home Credit cards Dividend adjustment forex ba. Stock CFDs are a good way to diversify your portfolio. CFD is a completely speculative instrument

Dividend adjustment forex ba. Stock CFDs are a good way to diversify your portfolio. CFD is a completely speculative instrument

Currency market provides ample opportunities for earning money, but it has one significant drawback - a narrow list of assets available for trading. Against this background, CFDs on shares become attractive, allowing you to diversify your portfolio.

A classic CFD is a special contract for the difference in prices of an underlying asset, upon the purchase/sale of which the losing party pays a profit to the counterparty who made a more accurate forecast, and the broker charges a commission for intermediation.

The first CFDs began to be used in the UK relatively recently - in the 90s of the last century, but in such a short period of time they have already managed to gain a strong foothold in the financial markets and were even recognized by authoritative European regulators as a full-fledged investment instrument.

Specifics of CFDs on shares when trading through a Forex dealer

Before talking about the features of modern CFDs, let's imagine for a moment what this market was like at the stage of its formation. Firstly, as is already clear from the name, contracts for difference belong to the category of over-the-counter, i.e. These transactions were never released to the main market.

Secondly, in order to open a position on a security or commodity asset, interested parties (or companies) had to discuss the terms of the transaction and conclude an agreement “on paper”, according to which the profit received by one of the parties after a change in the quotes of the underlying instrument is paid at the expense of funds of the losing party.

To make it clear what we are talking about, let's look at an example. Let's assume that speculators A (bull) and B (bear) have entered into a CFD with each other on a security, which by the time the contract expires has risen in price by $10. The transaction volume corresponded to 1000 shares.

This means that party A will receive an income of $10 thousand, and investor B will lose $10 thousand. In principle, the scheme is very similar to ordinary stock trading, because in the stock market the earnings of one investor are always a direct loss to his counterparties.

But this is all theory; in practice, many problems arose, ranging from non-compliance with the terms of the contract by individuals to difficulties in setting the date for repayment of obligations. Currently, almost all CFDs are opened through the intermediary of Forex companies.

Now the counterparty for all CFDs for a trader is directly his broker, i.e. when a client bets on an increase in the value of the underlying asset, the company automatically forms a reverse position. Further, depending on the volume of operations and the share of this DC in the overall retail market, the following risk management options are possible:

The company will not do anything, i.e. in case of a successful client transaction, she will pay him winnings at the expense of own funds– this is the most dangerous and undesirable option, since it can lead to bankruptcy of the broker with all that it entails;
If the company is large and actively offers CFDs on shares, it can match the opposing orders of two different clients, i.e. in this situation the classical scheme will be implemented;
The final approach involves hedging the aggregate position in the real stock market.

Advantages and disadvantages of CFDs on shares

Before proceeding to explore investment and speculative strategies, it is necessary to take into account the key pros and cons of contracts for difference, in particular when conducting comparative analysis between these derivatives and the actual shares traded on stock exchange, the following strengths can be noted:

CFDs use fractional lots, which means that you can open a position on a contract with a nominal value of 50, 10 or even 1 share (if you use a cent or micro account);
In this case, the trader is protected from a negative balance, i.e. he will not have any obligations to the forex dealer. But in the stock market, when using leverage, such situations are by no means uncommon;
Most CFD operations are carried out through the MetaTrader4 terminal, so many indicators, strategies and robots created for currency pairs are suitable for them;
To trade CFDs, it is not at all necessary to deposit a significant amount into your account;
Even during crises, when markets fall synchronously and brokers prohibit short positions, you can freely open sales using CFDs.

As for the disadvantages of CFDs on shares, there are also plenty of them, but the most noticeable disadvantages are the following nuances:

Spreads and commissions on CFD transactions are much higher than similar indicators on stocks, as a result of which many intraday and scalper strategies that generate income on the stock exchange begin to generate losses when trading in DCs;
The specifications and other conditions of CFDs on shares can be changed unilaterally by a forex dealer;
If a stock broker goes bankrupt or simply ceases operations, the trader will retain ownership of the purchased shares, and it is almost impossible to receive anything from the DC in such a situation (even if he had a license from a reputable regulator).

