CFD Stop Losses - Guaranteed Stop Loss (GSL)

[spitrader1]

i see many people are now advertising guarenteed stop loss..how can this be??

i have never traded CFD's so how does this work..if you were long AWC the other day at 6.75 with a stop at 6.65 say..earnings announcement comes out and the stock drops to 6.30ish when it reopens surely you are out at 6.30, not 6.65 where ure "guarenteed stop loss" is. I would have thought for newbies this is a trap to be aware of, unless i am getting this wrong.

 

[spitrader1]

Re: CFD STOP LOSSES

i see many people are now advertising guarenteed stop loss..how can this be??

i have never traded CFD's so how does this work..if you were long AWC the other day at 6.75 with a stop at 6.65 say..earnings announcement comes out and the stock drops to 6.30ish when it reopens surely you are out at 6.30, not 6.65 where ure "guarenteed stop loss" is. I would have thought for newbies this is a trap to be aware of, unless i am getting this wrong.

its ok, ive worked it out, there "guarenteed stops" you have to pay a premium for, and also have to be a certain distance from the market..

 

[Kauri]

Re: CFD STOP LOSSES

i see many people are now advertising guarenteed stop loss..how can this be??

Surely you jest..

Re: What do you do? (9 to 5)
I am a stockbroker (can here the silence)

 

[spitrader1]

Re: CFD STOP LOSSES

i see many people are now advertising guarenteed stop loss..how can this be??

Surely you jest..

Re: What do you do? (9 to 5)
I am a stockbroker (can here the silence)

an exercise in stupidity my dear watson..was waiting to see how many people dont understand the "guaranteed stop loss""

 

[Kauri]

Re: CFD STOP LOSSES

Spitrader1... I understand... a Stockbroker type of joke...

 

[Gundini]

Re: CFD STOP LOSSES

Is the guarenteed stop loss cost something like 1% of your total holding?

EG: BHP in CFD's @ 3% margin, so $10000 of BHP = $300 Margin of which guarenteed stop loss cost would be $100. Is that how it works? Also, do you pay the provider even if the guarenteed stop loss isn't triggered?

 

[Kauri]

Re: CFD STOP LOSSES

Is the guarenteed stop loss cost something like 1% of your total holding?

EG: BHP in CFD's @ 3% margin, so $10000 of BHP = $300 Margin of which guarenteed stop loss cost would be $100. Is that how it works? Also, do you pay the provider even if the guarenteed stop loss isn't triggered?

The GSL works on the share price, with IG the minimum it can be set from the purchase price is 5%. So in the case of $10000 of BHP it would be worth $500, and you would have to come up with that as your margin payment. By the way, with IG BHP is marginable at 5%, but if you can get 3% and went with a GSL I imagine you would have to put up the 5%. The cost of the GSL with IG varies according to the share, ranges from 0.3% through to 1%, and that is paid on top of the margin, as is your commission costs.

 

[RichKid]

Re: CFD STOP LOSSES- Guaranteed Stop Loss (GSL)

Check the terms of each CFD provider in relation to gsl's, they vary and can be expensive, you can even open a particular type of ac where you always use a gsl. I think a gsl will reduce the margin required to the gsl percentage. I can see how a gsl would be a great idea for possible t/o targets or illiquid and volatile stops which gap often.

My guess is they add the cost of hedging (call or put or whatever) to the exit brokerage and that becomes your GSL cost....not sure of this, happy to have an expert explain the mechanics.

Also note that some stocks don't have a gsl facility, check with your provider.

 

[Gundini]

Re: CFD STOP LOSSES- Guaranteed Stop Loss (GSL)

So the GSL cost, what ever it is, has to be paid even if it doesn't trigger?

 

[Kauri]

Re: CFD STOP LOSSES- Guaranteed Stop Loss (GSL)

From my experience with IG the margin required on any GSL'able share is limited to the maximum loss if your GSL is touched, and the minimum distance the GSL can be set from the purchase price is 5%. Your upfront costs for buying say... $10000 SBM..
GSL set at min 5% + 0.1% commission + 1% GSL premium = $500 margin + $50( 10% added to margin to cover Divi's etc) + $10 commission + $100 GSL premium. So your total outlay is $550 in margin and $110 in costs.
All is charged upfront when opening the position. The only exit fee is the 0.1% selling commission(based on the total sell value.
If you went the non GSL trip the initial margin is 15%, but you save the $100 GSL premium.
Note that interest is charged at (I think) 2.5% above the bank rate and is worked out on the total value of the shares held ( if your $10000 becomes 12000 you pay on the $12000) and it is calculated using only a 360 day year.
Above is not guaranteed to be correct, mostly from memory, check with your CFD provider...