IN ADDITION TO BEING SPECULATIVE, STOCK INDEX TRADING INVOLVES A SUBSTANTIAL RISK OF LOSS AND MAY NOT BE SUITABLE FOR ALL INVESTORS.

Size: px

Start display at page:

Download "IN ADDITION TO BEING SPECULATIVE, STOCK INDEX TRADING INVOLVES A SUBSTANTIAL RISK OF LOSS AND MAY NOT BE SUITABLE FOR ALL INVESTORS."

Kathlyn Hamilton
5 years ago
Views:

Stock Indices Fact sheet Introduction Stock Index Trading Stock indices on Swissquote s eforex platforms are OTC derivative contracts with a stock index as an underlying.

In other words, stock indices allow traders to go long or to short a stock index for an unlimited time period on a margin basis.

1 Stock Indices Fact sheet Introduction Stock Index Trading Stock indices on Swissquote s eforex platforms are OTC derivative contracts with a stock index as an underlying. They allow traders exposure to the change in value of the stock index without the need to physically own the underlying index. In other words, stock indices allow traders to go long or to short a stock index for an unlimited time period on a margin basis. Stock indices on Swissquote s eforex platforms are an alternative to the stock index futures markets and to standard contracts for differences (CFDs). In comparison with stock index futures which have higher margin requirements and standardized contract specifications, OTC stock indices allow traders to take advantage of reduced margin requirements and flexible contract specifications. Furthermore, compared to standard CFDs, stock indices offered by Swissquote do not require traders to manage their expiration dates. What are the underlying risks of stock index trading? The risk of loss in trading stock indices can be substantial. You should, therefore, carefully consider whether such trading is suitable for you in light of your financial situation. Stock index trading is speculative and influenced by many factors. Stock index trading can be very volatile and involves a high degree of risk. The low margin deposit required permits an extremely high degree of leverage. Accordingly, a relatively small price movement in a stock index may result in immediate and substantial loss or gain to the trader. Price movements are influenced by among other things; political and economic events, liquidity, and emotions of the market place. None of these factors can be controlled and no assurance can be given that the trading activity will result in profitable trades and not in substantial losses. IN ADDITION TO BEING SPECULATIVE, STOCK INDEX TRADING INVOLVES A SUBSTANTIAL RISK OF LOSS AND MAY NOT BE SUITABLE FOR ALL INVESTORS. Swissquote Bank Ltd. All rights reserved. V Stock Indices Fact sheet 1

2 Trade leverage Depending on your experience level, trade leverage can be a powerful tool to help maximize returns, or alternatively it can cause significant loss. Due to its complexity, trade leverage must not be taken lightly and it is recommended that you refrain from trading until you have read and fully understood the mechanism described in the eforex contract, in the Account opening documentation and on Swissquote s websites. Stock index trading with leverage may not be suitable for all investors as it carries a high degree of risk. As you could lose your initial deposit, you should ensure that you fully understand all the risks. These risks are also intensively described in the eforex contract, in the Account opening documentation and on Swissquote s websites. Failure of Electronic Trading System Electronic trading systems are susceptible to temporary breakdown. In the event of system or component failure, it is possible that (for a certain period of time), you may not be able to enter new orders, execute existing orders, modify, or cancel orders that were previously entered. In such circumstances, you shall directly contact a sales representative or the dealing desk in order to check and monitor your open positions. Swissquote Bank Ltd. All rights reserved. V Stock Indices Fact sheet 2

3 Stock Index Trading Swissquote aims to facilitate to its clients the access to online stock index trading, as well as to provide an alternative to the current solutions (e.g. futures, standard CFDs) offered by other online brokerage platforms. We aim to propose a stock index trading alternative with the same trading features that are currently applied to currencies, precious metals and energy on all of our eforex platforms such as; Real time trading Deep liquidity Low cost trading Leverage use Automatic closing out Automatic rollover of open positions No physical delivery A stock index transaction executed through Swissquote is made either against CHF (SMI/CHF), or EUR (DAX/EUR & ESX/EUR). What does Swissquote propose? The following stock indices and the associated symbols are offered for trading on all of Swissquote s eforex platforms. Each stock index transaction is a computation derived from its corresponding stock index future contract traded and quoted on EUREX. Stock Index EUREX Futures Symbol Swissquote Symbol EURO STOCKS 50 FESX ESX/EUR SPOT GERMANY 30 FDAX DAX/EUR SPOT SWITZERLAND 20 FSMI SMI/CHF Price generation Swissquote s stock index price is built through the combination of two stock index futures contracts with different maturities. Indeed, the stock index price on EURO STOXX 50 is based on the 1 st Maturity Future (FESX1) and adjusted by the Spread between the front contract (FESX1) price and the next available future (FESX2) price; the Spread is adjusted by a Delta Factor and a Time Factor. Swissquote Bank Ltd. All rights reserved. V Stock Indices Fact sheet 3