Thus, knowing the features and specifics of these contracts, you can find good opportunities for earning money, but CFDs are of greatest interest in terms of risk diversification. In addition, many companies pay a positive dividend adjustment.

Selection of contracts for trading

Since CFD quotes match exactly (down to the cent) the prices of the corresponding shares, they can be freely used in all medium-term and long-term strategies created for the stock market. Given this circumstance, in the future we will not place special emphasis on the fact that a contract for difference is only a derivative.

So, regardless of trading strategy, at the first stage of analysis it is necessary to select for the portfolio only those instruments whose correlation is relatively low. A special iCorrelationTable indicator helps solve this problem.

As you can see, this algorithm builds a correlation matrix, which is very convenient for assessing the relationship between different securities; in particular, for investment and trading, instruments whose correlation coefficient does not exceed 0.7 are of greatest interest.

Regarding the iCorrelationTable settings, we recommend using the following parameters:

CorPeriod = 104 – this value is relevant for the weekly chart, as it shows the relationship between prices over the last two years (this interval is more than enough);
SymbolsListVariant = 2 is a matrix display option, in particular, if you set one here, the indicator will build a table for all tickers without exception, and if you specify “2”, the program will explore the relationships only between securities specified by the user.

By the way, before entering a two in this field, you need to create a text document “Symbols” in the “MQL4 – Files” directory (remember, this folder is called by the “file – open data directory” command), the contents of which should look like this:

In our example, a strong correlation is observed between Boeing Co and Apple, as well as between General Electric and Johnson & Johnson, so it is not advisable to combine these securities when forming a portfolio. The fact is that there is no point in buying/selling instruments whose prices move synchronously, since it is much easier to increase the working volume of only one of these securities. In this case, the trader spends significantly less time on analysis.

And since we are talking about the volume of transactions with CFDs on shares, let us remind you that you should not overestimate the risks, since the volatility of these instruments is much higher than on Forex, in particular, for speculative transactions a leverage of 1 to 10 will be sufficient, and when forming investment portfolios it is reasonable refuse credit funds altogether.

By the way, recently European regulators (France, Belgium and other countries) have been putting forward new requirements for Forex dealers, including clauses according to which the company must limit leverage. For now, these reports are advisory in nature, but we believe that in the near future this indicator will be legally established at the level of 1 in 20 or 1 in 10.

Earnings from dividends

The main feature of CFDs on shares is that upon their purchase, a dividend adjustment is calculated. Typically, traders view this adjustment as a nice bonus to the main trade due to its small size, but this is just a superficial look.

The fact is that Western investors sometimes use one interesting technique - they assemble a portfolio of “dividend shares”, the dynamics of which are strongly correlated with stock indices, and at the same time open an equal short position in SP500 futures.

As a result, a kind of “lock” is formed, within which the profit/loss from the movement of stock quotes is compensated by the loss/profit received from the futures transaction, and the trader receives dividends from the companies. In general, this strategy is low-profit, but there are practically no risks.

Now let's look at this diagram through the prism of CFD. Firstly, forex dealers provide the opportunity to work not only with stocks, but also with indices. And, secondly, high leverage in a DC allows you to open large transactions by depositing a minimum of funds into the account (this is precisely the case when high leverage is beneficial, since thanks to hedging the risk of loss of principal capital is minimized).

Thus, you can make money on dividends in a dealing center, the main thing is to choose the right assets, calculate the volume of transactions and disable swaps (if any were accrued at all, because today many CFD companies on shares do not write them off).

And this is where the fun begins, since half of the work (selection of dividend securities correlating with SP500) has already been done for us by InstaForex, which added SPDR S&P 500 ETF Trust contracts to the list of assets. In other words, this is a CFD on shares of a fund that invests in SP500.

