Singapore-based financial blog that aims to educate people on personal finance, investments, retirement and their Central Provident Fund (CPF) matters.

Thursday, 16 March 2017

What is Contra Trading?

11:30 Posted by cheez No comments

Contra Trading, is the act of
1) buying a stock and selling it before payment date
2) selling a stock and buying it back before payment date

In Singapore, after a trade is executed, you have three working days before you need to pay the total cost of the stock.
If you buy a stock on Monday, you are only required to pay the total cost of the trade on Thursday.
However, in contra trade, you sell the stock before you are required to pay on Thursday.
You can sell on Monday, Tuesday, Wednesday or Thursday.
This effectively means you do not have to fork out a huge amount of money to pay for the stock.
In this scenario, you earn or pay the difference between the selling price and the buying price.

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Example 1: Normal Buying and Making a Profit
I buy 1,000 shares of ABC company at $3.00 per share on Monday.
Total I will need to pay $3,000 for these shares on Thursday (excluding brokerage fees)
On Wednesday, I sold the shares for $3.10 each.
I will earn $0.1 x 1,000 shares = $100 (excluding brokerage fees)
I earn $100, and I do not need to pay $3,000 for the shares that I have bought.

Example 2: Normal Buying and Making a Loss
I buy 1,000 shares of ABC company at $3.00 per share on Monday.
Total I will need to pay $3,000 for these shares on Thursday (excluding brokerage fees)
On Wednesday, I sold the shares for $2.90 each.
I will lose $0.1 x 1,000 shares = $100 (excluding brokerage fees)
I will need to pay to my brokerage firm $100 for the losses I incurred for the trade
But I do not need to pay $3,000 for the shares that I have bought.

Example 3: Shorting a Stock and Making a Profit
I sell 1,000 shares of ABC company at $3.00 per share (I do not own any shares previously).
Total I will take $3,000 in cash and I will need to delivery 1,000 shares of ABC (excluding brokerage fees)
On Wednesday, I buy back the ABC shares for $2.90 each.
I will earn $0.1 x 1,000 shares = $100 (excluding brokerage fees)
I earn $100, and I do not need to deliver the 1,000 ABC shares that I sold.

Example 4: Shorting a Stock and Making a Loss
I sell 1,000 shares of ABC company at $3.00 per share (I do not own any shares previously).
Total I will take $3,000 in cash and I will need to delivery 1,000 shares of ABC (excluding brokerage fees)
On Wednesday, I buy back the ABC shares for $3.10 each.
I will lose $0.1 x 1,000 shares = $100 (excluding brokerage fees)
I will need to pay to my brokerage firm $100 for the losses I incurred for the trade
But I do not need to deliver the 1,000 ABC shares that I have sold.

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Do note that although you are allowed to do Contra Trading in Singapore, there is an additional requirement if you are short-selling and buying back within the 3-day period.
You are required to "borrow" the stock you are short-selling from SGX (you need to have an account approved for short-selling) before you can short-sell.

Revolution to Trading Singapore Stocks 
using Contra Squeezing Techniques

Learning Points
1) How to perform contra trades using contra squeezing strategies
2) How to pick the right stocks for short-term trading
3) How to spot important entry and exit points for trading positions
4) Risk Management for Contra Trades
5) Sneak Peek into new category of Growth stocks

Speaker: Ronald K- Self-made millionaire investor
- Featured in Sunday Times twice for his approach to investing

Event Details:
Date: 25 March 2016 (Saturday)
Location: City Index Asia Pte Ltd, 6 Battery Road
Time: 10.00AM  3.00PM (registration starts from 9.30AM)
Price: $10 

*Lunch is provided

Click HERE for more information on the event!
Click HERE to sign up for the event!

Limited Seats Only! Sign Up Now!

Free Mystery Gift
for the first 20 registrants
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