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PSG Product Overview

PSG Product Overview. Presentation Overview. Market Jargon What is a CFD ? Key features of CFD product Comparison with traditional shares Comparison with other derivatives Pro’s & Con’s od trading CFD’s CFD Trading examples Investor risks and obligations. Market Jargon. Investor Trader

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PSG Product Overview

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  1. PSG Product Overview

  2. Presentation Overview • Market Jargon • What is a CFD ? • Key features of CFD product • Comparison with traditional shares • Comparison with other derivatives • Pro’s & Con’s od trading CFD’s • CFD Trading examples • Investor risks and obligations

  3. Market Jargon • Investor • Trader • Derivatives • Long • Short • Gearing • Margin

  4. Market Jargon -Investor • Investor – An Investor buys shares with the intention of holding them for a few months to years. • Share selection is based on long-term factors, such as company fundamentals or imminent sector growth.

  5. Market Jargon -Trader • A trader buys (or sells) shares with the intention of holding them for a much shorter timeframe, usually within days or weeks. • Share selection is based on short-term factors, such as market momentum or upcoming news flow. • Traders have a short-term view and act fast to bank profits. It requires more attention than investing, but the rewards are far quicker.

  6. Market Jargon • Derivative - A contract whose value depends on (or derives from) the value of an underlying asset e.g. share – ANG, BIL, SOL. • Long - When you go long, you are hoping that the underlying asset is going to rise so that you can profit from this upward movement. • Short – If you are shorting (or selling a contract), you will make a profit if the underlying asset of your CFD falls below the price you entered the contract at.

  7. Market Jargon - Gearing • CFDs are geared products. • This means that there are money multiplier effects at work i.e. gearing magnifies your returns 10 times or more. • Gearing is essentially the borrowing of funds to purchase a financial instrument i.e. trading on margin. • This means that you are leveraged. • For each cent the share moves in your favour, you are multiplying the profits by up to 10 times.

  8. Market Jargon - Margin • Due to the gearing aspect, you gain exposure to much more than your margin (deposit) covers you for. • You put down a small deposit (10%-15%) but benefit from the movement of the total exposure. • If the margin requirement is 10%, you effectively put down one tenth of the total value of whatever share you are trading.

  9. What is a Contract For Difference? Contract between 2 parties to settle at the close of the contract the difference between the opening price and closing price of a share specified in the contract multiplied by the number of shares specified in the contract • CFD: Contract for Difference • Party 1: Writer (Stockbroker e.g. Online Securities) • Party 2: Holder (Investor) • Contract type: Long OR Short • Internationally popular with professional investors and speculators (>30% LSE volume trade)

  10. What is a Contract For Difference? Buy shares Client Deliver CFD Buy shares Deliver shares

  11. What is a Contract For Difference? A geared investment whereby you only pay a Margin deposit • 10% Top 40 shares • 15% on Top 41 - Top 100 shares but benefit from the entire movement of the underlying share

  12. CFD Product Description Offer • Long and Short CFD’s on Top100 JSE listed shares. • Margin deposit • 10% Top 40 shares • 15% on Top 41 - Top 100 shares • Variation margin required for adverse share price movement. • Brokerage 0.4% per transaction • Breakeven 0.92% (VAT included) • Zero UST • Financing at competitive rates • Current borrowing rate 12.63% (± Prime – 2%) • Minimum Exposure per trade of R100 000 (R10 000 margin) Underwritten by Online Securities Ltd • PSG Online is a stockbroking firm who is a member of JSE • We are regulated by the Securities Exchange Control Act

  13. Comparison with traditional shares

  14. Comparison with other Derivatives

  15. Comparison with other Derivatives

  16. Low trading costs No expiry date Hedge your current portfolio All the benefits Gearing & Risk No voting rights Pro’s & Con’s of CFD trading Advantages Disadvantages

  17. CFD Example

  18. Profitable Long CFD Position 356 309

  19. Profitable Long CFD Position 356 309

  20. Non-profitable Long CFD 356 309

  21. Non-profitable Long CFD 356 309

  22. Important notes on CFD Long Positions • Pay interest at SAFEX + 2 % p.a • The holder will receive a synthetic dividend • Synthetic dividend • Dividend is not earned tax free as a CFD is a derivative contract • In the case of a Long CFD, a holder of a long contract will be paid an amount equal to the dividend by issuer. • This is seen as an income and is subject to tax

  23. CFD Example

  24. Profitable Short CFD Position 356 309

  25. Profitable Short CFD Position 356 309

  26. Non-profitable Short CFD 356 309

  27. Non-profitable Short CFD 356 309

  28. Important notes on CFD Short Positions • You pay a script lending fee of 1.5% p.a. • Receive interest at SAFEX -2 % p.a. • The holder is liable for the dividend • Synthetic dividend • Dividend is not earned tax free as a CFD is a derivative contract • In the case of a short CFD, a holder of a short contract will have to pay the dividend to the issuer

  29. Investor Risk and Obligations CFD’s provide investors with leveraged exposure to an underlying security. This has the effect of magnifying profits and losses and consequently trading in CFD’s carries significant more risk than traditional equity investments, therefore the CFD product is only suitable for experienced and sophisticated clients. In particular investors should note that profits and losses on CFD trades can be many times the original trade size. Depending on the nature of a trade, losses may be unlimited. One should therefore only trade in CFD’s if prepared to accept the attendant degree of risk. A worst case scenario should always be anticipated before entering into a trade as the value of a CFD contract is calculated on a continuous basis and investors have the responsibility to ensure that amounts transferred to meet their variation margin responsibilities are cleared timeously.

  30. PSG Online Sitemap

  31. Top 100 Shares: Margin List reset after each Quarterly futures Close out

  32. CFD Holdings

  33. CFD Order Book

  34. CFD Share Statement

  35. CFD Margin Statement

  36. CFD Financial Statement

  37. Summary & Conclusion • CFD trading is only suitable for experienced & sophisticated clients. • No admin cost (R40 p.m.) • Open a CFD trading account • Happy trading!

  38. Contact Details Trading Desk(011) 996 5201 Sihle Ngema(011) 996 5248 Cameron Pluck(011) 996 5202 Pierre Hageman(011) 996 5252 Elaine van Damme(011) 996 5212

  39. Questions?

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