As follows from the table, at the time of writing this review, this company paid $1.33 for each share, so before the register fixation date, it makes sense to buy SPY and at the same time open an equal sale of CFDs on the SP500 index (or futures).

In this operation, the trader will lose part of the funds on commissions and spreads, but the profit received from dividends should cover all costs. Perhaps the situation will change in the future, but in 2017 this scheme was quite profitable. As soon as the amendment arrives in the account, the transaction can be closed.

If InstaForex decides to remove CFDs on SPY from the list of assets, you can always manually assemble a portfolio that correlates with SP500. Of course, in this case you will have to use the iCorrelationTable indicator again. And in general, when creating portfolios (not only from CFDs) this expert irreplaceable.

Today we did not consider speculative technical strategies, since they are not much different from Forex trading methods, and focused on investments. Against this background, it would not be amiss to recall that many professional investors also take into account key fundamental indicators before making a decision to purchase a security, the most important of which is the P/E ratio.

This value shows how the current capitalization of a corporation correlates with its profit, in other words, it can be used to indirectly judge the payback period of investments in the company. If we're talking about stock market USA, then in a bullish cycle for blue chips the optimal P/E value can be considered 20-25.

When the ratio is significantly higher than the indicated values, the company is clearly overbought, i.e. It is possible to purchase such shares for the long term (with a reference to retirement age), but it is better to simply speculate on them. CFDs are just right for active trading.

Some investors also consider the Forward P/E ratio, which is calculated using projected earnings per share. It is generally accepted that a low value of this coefficient indicates the good potential of the issuer.

To summarize today's topic, we would like to emphasize once again that CFDs on shares belong primarily to the category of speculative instruments, but with the right approach they allow you not only to collect investment portfolio, focused on the medium term, but also earn money on dividends with virtually no risk to the deposit.

As for directly choosing a dealing center that provides such products, a simple rule applies here - it is better to open an account with well-known companies. In addition, we strongly do not recommend using the services of " personal managers”, since they are not responsible for customer losses. If there is a need to obtain analytical information, it is better to contact independent companies.

Investment greetings, friends! To ensure you make money on dividends, you need to buy dividend stocks wisely. Otherwise, you can buy fewer shares for the same money and lose a significant part of the profit. In general, earning money from dividends is an art. But if you want to plunge into this fascinating world, start trying now!

Dividends are paid by the company from profits received. Accordingly, you can count on receiving them only if the company operates successfully in the market. The higher the dividends and the more stable the company's financial position, the more expensive its shares are.

To receive dividends and, in fact, make money on stock dividends, you must own the security on the cut-off date. This is the last day on which the register of shareholders is closed. Whoever had the share registered on that day receives the same dividends.

For example, in 2018, Alrosa closed the register on June 14. You had to buy shares before June 11th - weekend adjustment plus T+2 trading mode (shares are credited to your account on the second day, so you need to buy at least 2 days before the cutoff).

You can sell a share even the next day - the main thing is that you own it on the closing date of the register.

To calculate how much you can earn from dividends, you need to look at the same dividend calendar. In the example with Alrosa, you could earn 5.04 rubles per share. The yield was 4.94% - the share itself was worth 106 rubles on the register closing date.

Where can you buy dividend shares?

Short answer: from any broker with access to the Moscow Exchange.

Detailed answer: issuers are listed on exchanges, including Moscow. But you can’t just come and buy a share there. We need a mediator. They act as a broker.

You will need to pay a commission to purchase shares. Usually it is generally small - hundredths or tenths of a percent. But in addition to this, brokers charge fees for depository services, account maintenance, etc.

In general, to buy a share, you need a broker. There is no way without him.

