10 000.00.
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jack12
Super Contributor
The only difference I can see between the 2, is Cfd costs are 0.35% if sold on the same day that they were bought.
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TOPIX
Regular Contributor
The differences between CFDs and SSFs can be summarised as follows: (1)SSFs have expiry dates, typically three to six months and must be renewed if an investor wants to maintain a position. Renewal (rolling over) attracts costs. CFDs last indefinitely. (2)Borrowing costs and expected distributions (dividends) are built into the price of an SSF. In contrast, CFD holders pay interest on a daily basis and receive distributions (dividendes) in cash. (3) SSFs are well regulated and traded on the South African Futures Exchange. CFDs are unregulated and should thus be treated with more caution. (4) SSFs are purchased in multiples of 100 while CFDs can be purchased in any quantity. (5) CFDs are easier to understand and more transparent than SSFs. (6) The costs (brokerage and market makers spread) are more or less the same for both instruments and will only become significant you if you trade small quantities in high volumes. Both are geared instruments and were developed for trading and not investing. If you want to trade with borrowed money (bad idea), this is the easiest way to do it.
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