SINGLE STOCK FUTURE TRADING
Shaun van den Berg
PSG Online: Head of Client Education
_______________________________
James Boardman
JSE Derivatives
Wednesday,23 May 2012

OVERVIEW
• JSE
– Central Orderbook
• PSG Online
– What are SSFs
– Terminology
– SSFs versus Equities.
– Risk
– Trading Strategy
– Pricing
– Account Registration
– SSF Simulator

JSE - A CENTRALISED MARKET

JSE – EVOLVING MARKETS
From this…

JSE – EVOLVING MARKETS
… where you could expect this…

JSE – EVOLVING MARKETS
… to this. Quiet, calm efficiency

JSE - A LEVEL THE PLAYING FIELD

JSE - SSF GUARANTEE HIERARCHY

JSE IT WAS EASY TO SAY NO…
NO!

JSE - CENTRAL ORDERBOOK
• Introduced competition on rates
• Now they all come to you, hoping for a yes…
Please?
You
Please?
Please?
Please?
Please?

JSE - SPREADS

JSE - SPREADS
R99
R1.5
R1
R1.5
R100 R101

JSE - SPREAD COST
• Can’t compare absolute spread values between instruments
• Need to compare in percentage of exposure
( OFFER BID )
( OFFER
2
BID )
• Value will be in basis points
= Spread%
– 1 Basis point = 0.0001
• On average spreads on Top40 Futures are 25 Basis Points

JSE - CONTACT DETAILS
• Parking tickets!
• Magnus de Wet
• James Boardman
• Rudolf Oosthuizen
– DerivativesTrading@JSE.co.za
– +27 11 520 7051

PSG - WHAT ARE SSFs
• SSFs are contracts entered into between
2 parties
• Right for the buyer to take delivery of that stock on the date of the contract’s expiry, a ‘deposit’, known as the initial margin is made and used as security
• Close out or Roll positions
• An SSF contract is made up of 100 shares geared at around 15%

PSG - SSFs EXPLAINED
• Standardised contract
• SAFEX
• Partially matched orders simply expire!
• Expire March, June, September and
December
• Including all relevant dividends and interest
• Go long or Go short
• Marked to market daily (MTM)

PSG - TERMINOLOGY
• Underlying
• Going Long
• Going Short
• Closing a position
• Expiry date
• Initial margin
• Variation margin
• Rolling a position

PSG - BENEFITS
• Highly capital efficient
• Low brokerage
• Very liquid
• Earn interest
• Benefit from Corporate Actions
• Cheaply diversify risk
• Hedge your portfolio

PSG - SSFs OR EQUITIES
Joe (Equity / Share Trader) John (SSFsTrader)
Joe is confident that Sasol Ltd shares will increase in the coming months.
He has R36,500 which she can invest.
Sasol’s share price is R365, therefore she buys 100 shares.
3 months later the price has increased by
10% so he sells his shares to make a R3,650 profit.
His return on his investment is 10%
John is confident that Sasol Ltd shares will increase in the oncoming months.
Sasol’s share price is R365, therefore he buys a Long Sasol SSF contract (JUN12
SOLQ).
The initial margin set by the broker is
R4,950 which is paid by the buyer.
After 3 months the price has increased by
10% and the investor closes out his position and sells out of the Sasol SSF contract he is holding. His profit is R3,650
His return on his investment is 58%.

PSG - UNDERSTANDING RISK
• Jack is an SSFs Trader
• Jack is confident that Sasol Ltd shares will increase in the coming months.
• Sasol’s share price is R365, therefore he buys a Long Sasol SSF contract – JUN12 SOLQ at R4 950 initial margin which is paid by the buyer
• The Brent Crude price decreases by $10 a barrel which negatively impacts on Sasol’s share price, which drops to R335 per share
• The SSF contract is made up of 100 underlying shares.
• The margin call for Investor B to continue trading is 100 x R30 (R365
– R335) = R 3000 variation margin which needs to be paid in to keep the investors position open. He has now laid out R 7,950
• After a month the share price continues to drop to R300. The investor chooses to close his position and must pay in a further
R 3,500 variation margin.
• His total outlay is R 10,950 but he receives his Initial margin back, so his total loss is R6000 (-121.2%)

PSG - SSF PRICING
• Interest payable is determined daily by the market maker in relation to the ruling
SAFEX rates.
• Interest will be paid on cash balances at a rate linked to the JSE Trustees rate.

PSG - SSF COSTS
• Brokerage on the Central Orderbook is charged at 0.4% (excl VAT) of the value of the transaction.
• 14% VAT on opening leg and 14% VAT on closing leg
• 0.912% total
• A booking fee of R60

PSG - TRADING STRATEGY
• Identify the candidate
• Wait for the breakout
• Set a reasonable target price (TP)
• Allow the share to retest
• Know when your trade has failed
• Exit at your price target (TP)
• Be patient
• Be disciplined

PSG - IDENTIFY THE CANDIDATE
• The more times a share price has touched these areas, the more valid these levels are & the more important they become.
• The longer these support & resistance levels have been in play, the better the outcome when the share price finally breaks out.

