Ok, here's my ha'penny-worth regarding derivatives: If you are seriously sure of your technicals and you are absolutely sure that a certain stock IS going to move in your direction over the next day/two days/five days, then warrants are fine. Warrants are a complicated enough instrument and ya haff ta make PRETTY sure that you KNOW what your time decay and gearing is and ESPECIALLY how these change against you as you lose your money.
You do not have the luxury, with warrants, that you can ride out an extended side-ways movement as you would be able to do with a similarly geared SSF for example. Time decay is an evil thing which eats you up while you think you're still ok. Add to this the expiry date and you have a lurking monster that spits you out in little pieces. For this reason I think warrants are an EXTREMELY risky instrument. Time decay is there in EVERY trade, whether you like it or not. Juxtapose this with SSF's which give you the SAME gearing as warrants most of the time, but without all the high-risk complexities.
I remember doing a comparison a while ago on this very forum between a reasonable warrant and a bog-standard SSF on Harmony. Same gearing both. Over a period of a month the SSF made a 100% profit while the warrant made a 35% LOSS purely because of time decay. I believe strongly that SSF's are a clean, professional way of trading while warrants are contructed as they are to merely make money for the issuer.
Yes, there IS a very very remote chance that an SSF might wipe you out *if you trade stupidly*. But there's a MUCH greater risk that warrants will wipe you out if you trade even less stupidly.
dude, with respect .. there is zero chance it was a bog standard warrant if it lost 35% and the ssf made 100% .. not even within a million miles .. an that remote chance .. does it matter how remote, if it is game over you surely never want to take the risk ?? an it is also not ust about trading badly, it is about black swan .. here's the analogy .. I have a bowl of smarties, in the bowl is say a dozen smarties, you can eat as many as you want - but one of them is doctored and if you eat that one you die - immediately .. so you say no thanks for the smartie .. that makes perfect sense .. then the question is, how many good smarties must there be before you'll take the risk, a million? a billion? a trillion? the honest answer is you will never take the risk as smarties are not that great that you are prepared to die for them .. so why are we prepared to loose huge (and potentially wipe out) just for one modest trade .. the problem is that we think it is all about the next trade, it isn;t .. it is about a life time of trading disciline ..
Ja Simon, that is why I never allow more that 10% of my total portfolio exposed in a single SSF (that is different to my risk - in which my stoploss defines my risk exposure). It is not to say that i won't have more than 100% exposure in total, but given my rule that I won't allow more than 6% total risk exposure in one direction (short or long), this is unlikely
Re:Re:Re:Re:trading styles by Vitorc on 15 Jul 16:04 Easy solution right there Simon. Give us CFDs through OST at an affordable brokerage markup and I'll be your first customer. "Re:Re:Re:Re:Re:trading styles by SimonPB(Standard Bank) on 15 Jul 16:21 deal .. give me a week .. or 3 .." Great news if you can organize CFDs on SB platform. If you can add CFDs for the Top40 would be really nice. Had a IdealCFDs account, was thinking to re open, but ill wait see what you are able to sort out. Ill prefer to be able to do all my trading in one place. The only catch with adding CFDs is that it's rather important to be able to watch a live chart with technical indicators. Would it be possible to look at that as well so that I wont need to keep opening IdealCFDs to watch the chart there...?
No, my money management risk is the same, warrants or SSF's. By total risk I mean that if my portfolio size is 100k, and OML is trading at R10, then I wont take out more than 10 contracts. Yes, I could have as much as 60% of my portfolio committed, but a black swan event pulling down the market without my stops kicking in is rare enough for me not to worry about it. And it is my trading portfolio, not my investment portfolio, the one is a percentage of the other.
read the smartie story above .. rare enough doesn't crack it .. it will happen in a trading life time, for sure it will .. an stops are great, if we have a sell off .. but what of an opening gap of say 30% or 50% ?? you say it won't happen, but that's not the issue because you can not see the future, so you have to expect it to happen and have a portfolio that will withstand it .. otherwise expect to go bust one day ..
Free live charts on OST would be exxxelent, maybe SB charge extra R20 p/m for live charts on SB' own charting platform. Or wont it balance out the advertising income and partnership with sharemagic? Im sure writing a live charting program isnt that tough, i'm even considering writing my own TA program.
Speaking of stops, IdealCFDs has a guaranteed stop (at a small additional cost) which I find very usefull when trading volatile shares. Also makes assessing your risk much easier. Anyone know of any other platforms that offer a guarateed stop? Maybe a thought for OST in the future?
The issue is not SBK and what they charge, it is the JSE and their fee structure. SBK pays per client for the data they provide. There is no way that SBK makes a profit by charging R100 (or whatever) for the current setup. The JSE fees would be more that that.
No - I don't think we are on the same page here - my exposure is the same, regardless of whether I entered in with a warrant or SSF. If I enter an SSF, then I reserve funds to cover the exposure. If I enter with a warrant, then my funds are committed. So the result is the same. And I tell you what, I have a far greater chance of consistently losing money with a warrant stoploss that doesn't kick in, than I do with an SSF with a far far far more reliable stoploss based on the ruling price of the underlying
so your 10% equates to total exposure, not margin requirement ?? sure, but so you're long an oml contract and you reserve 100 x 11.00 = R1100 (albiet margin requirement probably only R200) an as such you only really saving on broks .. but for the same exposure in a warrant you'd probably only need R150 .. an the stop loss issue, sure .. but that is a nasty reason to go bust ..
Its the only reason I use them (ssf's) to cut down on brokerage. And a trader without a stop is a bankrupt trader - period. Warrants can only be used if you are monitoring them permanently IMO. That is not my trading style - I have a quite week this week, but next week, for e.g. I will only be able to monitor about once a day. A warrant can't be trusted in that circumstance