Derivatives & CFDs
By opening a Contego Derivative or CFD account, you can make use of excellent live online trading systems, which could be downloaded straight off the internet (no software needed). Contact us for a demo.
Futures
Futures provide investors with enhanced exposure to price movements of an underlying stock or index. Participants can invest in the underlying asset without trading the individual asset itself. By putting down a required margin, a futures contract gives the investor the right to buy/sell an underlying listed financial instrument at a fixed price on a future date. At Contego we assist and manage our client’s investments in both Index and Single Stock Futures (SSF).
An SSF contract is done through a futures exchange and is a legally binding commitment made to buy or sell a single stock in the future. Each SSF contract trades in lots of a 100 shares and is standardised with regard to size, expiration and tick movement.
SSF are leveraged instruments. This means that you are fully exposed to price movements of the underlying instrument without having to pay the full price of that instrument. SSF therefore offer the potential to make a higher return from a smaller initial cash outlay (margin) than investing directly in the underlying instrument.
Leverage involves more risks than a direct investment in the underlying instrument. It is important to understand that this effect may work against you as well as for you – the use of leverage can lead to large losses as well as large gains.
SSF allow investors or traders to take advantage of an expected fall in the price of an underlying instrument. This means that they can sell or short the share and make a profit if the price goes down. SSF are thus an excellent trading and hedging tool.
Each SSF contract, upon expiry, is physically settled, which means that the buyer (long position) of a futures contract takes delivery of the actual scrip from the seller (short position).
CFDs
A CFD is an unlisted instrument in the form of an agreement between a buyer and a seller to exchange the difference in value of a particular instrument for the period as from when the contract is opened and until it is closed. The difference is determined by reference to an underlying instrument for the period that the CFD is held.
CFDs trade like equities, with no minimums (unlike the SSFs, 1 contract = 100 shares) and at exactly the same spot price as the underlying share itself. Just like SSF, it could also be used for both long and short positions, making it an excellent trading and hedging tool.
Just like SSFs, CFDs are also leveraged instruments, which again makes it important to understand that this effect may work against you as well as for you – the use of leverage can lead to large losses as well as large gains.