sfe-TradingFuturesAndOptions

sfe-TradingFuturesAndOptions - Equity Products Trading...

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Trading Futures and Options SFE futures and options are investment products used by traders and investors, both professional and private. There are a number of characteristics which distinguish futures and options from stocks, bonds or other traditional investment products which may make them particularly attractive to private investors. Leverage: the ability to undertake a comparatively large position for a very small initial outlay. This concept is similar to what is experienced when you buy a house. Imagine paying 10% deposit on a house worth $100000 and borrowing the remainder from a bank. If the property increases in value by 5% in one year, the return on your initial investment of $10000 is 50% (100000 x 0.05 = $5000). Futures and options provide a similar form of ‘Leverage’. Reduced cost of funding: SFE futures and options enable a private investor to gain exposure to Australian Equities, Bonds and currencies at a fraction of the cost of traditional investments. This results in a reduced cost of funding for those borrowing the money to invest. Making money from both a rising or a falling market: unlike traditional investment products which profit only when the market is going up, with futures and options you can also make money when the market goes down. To achieve this in traditional markets may necessitate the borrowing of stock, which incurs considerable cost. Developing trading strategies: futures and options provide traders with the flexibility and opportunity to exploit trends and variations in the marketplace that are not possible with traditional traded products. By combining different options and/or futures, traders can create a wide range of potentially profitable scenarios regardless of the direction of the market. Some of these are discussed later in this document. However, this increased potential to profit may bring with it an increased potential for loss when trading futures and options. For this reason this document is intended as a simple introduction to the world of trading futures and options. We recommend all investors seek expert advice from an experienced client adviser prior to participating in these markets. Equity Products
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About Sydney Futures Exchange Sydney Futures Exchange (SFE) is the 10th largest financial futures and options exchange in the world by volume turnover, and the second largest in the Asia Pacific region. SFE provides futures and options on the four most actively traded markets – interest rates, equities, currencies and commodities, with a number of its flagship products ranked in the world’s top ten most actively traded products in their market sector. With 24 hour a day trading capability, access to these products is made possible via a global electronic communications network and the world’s leading futures brokers. Regardless of location, users can choose between direct electronic access, utilising trading software from major Independent Software Vendor’s (ISV’s), broker proprietary systems, and the Internet, or traditional phone broking. SFE staff are available to assist new brokers, banks and customers through the process of connecting to and trading
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This note was uploaded on 08/30/2009 for the course FINM 3405 taught by Professor Philipgray during the Three '09 term at Queensland.

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sfe-TradingFuturesAndOptions - Equity Products Trading...

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