How to buy shares in a leveraged way

[ACEparts_com]

Bon

How do I go about buying shares (shorting I think it's called). I basically think that shares in X will be worth considerably less in 6 months time than now.
Suppose I have £10,000 to bet against the fall, how can i go about leveraging this to bet on say, £100,000 worth without being liable for more than £10K of my own money?

Answers on a postcard please

[shadowninja]

I think CFDs are one way.

PS why is everyone suddenly interested in the stockmarket? So many questions recently about oil, gold, stocks, etc.

[Fittster]

You could also look at spread betting.

[Ordinary Bloke]

As I understand it (that's close to 'not at all') if you can win a multiple of what you're betting, you can also lose a multiple.

Check very carefully the maximum you can lose, just because you bet £10K doesn't necessarily mean you can't get a bill for more if things don't go the way you expect over the next 6 months.

Others in the know will now explain...



...or tell me what a dipstick I am!

[MitchT]

ACEparts_com said:

How do I go about buying shares (shorting I think it's called).

The first thing you need to understand is that 'shorting' is selling something you don't own. Don't talk about 'buying' something to when you're intending to back it to go down, because you're not buying it. When you go short of something you effectively sell it even though you don't yet own it, the basis of this being that you believe it will fall in price and that you can buy it later for a lower price than you've already sold it for. To enter a short position you 'sell'. To exit a short position you 'buy'. Buying to exit a short position is also known as 'covering'. When you 'buy' something that you are already short of you effectively end the contract.

To put it simply... A shopkeeper advertises Plasma screens at a price when he believes he can acquire stock for a lower price than he has advertised it for. He has made a contract with the public to sell Plasma screens to anyone who wants them, at the advertised price, and now has to source Plasma screens for less than his advertised price to make a profit.

ACEparts_com said:

Suppose I have £10,000 to bet against the fall, how can i go about leveraging this to bet on say, £100,000 worth without being liable for more than £10K of my own money?

The FTSE 100 closed at 6204 on Friday, so you'd need to be positioned at about £16.12/point for your £10,000 to act like £100,000 that was spread over the entire market's value... but remember - if the market moved against you by 620 points (that's 10% of the market's value) you'd be wiped-out. While the economic outlook might be precarious, and a long-term fall is not unlikely, the volatility that arises at times like this is likely to put your capital under serious threat. It would only take OPEC to ramp-up crude output on Monday and within a couple of weeks crude could be back down at $70/barrel and the FTSE rocketing as a reflection of businesses' reduced costs. Your £10,000, leveraged across just 620 points of the FTSE 100, could be gone in a matter of weeks!

[ACEparts_com]

THANKS!, All very interesting. I think I should do as my dad says and that's stick to what I know, it's just that I can see house builders take a major kick in (imo) and would love to take advantage of it somehow. It's just knowing how that is the issue!

[_James]

ACEparts_com said:

THANKS!, All very interesting. I think I should do as my dad says and that's stick to what I know, it's just that I can see house builders take a major kick in (imo) and would love to take advantage of it somehow. It's just knowing how that is the issue!

Your problem though is that, unless you have access to information that the markets do not, the risk of house builders taking a kicking will already have been incoporated into their share price (from an entirely theoretical standpoint). Your expected gain would be zero, and you'd expect to incur a loss due to the transaction costs.

This is of course based on no knowledge whatsoever of how it actually works, but how I've been told it should work!

[NoelWatson]

_James said:

ACEparts_com said:

THANKS!, All very interesting. I think I should do as my dad says and that's stick to what I know, it's just that I can see house builders take a major kick in (imo) and would love to take advantage of it somehow. It's just knowing how that is the issue!

Your problem though is that, unless you have access to information that the markets do not, the risk of house builders taking a kicking will already have been incoporated into their share price (from an entirely theoretical standpoint). Your expected gain would be zero, and you'd expect to incur a loss due to the transaction costs.

This is of course based on no knowledge whatsoever of how it actually works, but how I've been told it should work!

