offering a comprehensive range of investment products and services.

Transcription

1 Linear Investments is a global investment manager offering comprehensive range of Investments is aaglobal investment manager investment products and services Linear offering a comprehensive range of investment products and services. Linear Investments is a global investment manager offering a comprehensive range of investment products and services

2 Contents What are CFD s? 03 ~ 04 Effective Trading Strategy 05 ~ 06 CFD Commissions and Pricing Our Approach to Trading The Next Step ~ 10 01

3 CFDs are becoming increasingly popular among Private investors the advantages of trading through Linear Investments include: Access to Long and Short trades Access to a personal dedicated trader, who provides: Leveraged Trading Trading ideas and recommendations No stamp duty Monitoring service for open orders Access to a wide range of products Sounding board for own ideas Better Execution Help with risk, stop-losses and profit target setting DMA trading 02

4 What are CFDs? A brief history of CFDs CFDs were first created in London in the early 1990s. They were initially used by hedge funds to short sell the market while using leverage. It also allowed these hedge funds to avoid paying stamp duty, similar to members of the London Stock Exchange. By the late 1990s, CFDs were introduced to private investors. The technology boom led to growth in online trading platforms, making it easy for investors to see live prices and trade in real time. Over the last decade, CFDs have seen incredible growth in the UK. They are also beginning to span the CFDs are a way of speculating on the price globe, having been introduced across Europe, Japan, Canada, Australia and South Africa. movements of financial markets around the world without buying or selling the underlying asset directly. They provide the opportunity to make profits (or losses) from a wide range of markets including equities, indices, currencies and commodities. CFDs can be used to speculate on upward or downward price movements, making them a How do CFDs work? A CFD (Contract for Difference) is basically an agreement to exchange the difference between the opening and closing value of a contract at its close. The price of your CFD will then replicate the price of the underlying asset giving you a profit (or a loss) as the price of the underlying moves. There are no expiry dates on CFDs, as a result you can run a position for as long as required. flexible alternative to traditional trading. CFD prices As with traditional share dealing, CFD prices are quoted as a Bid (the price you can sell at) and an Offer (the price you can buy at). You then buy or sell a CFD based on the value of a certain amount of the underlying asset. Margin trading Margin trading enables you to trade an entire portfolio without tying up large amounts of capital. When you lodge a security deposit of, say just 10,000 (or equivalent currency) in your account, you can trade up to 100,000 worth of shares. This is a 'margin requirement' of 10%. Although the margin requirement can be as low as 5% for CFDs for some FTSE 100 shares, this represents a leverage factor of 20:1. For smaller companies or if a share price is notably volatile, the margin requirement can be set above 10%. 03

5 You must maintain your margin if the market moves against you and your deposited funds do not cover open position losses and margin requirements. This may mean sending additional funds at very short notice and/or reducing the size of your positions, which is known as a 'margin call'. Trading CFDs on margin allows you to take large market positions in relation to the money you have deposited. Margin trading magnifies both your profits and your losses. Risk management Many investors choose to limit their risk - or protect a running profit or open position - by placing a 'stop-loss' order, which closes out their position automatically once a set price level is reached. This can be done with in conjunction with your personal dedicated broker or at pre-arranged levels. While it is recommended using a stop-loss, we should point out that your stop-loss might be filled at a worse price than you had requested, which may happen in fast moving market conditions, or where a share opens a trading session well away from its previous close. Guaranteed Stop Losses? Linear Investments offer an execution to a full advisory service. Each Linear client will have a personal dedicated trader, who will tailor a level of service to your needs. Which will include the latest opportunities and research in the market. Your Personal dedicated trader can be used to be a portfolio monitoring service or a full blown advisory service that will take you through each stage of your investment, or anywhere in-between. Your Personal dedicated trader will be someone to build a relationship with to seek advice from and exchange ideas with. We believe our clients prefer to have another perspective and additional input that we can provide. As a client you can tailor the service to your needs. You'll be provided with; an online trading platform, live prices, charts and access your account at any time. Our service will include intra-day market technical analysis and commentary on your evolving positions. Our service is traditional, we believe that person to person contact is very important and that a personal service with a primary point of contact helps to build a successful trading partnership. 04

6 Effective Trading Strategy: Example 1: Long trade with net profit, Imagine the physical purchase of 500 shares in XYZ priced at 200 pence each. By investing the same amount of capital you would be able to purchase 5000 CFDs at 200 pence each, after 10 days you sell the same amount of shares for a profit at 215 pence each your deposit is returned to you together with your Money management is a very important part profit minus commissions. of successful trading. We at Linear can discuss all aspects of risk management with you. Limiting losses is as important as making market gains. Clients, through the trading desk will be informed of a range of market live research, Action Opening Value Commission (0.5%) drawing on a wide range of information Stamp Duty (0.5% on shares) sources and analytical sources relating to the Deposit Required (10% for CFD) Buying Shares Buying a CFD 1,000 10, ,000 1,000 Selling Shares Selling a CFD 1,075 10, fundamental and technical aspects of their traded market. Action (Winning Trade) Closing Value Commission (0.5%) Using Leverage Explained: The Client will be provided with two levels of commission dependant upon whether your account is advisory or execution only. Interest Charges * Net Profit Nil * (including libor + 2.5% = 4% pa on CFD) 05

