Short selling for the retail investor
Brendon Lau’s article, How to profit from profit warnings, was great but how can I short any stock when I trade with CommSec and nabtrade and they neither allows it?
I understand the principles behind it, but how does the average person actually do it?
An article on how this can be done and in particular which broker(s) allow it and the associated costs would be great.
Brendon’s response: Shorting is never an easy proposition for retail investors. The most straightforward option is to use a full-service broker (such as UBS) as they can organise a short sale on your behalf.
Another way to short a stock is to use “put” warrants or options. The advantage is that these can be traded via an online broker (such as E*Trade). The downside is you need to understand how derivatives work.
The third way is to use a Contract For Difference (CFD). CFDs are a lot easier to understand than warrants and options, but CFDs are very leveraged instruments and you can lose more than the initial capital if the stock moves against you.
There are pros and cons for each shorting option and Eureka Report is looking at putting together an article to explain what these are in more detail. Tim Treadgold has also just written an article on short-selling that you may find of interest. (see: Short selling bears feast on junior miners).
It was with interest I read Roger Montgomery's article on Ryman Healthcare, A village model with investment appeal, but when I search for an ASX code I cannot find one. Is the company only listed in New Zealand? How can the average CommSec trader purchase shares if they so wish?
Editor’s response: Thanks for your letter. Ryman Healthcare is a New Zealand listed company only. Before investing, I would suggest seeking professional advice about the appropriateness of this and any other international investment.
Why laud a weaker dollar?
I would like to know why people are applauding the fall of the Australian dollar? Maybe there is a key point I am missing but I can see no benefit in a weaker dollar. Things are expensive enough here now and at least a dollar that was running level with other currencies kept a lid on prices. Watch as it falls and prices go up.
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