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CFD's... Just like Gambling?

Discussion in 'Shares' started by yo yo ma, 9th Feb, 2008.

  1. yo yo ma

    yo yo ma Member

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    I have posted this on SS but it may be more appropriate here.

    I was unaware that CFD's are banned in the US. Sure, in good times they can make you a lot of money. In these volatile times though, they have been described in this article as "betting".

    The Australian- Push to 'gamble' on stocks
    Steve
     
  2. AsxBroker

    AsxBroker Well-Known Member

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    Hi Yo Yo Mama,

    CFDs are similar to Futures contracts without an expiry date.

    Sounds like the Securities Exchange Commission have done something to protect their citizens from themselves.

    It's hard to believe that CMC's clients have made more money than they have lost because that would mean that CMC have lost money and I'm sure they aren't a charity...

    Cheers,

    Dan
     
  3. Tropo

    Tropo Well-Known Member

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    Spot on!!:p:
     
  4. tropic

    tropic Well-Known Member

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    Personally never touch CFD.
    I do agree that trading "scheme" like CFD increase volatilty on the market.
    It is volatile enough as is. We have CFD, margin lending etc, what next.
    Are we going to have ASX like a roulette table or investment board?
     
  5. Tropo

    Tropo Well-Known Member

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    CFDs do not increase volatility in the market. It’s a different instrument like options.
    CFD is designed for traders NOT passive investors. If you are an investor forget CFDs.
    Statistically market is moving sideways most of the time (current volatility is “normal”), so get used to it.
    Last few years bull run was unprecedented and may not repeat itself before your retirement.
    Below link contains basic info about CFDs.
    CFD trading simulator - ASX - Australian Securities Exchange
    :cool:
     
  6. DaveJ

    DaveJ Well-Known Member

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    Don't CFD providers actually offset their clients CFD trades by buyings/shorting the underlying as appropriate? Therefore this would increase the volatility within the market as there is more trading?

    Option Market makers also offset their risk in other instruments (eg shares, futures, other options etc)....
     
  7. Insight

    Insight Brisbane Buyers Agent

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    DaveJ CFD's definitely increase volatility for the reason you mention, probably other reasons as well.
     
  8. Tropo

    Tropo Well-Known Member

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    DaveJ,
    That’s O.K.
    There are a lot of reasons which increase volatility in the market (big institutional players, key announcements etc).
    I would think that CFD in OZ is not big enough to be a major reason behind a choppy market.
     
  9. Rod_WA

    Rod_WA Well-Known Member

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    Market makers usually attempt to offset within their own client base, before going to the market; eg with with BHP, there are likely to be both short and long positions, so they can just keep a tally of the difference, and then put this difference on market; this will be inconsequential to the market.

    But with less traded shares, and particularly those with a lot of short/long positions, these are quite likely to be hedged on market. So I reckon CFDs on less liquid shares will influence the price.
     
  10. michael9

    michael9 New Member

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    CFD's for newbies

    I started a CFD account and subscribe to the Australian Stock Report. I'm brand new at this side of things but have property investments as wel. I set up a small account ($5K) with the expectation of learning more about the stock market (great timing I know!). I've found it stimulating and engaging. I did this because I started an allocated pension fund in November (more great timing!) and was very frustrated to find that what was a goodly sum had shrunk considerably in a few short months. In time, and with a lot more expertise, I'd like to take more control of my investments. The guys at ASR are great and very patient with me and I appreciate that.

    I'm a $80 down after two and half weeks and presently sitting out and watching and learning ... lots of extra reading happening. I don't think it's gambling because I'm controlling exit points on trades and in particular setting very conservative stops.
     
  11. Insight

    Insight Brisbane Buyers Agent

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    It's a great way to learn if you aren't playing with hurt money I think.

    To be a complete wet blanket and going on memory here I would wager you would need Warren Buffet + returns to generate a profit over subscription fees to that tip sheet and commish on that account size. 22% on 5k = $1100 return in the first year.