Which companies to choose for buying dividends

To make money on dividends, you need issuers that consistently pay these same dividends. Not so much. I personally recommend:

MTS – stable payments and, in principle, a good future;
Lukoil – regularly increases dividends;
Sberbank – main bank countries whose dividend policy provides for an increase in payments;
Moscow Exchange - growth prospects;
Norilsk Nickel;
Gazprom.

From foreign issuers:

Kimberly-Clark;
SySCo;
Coca-Cola;
Apple;
Berkshire Hathaway;
Procter & Gamble (manufacturer of Tide);
McDonald's and others.

These companies pay dividends consistently—and, more importantly, regularly increase their payouts. By purchasing Dividend Aristocrat shares at a discount, you can expect that one day the dividends will even exceed the purchase price.

In general, you should choose dividend stocks based on the following data:

how long has the company been making payments?
Are dividends growing?
what does it feel like financial condition companies;
whether the shares are overbought;
whether dividends are included in the share price;
does the company repurchase shares (if yes, this is a good sign, since, firstly, stock prices will rise, and secondly, management will be ready to pay generous dividends to themselves);
Are there plans to change the dividend strategy?

Of course, you should also look at the ratios - primarily P/E and P/S. And stick to any of the strategies for buying dividend stocks.

And one more thing - past profitability guarantees the same profit in the future. Consider this a risk notice.

Strategies for buying dividend stocks

Buy and hold

The most simple strategy, it is sometimes called the averaging strategy. Its essence is that you can earn money from dividends on shares simply by purchasing them in certain shares at regular intervals.

Important: in the following example, I did not calculate profit to the nearest ruble; it is more important to understand the principle of the strategy itself.

For example, a year ago you decided to save 5,000 rubles from your salary and use this money to buy Sberbank shares at the current price. Over the past year, quotes have varied from 140 to 220 rubles per share. You managed to buy 330 shares for an average of 180 rubles.

In 2018, the dividend amount was 12 rubles per share. Consequently, by the middle of the year (and Sberbank pays dividends in June) you had approximately 300 shares, and you received 3,600 rubles. If the bank increases payments next year, you will receive even more - due to an increase in the number of securities in your possession and due to a larger number of dividends.

The beauty of the strategy is that you don't need to calculate multiples or understand financial statements. You simply buy shares of well-known, reliable companies that consistently pay dividends, and receive payments.

Over the course of a year, you buy shares at the average possible price—hence its name: “averaging.”

Purchase at a discount

But the method described above is not always good. For example, if you did not buy Sber shares for 240 rubles, but put 5,000 rubles into your account, and bought shares when quotes fell to at least 200, you would have purchased not 20 shares, but 25 (in fact, Sberbank shares are sold in lots at 10 shares, so in both cases you would buy 20 shares - but it is important for us to understand the very principle of buying at a discount).

Therefore, a better strategy for making money on dividends would be to buy at a discount.

You should purchase shares of reliable companies whose quotes have collapsed due to external reasons beyond the control of the business. For example, due to the sanctions imposed against Russia. Or due to seasonal changes. Your task is to buy more shares for the same money. After all, the size of dividends does not depend on the quantity invested money, as is the case with deposits, but on the number of shares in hand.

Buy before dividend announcement

The company announces the payment of dividends after a meeting of the board of directors. This is where the recommended payment amount is decided. Then a meeting of shareholders is organized, where they confirm the decision of the directors or decide that it is better to leave the money in the company.

It seems like the best time to buy dividend stocks is right after this. But you’re not the only one so smart :) Thousands of eyes are watching dividends. And as soon as positive news about the divas appears, shares begin to be bought and quotes grow by leaps and bounds.

By the time dividends are paid, the value of shares increases significantly, since everyone wants to receive them. And immediately after the payment, quotes fall, as speculators begin to get rid of shares that have become unnecessary.

This is called the dividend gap. The higher the dividend, the larger the gap.

Using the example of MTS shares, it can be seen that after the payment of dividends on July 5, quotes fell from 288 to 269 rubles. After this, a downward trend began. Those who bought the company's shares a few days before the cutoff are now forced to experience a drawdown.

