The Blue Roof

I have attended a very interesting meeting yesterday. I was invited by the stockbrokers who are introducing a new platform to trade SSF. I can’t comment on the platform, because I don’t know enough.

 But I did learn a few things about Single Stock Futures (SSF) which was very valuable.

 My first question was: what is the difference between an SSF and a Contract for Difference (CFD). The answer is: an SSF is more highly geared, a CFD does not have an expiry date, trading CFD’s costs more and CFD’s are unregulated. Basically anybody can start making a market in CFD’s. That is why you have to choose your partner very carefully. Apparently there was a South African company that sold CFD’s that disappeared with investor’s money. That is why you should rather trade through Standard Bank (or a similar institution). Further more, CFD’s you are entitled to the dividends, with SSF you are not, so it is calculated into the carrying costs.

 Other than the fact that you can use SSF as a way of trading and making short term gains, it offers other benefits. First of all, you can “short” it. In other words, you can sell something that you don’t have. I, like most other people, knew the stock exchange was too high, but I did not want to sell the shares in very good companies. If I rather sold an SSF, I would have made the money that I lost on the shares. In other words, I really could have had my shares and my money! I wish I understood SSF better 2 years ago.

 I don’t like the idea of margin calls – that is when the gearing turns against you and you have to give the stockbroker more money to cover the risk. But I can use SSF to buy the monetary value of shares that I would buy outright, and save a lot on trading costs – and still have the potential to make the profits I would have made if I bought the shares outright.

 I am still a long way from trading in SSF, but I am definitely going to investigate more, to see how I can use this financial instrument to help me create wealth and protect my wealth.

 What did attending this cost me? Nothing! Not quite true – I did not really feel like driving to this meeting after a day at the office. It did take 2 hours of my time and travelling cost. But it was worth much more!

 At the meeting I meet somebody else. He opened a broking account with Standard Bank at R50 per month. That is R600 per year. And he has access to all their training – at no further cost. That is what I mean by investing in yourself first.