13( ) Can’t compare absolute spread values between instruments JSE - SPREAD COSTCan’t compare absolute spread values between instrumentsNeed to compare in percentage of exposureValue will be in basis points1 Basis point =On average spreads on Top40 Futures are 25 Basis Points(OFFERBID)= Spread%(OFFERBID)2
14Parking tickets! Magnus de Wet James Boardman Rudolf Oosthuizen JSE - CONTACT DETAILSParking tickets!Magnus de WetJames BoardmanRudolf OosthuizenAnd that’s the very brief story of the JSE and the AltX market. Please feel free to ask any questions you might have and either myself or Noah Greenhill will do our best to answer them.
15SSFs are contracts entered into between 2 parties PSG - WHAT ARE SSFsSSFs are contracts entered into between 2 partiesRight for the buyer to take delivery of that stock on the date of the contract’s expiry, a ‘deposit’, known as the initial margin is made and used as securityClose out or Roll positionsAn SSF contract is made up of 100 shares geared at around 15%
16Standardised contract SAFEX Partially matched orders simply expire! PSG - SSFs EXPLAINEDStandardised contractSAFEXPartially matched orders simply expire!Expire March, June, September and DecemberIncluding all relevant dividends and interestGo long or Go shortMarked to market daily (MTM)
17Underlying Going Long Going Short Closing a position Expiry date PSG - TERMINOLOGYUnderlyingGoing LongGoing ShortClosing a positionExpiry dateInitial marginVariation marginRolling a position
18Highly capital efficient Low brokerage Very liquid Earn interest PSG - BENEFITSHighly capital efficientLow brokerageVery liquidEarn interestBenefit from Corporate ActionsCheaply diversify riskHedge your portfolio
19PSG - SSFs OR EQUITIES Joe (Equity / Share Trader) John (SSFsTrader) Joe is confident that Sasol Ltd shares will increase in the coming months.He has R36,500 which she can invest.Sasol’s share price is R365, therefore she buys 100 shares.3 months later the price has increased by 10% so he sells his shares to make a R3,650 profit.His return on his investment is 10%John is confident that Sasol Ltd shares will increase in the oncoming months.Sasol’s share price is R365, therefore he buys a Long Sasol SSF contract (JUN12 SOLQ).The initial margin set by the broker is R4,950 which is paid by the buyer.After 3 months the price has increased by 10% and the investor closes out his position and sells out of the Sasol SSF contract he is holding. His profit is R3,650His return on his investment is 58%.
20PSG - UNDERSTANDING RISK Jack is an SSFs TraderJack is confident that Sasol Ltd shares will increase in the coming months.Sasol’s share price is R365, therefore he buys a Long Sasol SSF contract – JUN12 SOLQ at R4 950 initial margin which is paid by the buyerThe Brent Crude price decreases by $10 a barrel which negatively impacts on Sasol’s share price, which drops to R335 per shareThe SSF contract is made up of 100 underlying shares.The margin call for Investor B to continue trading is 100 x R30 (R365 – R335) = R 3000 variation margin which needs to be paid in to keep the investors position open. He has now laid out R 7,950After a month the share price continues to drop to R300. The investor chooses to close his position and must pay in a furtherR 3,500 variation margin.His total outlay is R 10,950 but he receives his Initial margin back, so his total loss is R6000 (-121.2%)
21PSG - SSF PRICINGInterest payable is determined daily by the market maker in relation to the ruling SAFEX rates.Interest will be paid on cash balances at a rate linked to the JSE Trustees rate.
2214% VAT on opening leg and 14% VAT on closing leg 0.912% total PSG - SSF COSTSBrokerage on the Central Orderbook is charged at 0.4% (excl VAT) of the value of the transaction.14% VAT on opening leg and 14% VAT on closing leg0.912% totalA booking fee of R60
23Identify the candidate Wait for the breakout PSG - TRADING STRATEGYIdentify the candidateWait for the breakoutSet a reasonable target price (TP)Allow the share to retestKnow when your trade has failedExit at your price target (TP)Be patientBe disciplined
24PSG - IDENTIFY THE CANDIDATE The more times a share price has touched these areas, the more valid these levels are & the more important they become.The longer these support & resistance levels have been in play, the better the outcome when the share price finally breaks out.
25PSG - ENTRY AND EXIT POINTS Once prices are set to close above a resistance level, a trader will establish a bullish position.When prices are set to close below a support level, a trader will take on a bearish position.The exit point itself should be set at a critical price level, e.g. Support & Resistance
31SSF Central Order Book ALSI – Most popular Top 40 Shares Liquidity, Cheap,Tight SpreadsLong & Short
32SSF Order Book – ALSI Trade 2 point spread = R10 x 2 points = R20Margin = R28 050Exposure = RCost R25 per contractR10 per point100 points move = R1000BuyMoves 300 points up=300 points move x R10 = R3 000
33SSF Order Book – ALMI Trade 40 point spread = R1 x 40 points = R405 Contracts x R2 805 = R14 025Margin = R2805Exposure = R28 050Cost R55 per contractR1 per point100 points move = R100BuyMoves 300 points up=300 points move x R = R300 x 5 = R1500