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CFDs – Great Way To Short

Sarah Tan — Fri, 24 Oct 2008 03:15:52 +0000

Financial Stocks Takes A Beating

Due to adverse publicity over the Lehman Brothers saga, DBS stocks have fallen sharply. More than 2 billion dollars worth of value vaporized in a short week or two.
My system had told me to short DBS 3 weeks ago using CFDs. At that time, I think the price was $14 or $15 plus. However, I set my stop loss price a little low, so I was stopped out too quickly in a day or two. However, after that, it continued to free fall all the way until $10 plus yesterday. That would have been 5 times my initial investment.

Jardine C&C was another stock that appeared on my system. However, I was too busy that few days to short it, so when it fell by a few dollars, I thought it had fallen too low. My system did not give the signal to buy it back, so I could have taken that opportunity to sell it. It fell until $9 plus at a low, so again, my initial investment could have multiplied by a few times.

I was on a good trade for UOB, but I got a little nervous about seeing the numbers change rapidly, and decided to take early profits. It fell a further $2 in the next few days. But anyway, this is my first successful CFD trade.

The best CFDs to short are those that cost more than $5. They need to have market volume to move. So forget about penny stocks when you try to short them.

You are only trading with the brokerages and you do not own any physical stock. Do look out for brokerages that charge obscene amount of money. Some of the cheaper CFDs brokerages include Saxo Traders and CMC Markets.

Lehman Brothers Saga Continues

Sarah Tan — Fri, 24 Oct 2008 01:28:35 +0000

Regarding the Lehman Brothers saga, and the High Notes and Minibonds issues, one word that stood out was ‘greed’.

When I watched the news last night, one woman admitted that it was greed that led her to put her money there. She was attracted by the 5% interest rate, instead of the less than 1% offered by Singapore fixed deposits. True, many were retirees and some were not highly educated. However, there is no such thing as free lunches in the world. The risks would have been considerably higher if the interest rate was higher.

Of course, it is sad to read about a cobbler in his 70s who had invested his life savings into the funds. I have heard of younger people who invested $100000. The positive thing is the younger professionals still have the ability to earn the amount again.

What DBS, Maybank and Hong Leong are doing now is to look at the profile of the investors, to decide who should get help. Maybank is looking at retirees and those with primary education or less. Hong Leong will look at ‘vulnerable investors’ while DBS is not coming forward with their criteria.

One costly lesson I’ve learnt is that you should know what you are buying into, and not what other people tell you to. You have to take responsibility.

Lehman Brothers Minibonds High Notes 5 DBS Maybank Hong Leong Finance

Financial Meltdown and Rally

Sarah Tan — Sat, 20 Sep 2008 04:06:32 +0000

What a rollercoaster week it had been for the financial markets. First, Lehman Brothers take a hit, sending the markets into a tailspin, followed by Merrill Lynch and AIG. Bank stocks in Singapore plunged before bouncing back.
Some of the events affect us. If you have AIA insurance policies, you may have been feeling very worried whether your policies are safe. Those who bought DBS High Notes 5, would be thinking whether their entire investment would be gone, as so long one of the companies went belly-up, the structured notes would be terminated.
With the huge bailout from the US government that is supposed to be hundreds of billions, Asian stocks rose on Friday. At this point, I still feel they are at an extremely volatile stage. Enter the market at your own risk. Oil prices and gold prices moved up again.