Best way to short sell?

[quinn123]

Hi,

I have a very simple question to ask: What is the most affective way to short sell? (My broker is commsec and I currently only trade Australian securities)

It would be between CFD's and direct short selling using a broker?

I understand that the ASX put a ban on short selling in the last down turn. What is with that BS? How do I avoid it so I can make money when the market is going down?

Cheers,

Quinn

 

[quinn123]

From my readings I'm intrigued by CFD's. A CFD trade with low margin and a guaranteed stop loss could be a powerful tool. Set risk with high leverage... Just have to incorporate it into a risk management system that I already have for shares. Am I right?

 

[skyQuake]

From my readings I'm intrigued by CFD's. A CFD trade with low margin and a guaranteed stop loss could be a powerful tool. Set risk with high leverage... Just have to incorporate it into a risk management system that I already have for shares. Am I right?

the asx banned NAKED short selling, that is, selling without borrowed stock (and still is banned, covered short selling is legal).
The retail brokers will usually have inventory that u can borrow; Anyways be aware that the guarantee stop loss is usually a set % away from the last price. For the banks around 2%, for the more volatile stuff, 3%+
Considering gaps > 3% are quite rare, it may not be such a good deal. Depending on the provider, they also charge u around 0.5% of total trade value to use a guarantee stop. So make sure you do your homework before signing up for the cfd provider's guarantee stop loss (or a limited risk acct as CFD providers call it)
That being said, if you want to short normally, do it thru a cfd provider. Not commsec. Most providers offer cheaper brokerage and a larger array of stocks to short, and free conditional orders.

 

[skc]

the asx banned NAKED short selling, that is, selling without borrowed stock (and still is banned, covered short selling is legal).
The retail brokers will usually have inventory that u can borrow; Anyways be aware that the guarantee stop loss is usually a set % away from the last price. For the banks around 2%, for the more volatile stuff, 3%+
Considering gaps > 3% are quite rare, it may not be such a good deal. Depending on the provider, they also charge u around 0.5% of total trade value to use a guarantee stop. So make sure you do your homework before signing up for the cfd provider's guarantee stop loss (or a limited risk acct as CFD providers call it)

Depends on what you trade of course. Smaller end miners do gap a fair bit. Plus it's not the initial distance from your entry where gaps happen, it's the last trading day before you get stopped out that you worry about. So your stop could be 5% away, and the share price has fallen 4.5% up until yesterday, then it gaps down 5% on you on that last day.... that's when guaranteed stops work for you.

Be selective on guaranteed stops and they could be a powerful tool imo.

I am not an options person but it would be interesting to see if the price of the guaranteed stop works out to be cheaper or more expensive than some equivalent options play... Wayne?

 

[Wysiwyg]

From my experience there are good and bad points to a guaranteed stop loss. The obvious good point is they get you out at a fixed loss. The bad point is they charge whether it is triggered or not and the minimum stop distance from entry is inhibitive also there is greater spread. Very useful if trading news events and get the coin flip wrong.

 

[eddyeagle]

CFDs and spread betting are an effective way to short-sell. You can short stocks, indices, commodities etc

Make sure you understand how they work first before you jump in and definitely use a stop loss in case the trade goes against you.

I am currently short on the FTSE 100 - I went short just before Obama made his announcement and it has been a good trade so far!

 

[skyQuake]

Depends on what you trade of course. Smaller end miners do gap a fair bit. Plus it's not the initial distance from your entry where gaps happen, it's the last trading day before you get stopped out that you worry about. So your stop could be 5% away, and the share price has fallen 4.5% up until yesterday, then it gaps down 5% on you on that last day.... that's when guaranteed stops work for you.

Be selective on guaranteed stops and they could be a powerful tool imo.

I am not an options person but it would be interesting to see if the price of the guaranteed stop works out to be cheaper or more expensive than some equivalent options play... Wayne?

Funnily enough I tried this for a while. Main problem is marketmakers dont come out to play in the mornings, making hedging a pain. Oppies will usually 'price in' some of the volatility of an upcoming announcement but the GSLOs can't so theres a bit of an edge there.

Sometimes barrier warrants work just as well or even better than GSLOs.