4 Swissquote s EURO STOCKS 50 (ESX/EUR) = FESX1 [ [ Spread Delta Factor ] * Time Factor ] ± SQ Markup Spread = FESX2 FESX1 (eq to. price difference between 2 nd Maturity & 1 st Maturity Future contracts) FESX1: the 1 st Maturity Future FESX2: the 2 nd Maturity Future Delta Factor = price adjustment computed once per quarter in order to avoid a price gap at the future contract switch. Time Factor = ratio combining the remaining days before FESX1 expiration and the total number of days between the last and the next expiration. Overnight Rollover In order to smooth out the price difference between the two futures contracts (FESX2 & FESX1), which basically represents the quarterly rollover cost, we would apply this difference on a daily basis, as a rollover fee: Quarterly rollover cost = Spread (FESX1, FESX2) With such a fee actualized on a daily basis, you do not suffer from the switch from one contract to another. Daily Rollover = ( ( [ FESX2 FESX1 ] - Delta Factor ) / Y) ± SQ Markup Y = total number of days between the last and the next expiration. This rollover mechanism is applied on a daily basis and therefore has consequences on your account. The rollover process takes place automatically between 11:00 pm CET and 11:15 pm CET. The debit or credit is then booked to your account on the following day. Swissquote Bank Ltd. All rights reserved. V Stock Indices Fact sheet 4

5 Practical examples of Overnight Rollover Example 1 Date of transaction: 24 January 2011 Available FESX contracts: Price Roll date FESX1 maturity FESX Delta Factor = -72 Time factor = 0.51 Spread = = -76 ESX/EUR price = ((-76 - (-72)) * 0.51) + mark-up = mark-up Roll over fee: mark-up Example 2 Date of transaction: 30 March 2011 Available FESX contracts: Price Roll date FESX1 maturity FESX Delta Factor = 79 Time factor = 0.79 Spread = = -1 Synthetic spot oil price = ((-1 - (79)) * 0.79) + mark-up = mark-up Roll over fee: mark-up. Swissquote Bank Ltd. All rights reserved. V Stock Indices Fact sheet 5

6 Leverage Deciding which of Swissquote s various platforms to trade stock indices on will also allow you the choice of leverage you wish to have. Opt to trade on the Advanced Trader, Web Trader or MT4 platforms and you will experience a constant maximum leverage of 25:1, weekends included. When choosing to trade on the FXBook platform, you will also enjoy a maximum leverage of 25:1; however this leverage is only available between 11:00 pm CET on Sunday and 10:00 pm CET on Friday. On weekends (between 10:00 pm CET on Friday and 11:00 pm CET on Sunday), the maximum leverage may be reduced. Regardless of which platform you choose, a 25:1 leverage with a capital outlay of USD 1,000 will allow you to invest USD 25,000 on the market. This maximum leverage is available between 11:00 pm CET on Sunday and 10:00 pm CET on Friday. Please refer to the margin requirements provided on the website, for each corresponding platform. Automatic closing out You are fully responsible for monitoring the activity on your account. However, with the purpose of avoiding that your losses exceed your entire equity, Swissquote operates a system which automatically closes out all open positions as soon as the margin threshold is breached, at the next available market price for the corresponding execution size. For additional information, please refer to the eforex contract, the Account opening documentation and Swissquote s websites. Swissquote Bank Ltd. All rights reserved. V Stock Indices Fact sheet 6

7 Help If you require help or further information, please do not hesitate to contact our FX sales team Swissquote Swissquote is the leading Swiss bank in the area of financial services and online trading, and is listed on the Swiss Stock Exchange (SIX, ticker symbol SQN). With branch offices throughout Switzerland and an international location in Dubai UAE, Swissquote is headquartered in Gland (VD) in a building housing the latest technological advancements. Customer Care Center Gland Headquarters T Swissquote Bank Ltd F Ch. de la Crétaux 33 When calling from overseas: 1196 Gland T Switzerland F Zurich Office Swissquote Bank Ltd Schützengasse 22/ Zurich Switzerland Dubai Office Swissquote Bank Ltd (DMCC Branch) Jumeirah Lakes Towers, Almas Tower Level 33, Office 33J P.O. Box , Sheikh Zayed Road Dubai, UAE / Legal notice: This presentation is not intended for persons who, due to their nationality or place of residence, are not permitted to receive such information under local law. The information and opinions contained in this Factsheet were produced by Swissquote as per the date stated and may be subject to change without prior notification. Although the information has been obtained from and is based upon sources that Swissquote believes to be reliable, Swissquote assumes no responsibility for the quality, correctness, timeliness or completeness of the information contained herein. Swiss Bankers Association Directives on the Independence of Financial Research do not apply. This Factsheet does not constitute an offer or an investment recommendation or advice and does not replace the qualified advice necessary prior to making any investment decision, especially relating to the associated risks. Past performance is no guarantee for future performance. Derivative financial products are not considered collective investment vehicles as defined by the Swiss Collective Investment Schemes Act (CISA) and are therefore not subject to the supervision of the FINMA. The investor is exposed to the default risk of the issuer/guarantor. This Factsheet may not be copied or distributed without permission. Swissquote Bank Ltd. All rights reserved. Swissquote Bank Ltd. All rights reserved. V Stock Indices Fact sheet 7

Nickel. Fact sheet. Introduction. Nickel Trading

Nickel. Fact sheet. Introduction. Nickel Trading Nickel Fact sheet Introduction Nickel Trading As an alloying metal, the uses of nickel are extraordinarily diverse. Its high melting point and resistance to corrosion have contributed greatly to the wide