2007-03-26 02:51:43 · 5 answers · asked by Anonymous in Business & Finance ➔ Investing
With spread trading you actually purchase one security and actually short another.
With CFDs (which are illegal in the US -- but common in the UK) you are essentially making a bet on the total return of one stock. CFDs are a contract where one party pays the total return on an asset while the other pays LIBOR plus a spread. To make it like a spread trade, you would have to go long one CFD and short another.
Though CFDs are illegal in the US, Equity Swaps are not. The difference between an equity swap and a CFD is that with equity swaps, both parties agree to a fixed length contract, while with a CFD, the parties can end it at any time.
2007-03-26 08:44:21 · answer #1 · answered by Ranto 7 · 0⤊ 0⤋
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2016-12-24 21:58:14 · answer #2 · answered by ? 3 · 0⤊ 0⤋
1) Futures cover more than just commodities including stock indices, bonds, interest rates, currencies, and others. 2) Despite what the other poster told you, trading physical commodities in the size of futures contracts is not really something you can do yourself unless you are deeply involved in the commodity. One great thing about futures contracts is that you don't have to know anything about delivery options, quality, grading, place of delivery, sale of physicals, etc. to trade commodities. Trading a futures contract is completely simple. Trading thousands of live cattle is very difficult. 3) Trading futures contracts requires much less money than trading physicals. If you trade futures contracts you only need to have, at most, initial margin + the change in value of the underlier*size of the contract not the value of the underlier*size of contract. For instance, if you buy a gold contract and the margin is 10%, you need to have only 10% of the value of the gold underlying the contract. You may need to put in more money if the contract moves against you but it will still be less than the entire amount needed to purchase the gold. 4) Virtually everyone who trades futures closes out the position before delivery. I've worked for hedge funds for many years trading commodities and never seen a cow, a pig, a grain silo, an oil storage facility. I sometimes remember where Henry Hub is but I don't right now.
2016-03-17 02:29:50 · answer #3 · answered by Nedra 4 · 0⤊ 0⤋
This is difficult to understand for me too
2016-09-19 16:33:58 · answer #4 · answered by Anonymous · 0⤊ 0⤋
can someone tell what is the right answer for this question?
2016-08-23 22:05:13 · answer #5 · answered by ? 4 · 0⤊ 0⤋