Assuming efficient markets, you are not far wrong

[cannedheat]

NoelWatson said:

_James said:

ACEparts_com said:

THANKS!, All very interesting. I think I should do as my dad says and that's stick to what I know, it's just that I can see house builders take a major kick in (imo) and would love to take advantage of it somehow. It's just knowing how that is the issue!

Your problem though is that, unless you have access to information that the markets do not, the risk of house builders taking a kicking will already have been incoporated into their share price (from an entirely theoretical standpoint). Your expected gain would be zero, and you'd expect to incur a loss due to the transaction costs.

This is of course based on no knowledge whatsoever of how it actually works, but how I've been told it should work!

Assuming efficient markets, you are not far wrong

But that would be a big assumption to make...

[_James]

cannedheat said:

NoelWatson said:

_James said:

ACEparts_com said:

THANKS!, All very interesting. I think I should do as my dad says and that's stick to what I know, it's just that I can see house builders take a major kick in (imo) and would love to take advantage of it somehow. It's just knowing how that is the issue!

Your problem though is that, unless you have access to information that the markets do not, the risk of house builders taking a kicking will already have been incoporated into their share price (from an entirely theoretical standpoint). Your expected gain would be zero, and you'd expect to incur a loss due to the transaction costs.

This is of course based on no knowledge whatsoever of how it actually works, but how I've been told it should work!

Assuming efficient markets, you are not far wrong

But that would be a big assumption to make...

Don't we assume that markets are semi-strong form efficient? So that you can profit from private information, but not public?

[matsmith]

im not being funny here now- but the fact that you say you want to buy shares to short suggests to me that you dont know a huge amount about the markets, how they work, etc

the main problem is there are plenty of spread betting companies etc who would just love to take your hard earned cash off you, and i think i would be correct in assuming you are highly inexperienced so leveraging could be a terrible mistake.

cash in the bank is obviously the safest, but if you really do want to have a go at the markets then you could put a small amount into an account with someone like IG or Finspreads (i think finspreads offer 10p per point bets, someone else might confirm??)

some SB's also offer deals such as matching your deposit up to £100 or £200 or whatever, so that will cover some of the losses your bound to suffer in the early stages


but with all that said, i obviously wouldnt recommend an act which is basically gambling lol, especially at times as potentially volatile as these!

[LeoSayer]

Some hedge fund managers are already making the same bets. IGindex is a good way for the public to profit in a falling market. You can also short the London or UK propety price index.

[Horse_Apple]

ACEparts_com said:

THANKS!, All very interesting. I think I should do as my dad says and that's stick to what I know, it's just that I can see house builders take a major kick in (imo) and would love to take advantage of it somehow. It's just knowing how that is the issue!

Been priced in for months now anyway

[amorgan]

I have friends who own an advisory CFD broker called Central Markets. It is quite a new company but one you should see a lot more of in the future. These guys give you all the advise and structure the trades to suit your own profile. They work mainly on Technical Analysis and have had a couple of very good results recently with shorting British Airways and also Alliance and Leicester (see today)

[Horse_Apple]

amorgan said:

I have friends who own an advisory CFD broker called Central Markets. It is quite a new company but one you should see a lot more of in the future. These guys give you all the advise and structure the trades to suit your own profile. They work mainly on Technical Analysis and have had a couple of very good results recently with shorting British Airways and also Alliance and Leicester (see today)

http://www.fsa.gov.uk/register/firmIndivSearch.do?sid=192475

All ex sales staff from penny share shops? I wonder how many are actually qualified beyond basic Reggie Rep?

[amorgan]

They are a lot more qualified than your order takers you call at IG, CMC or the other main stream guys. Then again these guys dont pick the trades, their technical guys they employ do that. Its these guys who come up with the goods.
Anyway the post was meant just as a bit of advise ( as they are doing very well in this market at the moment) not for another broker to try and shoot them down by doing a history search on the FSA register.

[Horse_Apple]

amorgan said:

They are a lot more qualified than your order takers you call at IG, CMC or the other main stream guys. Then again these guys dont pick the trades, their technical guys they employ do that. Its these guys who come up with the goods.
Anyway the post was meant just as a bit of advise ( as they are doing very well in this market at the moment) not for another broker to try and shoot them down by doing a history search on the FSA register.