PSG - ENTRY AND EXIT POINTS
• Once prices are set to close above a resistance level, a trader will establish a bullish position.
• When prices are set to close below a support level, a trader will take on a bearish position.
• The exit point itself should be set at a critical price level, e.g.
Support & Resistance

PSG - ASCENDING TRIANGLES
TP

PSG - MARKETWORX
• Mentored learning
• Full day workshop (09h00 – 16h00)
– Monday, 25 June 2012
• Fundamental Analysis & Investing
• Technical Analysis & Trading
• Cost: R200

PSG - SIMULATOR TRADING
• Click here
• Submit your details
• Login
• Select your SSFSM account (top right)
• Reset simulator
• Select “New Order”

SSF ACCOUNT REGSITRATION
• Click here

SSF Margin
Initial margin per contract
Top 40 Shares
ALSI & ALMI
Copper, Gold, Platinum
& Silver
WTI Crude Oil

SSF Central Order Book
ALSI – Most popular
Top 40 Shares
Liquidity, Cheap,
Tight Spreads
Long & Short

SSF Order Book – ALSI Trade
Margin = R28 050
Exposure = R280 500
Cost R25 per contract
R10 per point
100 points move =
R1000
Buy (Long) @ 30 089
Moves 300 points up
= 30 389
300 points move x R10
= R3 000

SSF Order Book – ALMI Trade
Margin = R2805
Exposure = R28 050
Cost R55 per contract
R1 per point
100 points move =
R100
5 Contracts x R2 805 =
R14 025
Buy (Long) @ 30 050
Moves 300 points up
= 30 359
300 points move x R1
= R300 x 5 = R1500

SSF Simulator (SSFSM)
Step 3
Click Reset
Simulator
Step 1
Select
SSFSM
Step 2
Check
R100 000

New Order (ALSI)

New Order (ALSI Buy)
Step 1
Select
Direction
Example 1:
Buy (Long)
1 contract
@ 30 089
Step 2
Enter
Contracts
Step 3
Enter
Price (R)
Step 4
Click
Submit
Order

Trade History (ALSI Buy)
Select
Trade
History
Margin
Movement

Financial History (ALSI Buy)
Select
Financial
History
Margin = R28 050
Exposure = R280 500
Cost R25 per contract
R10 per point
100 points move =
R1000
Margin &
Brokerage
R25

New Order (ALSI Sell)
Sell (Long Close)
Moves up to 30 389
= 300 points move x R10
= R3 000
Step 1
Select
Direction
Step 2
Enter
Contracts
Step 3
Enter
Price
Step 4
Click
Submit
Order

Trades History (ALSI Sell)
Profit or
Loss
Margin
Returned

Financial History (ALSI Sell)
Select
Financial
History

SSF Simulator Portfolio
Select
Portfolio
Example 2:
Buy (Long) @ 30 089
Moves down to 29 921
= 169 points move x R10
= R1 690 loss
(Margin Call)
Example 3:
Sell (Short) @ 30 089
Moves down to 29 789
= 300 points move x R10
= R3 000

New Order (Remgro Buy)
Step 1
Select
Direction
Step 2
Enter
Contracts
Step 3
Enter
Price (R)
Step 4
Click
Submit
Order

Trade History (REM Buy)
Select
Trade
History
Margin = R2 122
5 Contracts
5 x R2 122 = R10 610
Exposure = 5 x 100 x
R131.50 = R65 750
Margin
Movement

Financial History (REM Buy)
Select
Financial
History
Brokerage =
Exposure R65 750 x
0.47% (VAT incl) =
R309.03
Margin &
Brokerage
R309.03

SSF Simulator - Portfolio
Select
Portfolio
Exposure
5 x 100 x
R131.50 =
R65 750

New Order (Remgro Sell)
Step 1
Select
Direction
Step 2
Enter
Contracts
Step 3
Enter
Price (R)
Step 4
Click
Submit
Order

Trade History (REM Sell)
Select
Trade
History
Profit or
Loss
Sell (Close)
REMJUN12 contract
@ R142.00
Exposure = 5 x 100 x
R142.00 = R71 000
Margin
Returned

Financial History (REM Sell)
Select
Financial
History
Brokerage = R71 000 x
0.47% (VAT incl.) =
R333. 70
Profit =
R71 000
– R65 750
= R5 250
Brokerage
&
Profit

SUPPORT
• General enquiries
– 0860 PSG PSG (774 774)
– info@psgonline.co.za
– www.psgonline.co.za
• Trading assistance
– Lawrence Marshall
– lawrence@psgonline.co.za
• Educational enquiries
– education@psgonline.co.za

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