The strategy.
On 26 June 2006, BlueScope Steel (ASX code: BSL) closed at its highest level in eight months. The next day it began to fall back. Chris formed the view that it was likely to fall further, and decided to use OTC CFDs to short sell the stock and benefit from his view.
How he did it.
On 27 June 2006, Chris sold 3,000 BlueScope Steel OTC CFDs at $8.54 each.
The result.
On 30 June 2006, Chris closed his short position, buying back 3,000 BlueScope Steel OTC CFDs at $7.95 each. After taking interest and commission into account, Chris earned a net profit of $1,713.95, giving him a return of 66.07% on his initial outlay. All in just four days.
| Open Short Position |
| Sell Quantity |
3,000 |
| Price |
$8.54 |
| Contract Value |
$25,620 |
| Initial Margin |
$2,562 |
| Brokerage |
$32.03 |
| GST |
$0 |
| Initial Outlay |
$2,594.03 |
| Close Short Position |
| Buy Quantity |
3,000 |
| Price |
$7.95 |
| Contract Value |
$23,850 |
| Variation Margin/Profit or Loss |
$1,770 |
| Brokerage |
$29.81 |
| GST |
$0 |
| Interest (paid to Chris by CommSec) |
$5.79 |
| Profit (credit) |
$1,713.95 |
| Return On Outlay |
66.07% |
Assumptions: Initial Margin calculated at 10% - Interest calculated at RBA Base Rate of 5.75%, minus margin of 3%.
This example is hypothetical and for illustrative purposes only. CommSec does not specifically recommend the stock used in this example and does not warrant that it will be available for OTC CFDs. Past performance is not indicative of future performance. OTC CFDs are speculative products that are highly leveraged and carry significantly greater risk than ungeared investments such as share trading; see the risk disclosure statement in the OTC CFD Product Disclosure Statement for details.
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The presence of a managed fund on this list should not be construed as a recommendation. No representation is given, warranty made or responsibility taken as to the appropriateness or performance of any of these funds.
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