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Regular Readers / Tweet Followers, will probably know I have some Huge FTSE100 Short Positions running which I put on earlier in the Year when Markets went quite ugly and caught everyone by surprise. Sadly my timing here was atrocious and Sods Law meant that the Markets rallied strongly since that malaise and this has been a real pain for me - it really was the worst possible scenario that could have played out.
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THIS IS NOT A TIP OR RECOMMENDATION. I AM NOT A TIPSTER. PLEASE DO YOUR OWN RESEARCH. PLEASE READ THE DISCLAIMER ON THE HOME PAGE OF MY WEBSITE. IF YOU COPY MY TRADES, YOU WILL PROBABLY LOSE MONEY.
If you follow me on Tweets or have looked at the ‘Changes List’ on my Homepage, you might have seen that I bought a Long Spreadbet on FTSE100 at 6389 late on the Evening of Thursday 26th November 2015 (equivalent to about 20% of my existing Long Exposure via Stocks in my Trading ISA and Spreadbets) and I wanted to do a quick Blog to show my reasoning and to also do a quick glimpse at how the FTSE100 and S&P500 look for the coming Weeks and for December.
I was just watching Channel 4 News with them going on about some or other terrible thing that is happening in the World, when something that has been playing on my mind hit me as an idea for a hopefully very quick Blog. Of course, once I actually started bashing it out (this is after starting the Netbook - coal fired, doing the Virus Scan, opening ShareScope, updating ShareScope data, opening MS Works etc. - you get the picture), I found that my very simple idea of one Chart and some words has morphed into 4 Charts and probably a shed load more narrative. To be frank, my original idea was a bit too skimpy and it clearly needed a bit more to give some sensible context for you Reader types.
This Blog is in essence about a possible Short FTSE100 Position which I considered placing on the night of Thursday 17th September 2015, when the S&P500 was screaming at me that it was a good time to put a Short on.
IMPORTANT HEALTH WARNING This Blog revisit’s a very traumatic period in the Markets. If you are of a Nervous Disposition or if you suffer from any Health Maladies it might be best not to read it or at least to be sitting down and away from Sharp Objects. Alcohol may help in this case, but WheelieDealer makes no suggestions that Readers should use Booze on a regular basis (this goes for Crack Cocaine also).
Specific Lessons I need to Learn:
IMPORTANT HEALTH WARNING This Blog revisit’s a very traumatic period in the Markets. If you are of a Nervous Disposition or if you suffer from any Health Maladies it might be best not to read it or at least to be sitting down and away from Sharp Objects. Alcohol may help in this case, but WheelieDealer makes no suggestions that Readers should use Booze on a regular basis (this goes for Crack Cocaine also).
Unless you are seeing this Blog some time in the distant future (do you guys still have PCs and stuff or does info just automatically appear in your Brains?), I doubt if any Readers are unaware of what happened on Monday 24th August 2015 (I am starting my first draft of this on Tuesday 25th August 2015) and it feels to me like this will become a day in Stockmarket Folklore like the ‘Wall Street Crash’ and the ‘1987 Crash’. Funnily enough, with both of those I suspect many Readers did not trade through either - but we still know all about them nonetheless. A Conundrum of Logic
If you thought the last chunk was weird, wait for this bit. Hopefully you will have understood from earlier bits of this WheelieBlog Series that my overall approach is to have about 60% of my Overall Exposure in Normal Shares and then to have the remaining 40% roughly in Spreadbet ’Virtual’ Exposure. This then makes me think. Why don’t I just forget about owning any Shares at all and just go 100% of Exposure as a Spreadbet ‘Virtual’ Portfolio? If I did this, I could up my Exposure probably by 100% - i.e. I could have DOUBLE the Exposure that I have now. Obviously this would mean that any actual £s return I make in a Year would be doubled - and of course any Loss would be doubled. It has a certain appeal I have to admit (not the Loss bit obviously.) How to deal with Nasty Bear Markets
Due to the nature of the Leverage in Spreadbets, when Markets go a bit nasty, the Cash Buffer in your Account can evaporate very fast - it is quite scary and this is why you must control your Exposure at all times. I have found that by building up my Spreadbet Portfolio slowly over time, I have learnt how the ‘Margin’ (Deposit) and ‘Cash Buffer’ tend to move and I now always have a big Cash Buffer sat there ready. This comes with experience but it is vital to start small and learn how the whole thing works before you take larger Positions. An Unexpected Danger during the Credit Crunch
This section is a word of warning and something to be aware of. It has only happened to me once, during the Credit Crunch, but it was really very, very, unpleasant. What happened was that my Spreadbet Companies changed their Margin Rates as the turmoil in Markets occurred. It is easiest to explain this with an imaginary scenario - let’s say the Margin Requirement was 10% of my Portfolio and I had £200,000 of Exposure. This would mean that my Initial Margin Requirement was £20,000, so I had to have AT LEAST that amount of money just tied up in the Account as Margin (Deposit) to keep the Positions open. Now, let’s imagine the Spreadbet Company increased the Margin Requirement to 20% - this would mean I now needed £40,000 or they would close down some of my Positions until the Exposure fell back enough and the Cash rose enough to get back into balance. Leading on from the last 2 parts of this Blog Series, I now move onto the actual mechanics of how I go about getting the Advantages of Leverage from Spreadbets whilst reducing the Risk and keeping things easy and manageable.
Long Term Portfolio Approach - ‘Mirroring’ The simple Logic is that I do a 'mirror' of my Normal ISA Share Portfolio as a Spreadbet Portfolio. Say, as an example, that I had £10k of Aviva shares, then I would 'mirror' as a Spreadbet by doing about £20 a Point (AV. price roughly 490p ish now) which would mean an Exposure of near £10k which would be like the Share position. So, I do this with all my stocks and it means that the 'Risk' is spread across them all just like in a Share Portfolio. This means I probably have as many as 35 Spreadbet Positions open at the moment. CFDs
In many ways CFDs (Contracts for Difference) are similar to both Normal Shares and Spreadbets - sort of a cross between the two - a mongrel (woof). As with Normal Shares, you pay a Commission and they are Taxed and you receive Dividends where you get the payment on the Ex Div date (like a Long Spreadbet). Like with Spreadbets, you can use to go Short, you can do it on Margin (so you get Leverage) and you do not own a Stake in the underlying Company. If you are Short, you lose the Dividend on the Ex Div date - beware. Like Normal Shares, the Buy and Sell price is exactly the same as the Normal Shares in the underlying Market. With Spreadbets the prices are very different - always wider. |
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