7 Example 2: long trade with net loss, Using the example above, but after 10 days you sell the amount of shares for a closing price of 190 pence your deposit is returned to you minus your loss and commissions. Action Opening Value Commission (0.5%) Buying Shares Buying a CFD 1,000 10, ,000 1,000 Selling Shares Selling a CFD Closing Value 950 9,500 Commission (0.5%) Nil Stamp Duty (0.5% on shares) Deposit Required (10% for CFD) Action (Losing Trade) Interest Charges * Net Loss * (including libor + 2.5% = 4% pa on CFD) 06

8 CFD commissions and pricing: Our commission rate on equities depends on whether it is advisory or execution. These rates are 10 basis points for execution only and 25 basis points for advisory For commission rates and charges related to other instruments please contact Linear Investments for further information. Trading can be conducted over the telephone or through the online trading platform. You will not be charged any additional cost for trading over the telephone. Linear Investments does not charge any hidden costs such as administration, compliance or management fees and we do not widen the spread of shares. As you can see, CFD trading is very similar to normal share dealing. You deal at the cash price of the share, and pay a commission on both the open and close, which is calculated as a percentage of the value of the transaction. Financing: When you trade CFDs you may incur financing charges on positions held overnight. If you are long, you'll have to pay interest; if you are short, you may receive interest. On equity positions, long positions will be debited a financing charge of LIBOR + 2.5%, while short positions will be credited finance of LIBOR - 2.5%. For example, if a client was holding a long CFD position in a share, they would pay financing at 2.5% over LIBOR. If LIBOR was say 1.5%, the client would be paying a funding rate of 4% per annum. If the total contract value was 10,000 the funding charge would be around 1.10 for every day the contract was maintained ( 400 per annum divided by 365 days). The funding charge is only incurred if the position is held overnight. These amounts will be credited or debited on the next trading day. Dividend Adjustments: When a position is held long on the close of business on the day prior to the ex-dividend date your account is credited the difference. An account is debited when a short is held prior to the ex-dividend date. 07

9 Our Approach To Trading: At Linear Investments, we believe that successful trading requires a combination of fundamental and technical analysis, but this should be coupled with extensive market knowledge and trading psychology. Linear Investments research is based on a combination of fundamental and technical analysis in order to create and maximise a trading edge and to provide the Client with a better understanding of the markets. Our trading recommendations are decisive and concise, they are specifically developed to take advantage of the CFD traded market. Fundamental analysis is constantly evolving, a company fundamental data can evolve on a daily basis. Fundamental analysis can take many forms. We at Linear draw on many sources for fundamental analysis. Technical analysis is very important for successful market trading. Good fundamental trading ideas can be undone by incorrect timing. Technical analysis helps judge market sentiment and can help with the timing of trades. Also we have found that certain chart patterns can have a higher success rate in different market positions. We at Linear find that changing the emphasis for example, of momentum indicators to overbought or oversold indicators, to match our market view helps the stock screening process. At Linear Investment we have brokers and ex-traders who have many years experience in a wide variety of markets. We have found that by developing a trading plan before entering a trade it takes the stress and worry out of trading, as all options and outcomes will have been considered and analysed, and a plan, no matter what the outcome, formed. As we say at Linear Investments: plan your trade & trade your plan. 08

10 The Next Step: How do I apply? Applying for an account is quick and easy. You can contact us on our telephone number below or through our website. Upon approval of your suitability, we are happy to assist you in setting up your account. One Knightsbridge Green London SW1X 7QA United Kingdom Any questions? This guide cannot cover all aspect of CFDs and our advisory service. If you can not find the answer to your question, please do not hesitate to contact us, and we will be happy to answer any Telephone: +44 (0) questions. Linear Investments Ltd is authorised and regulated by the Financial Services Authority No VAT No. GB Registered in England & Wales No : One Knightsbridge Green, London, SW1X 7QA. 09

11 Trading in Contracts for Difference may not be suitable for all investors due to the high risk nature of the products. You may lose all of your initial stake through the use of leverage and may be required to make additional payments by way of margin on a frequent and sometimes daily basis. Failure to do so can result in the closure of part or all of your position. The value of an investment in a Contract for Difference may be affected by a variety of factors, including but not limited to, price volatility, market volume, foreign exchange rates and liquidity. Contracts For Difference are short term trading tools. Commissions on Contracts for Difference are charged on the leveraged amount (not the deposit) and therefore costs can build up when frequently traded. You should evaluate potential losses against affordability. Extended runs of losses as well as profits can occur. Past performance is not necessarily a guide to future performance. Information and research produced by Linear Investments, does not constitute a recommendation or offer to make a transaction in any derivatives or securities, and is intended to be general in nature. If in any doubt, please seek further independent advice. Tax laws may be subject to change. 10

12 One Knightsbridge Green, London SW1X 7QA, United Kingdom tel: +44 (0)