Stocks Mkts Down, down & Down... How to Capitalize on them?!

Total Massacre out there! Who have not been spared?!

Anyway, an idea came to my mind... Why do we only think of buying when stock markets go up? Why not capitalize on them when they come down?

According to my past experiences.. There are 3 methods to do that in stock markets:

  1. Short - Selling: It is to borrow and sell. From the singapore context, i think that Short-selling can only lasts for T+3. Which means you have to close the position within 3 days and your technical analysis or hunch must be damn zhun!
    An example will be like today - Monday 04 June 2012. If you see how the US stock markets fare last friday [A near 300 point drop for Dow Jones], you can roughly guess the impact it will have on stock markets on Monday.
  2. Buying Put warrants / options: To be honest, i am not familiar with Warrants although i know they function like Options. I done a little research and it seems that Warrants are bought directly through the same portal where you buy/sell your stocks.
    More information can be found here:  http://www.dbsvickers.com/warrants/Pages/default.aspx#3
  3. CFD trading: I think this is by far the most popular tool used to go short the market. They are offered by many providers like phillip-securities, city index, igmarkets.com.sg etc..
    The bad point about CFD is that the number of stocks you can short is limited to the selection they offer you & they are mainly blue chip stocks.
    Despite paying a daily fee for shorting CFD, the blue chip stocks don't usually fall much in value within a short period of time. Thus, you really need to also time the market well in order to maximize the winnings with minimum costs of holding to the short position.
I believe the list is not exhaustive... I have quite limited knowledge on this field and would appreciate greatly if someone can also share their experience here! Thanks!

1 comment:

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