Sale on cut-off day

Therefore, another way to make money on company dividends is to sell them on the cut-off day. For example, having purchased the same MTS shares after their value fell shortly before payment (there was a claim from the FAS regarding roaming) for 250-260 rubles, one could sell them for 288 rubles. Profit – 18-28 rubles per share. It is quite comparable to the size of the dividends themselves – 23.4 rubles.

So you can buy shares much in advance and sell them at the peak of their value - you will earn much more than just receiving dividends.

Purchase after cutoff

Have you seen stock prices fall after dividend payments? This is a great time to buy. If you want to invest in a particular stock and hold it for as long as possible, I advise you to skip the cut-off date and buy the security after. Buy more shares with the same money.

Many investors buy shares in advance and sell them on the cut-off day, following the previous strategy. But since they want to continue to own the shares, they buy them back immediately after the dividend gap.

Particularly cunning ones also open a short position in order to earn extra money on a downward trend. But this carries risks - the stock could continue to rise if good news comes out or the company has good multiples.

Conclusion

Thus, there are several strategies on how to make money on dividends - from the simplest “buy and hold” to the complex one, which includes early purchase and sale on the cut-off day with subsequent repurchase. You can reinvest the dividends received to build up your portfolio or, on the contrary, withdraw them to your account, feeling like you are living on interest. In any case, good luck with your stock purchase and may the dividends be with you!

CFD is a completely speculative instrument

So, let's start with the first concept, or a contract for difference is a transaction between a trader and a dealing center to pay the difference in value between current value asset and its value at the time of expiration or closure of this contract. If we take CFDs on shares, then they do not have an expiration date (unlike CFDs on futures contracts), and moreover, only a trader can unilaterally close an agreement (or, in our opinion, close a CFD transaction), this is also one important advantage.

As you understand, a CFD is a derivative instrument, the value of which varies depending on the underlying instrument, in our case, the value of the share. This is an absolutely speculative instrument, and it was for this purpose that it was created, as an opportunity to work with a small deposit.

Purchasing CFDs on shares does not involve physical ownership of shares. Thus, by purchasing a contract for difference, you do not become a shareholder of the company. Let's immediately look at what this promotion is. Promotion ( Share) is a security that secures the right to receive part of the company's profits (dividends) and the right to participate in the management of the company (shareholder fees). There are different types and types of shares, but we will not dwell on this, since this is not the main topic of the article, but there is simply a huge amount of information about this that is freely available on the Internet.

Of course, if you have purchased a contract for difference on some stock, then you do not apply for participation in shareholder meetings, but with dividends it is different. So, we come to the term - this is the part of the company's profit that is paid to its shareholders in accordance with the number of shares they own.

Dividend payment calendar

Many CFD brokers, like stock market brokers, pay dividends. Although often, due to the fact that this is not a stock, but a contract for difference, this concept is replaced by another - an adjustment for dividends ( Dividend adjustment), although the essence does not change. Its size is indicated on the website of the dealing center whose services you use. When you open the dividend payment calendar, you will see several different dates. We'll look at it in chronological order.

So, the first date is the “announcement date” ( Declared Date). As of this date, a meeting of shareholders had already taken place, where the company's profits were announced and they decided how much of it could be given to pay dividends. Thus, on this day the amount of dividends that will be paid on each share is published.

The next date is the “registry fixation date” ( Ex-dividend Date). It is on this day that you need to own shares, or rather, in our case, contracts for difference, in order to receive the amount of the dividend adjustment. To be more precise, at the time of the opening of the trading session you should already have an open position on CFD per share, i.e. in fact, the contract must be purchased the day before the register fixation date. It is important.

And the last date is the “Payment Date” ( Pay Date). On this day you will receive your dividend adjustment if you held a CFD on shares on the day the register was recorded. As you understand, you do not need to hold a contract for a share until the payment date; you can sell it even on the day the register is fixed; anyway, your account is already included in the register, and you will receive your dividend adjustment without any conditions.

The frequency of dividend payments, as well as the size, depends on the decision of shareholders. Basically, they are paid once a quarter, for some instruments once a year. This information is also mainly presented on the website of your dealing center. And one more thing, not every company constantly pays dividends. You understand that sometimes companies complete their reporting period with a loss, and, in fact, there is nothing to pay dividends from, then the meeting of shareholders decides not to pay dividends.

Also, keep in mind that in order to receive dividends, you must have a contract. If you have a sell position (Sell) at the time of register fixation, then the amount of the dividend adjustment will be debited from your account on the payment day. I’ll also add that many dealing centers have a dividend calculation calculator, which is quite convenient. And, perhaps, enough about dividends.

ETF – exchange traded funds

In share CFDs, not all instruments are actually shares in the full sense of the word. Some of them are securities A slightly different type, they are called exchange traded funds. So, Exchange traded funds() is an index fund whose shares are freely traded on the stock exchange. The structure of such a fund completely replicates the structure of the underlying instrument/index.

For example, an instrument that is definitely available at all dealing centers that provide access to CFDs on shares is the instrument under the ticker SPY. This is a fund whose underlying instrument is the S&P500 index. This fund includes shares of all companies that are included in this stock index and in the same proportion. By the way, this is the very first ETF that began trading in the United States, and at the moment, it is one of the most popular instruments in terms of trading volume. Traders also call it “Spider”. Also, many dealing centers often have ETFs with the following tickers – DIA, QQQ and others.

Multiplicity. All CFDs on shares have two signs after the coma, this is due to the primary instrument – shares. Although, in principle, shares in the USA that cost less than a dollar have 4 digits after the coma, contracts for difference are not made for such shares, since these are mainly so-called “junk” shares (shares of companies that have a high probability of they will be removed from the auction).

Position size. Size 1 lot contract for difference is equal to 1 lot on the exchange. In the USA (shares of American companies are mainly only available in CFDs) the standard includes 100 shares, regardless of price. Thus, if we buy a CFD with a volume of 0.01, then this is equal to the fact that we bought one share. It's pretty simple here.

Shoulders. As I wrote above, CFDs were created for speculative purposes only, so using them without leverage makes no sense. Basically, in almost all dealing centers, CFDs on shares can be bought or sold with 10% collateral, i.e. with a leverage of 1 to 10. Some service providers give the opportunity to work with a leverage of 1 to 20 or even more.

Cost of operations. Now we come to the financial issue. What fees are charged to us for operations and CFDs on shares? The first is the commission. It depends on the broker, but on average it is 0.05%. Commission is paid only when opening a position, unlike the stock market, where commission is paid both when opening and closing. Further . On each CFD position, as well as on currencies, we pay a spread. The spread of contracts for difference is static, not floating, and mainly depends on the value of the contract itself. The higher the company's value, the higher the spread. And one more cost is the payment for overnight transfer, the so-called swap. Swap is usually a small cost, which, by the way, can be avoided in most cases if your dealing center has one (and almost all of them have them).

And one last point. CFDs on shares are available for trading only when the asset itself (share) is traded. If you are trading CFDs on US stocks, then trading hours are from Monday to Friday from 9:30 to 16:00 exchange hours (EST). Therefore, often the charts of instruments seem “equal”. You also need to take holidays into account, since unlike Forex, during holidays stocks, and therefore CFDs, are not traded.

These are the featuresCFDAs you can see, there is nothing complicated about the shares. And in the following articles we will look at how profitable it is to work with this type of tool, and what advantages it has over other tools (by the way, for some reason almost no one uses them) and which no other tool has. See you!

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Dividend adjustment forex ba. Stock CFDs are a good way to diversify your portfolio. CFD is a completely speculative instrument

Where can you buy dividend shares?

Which companies to choose for buying dividends