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What's this? - CoscoCorp.ES.0912
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tradersgx
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19-Dec-2009 00:29
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List of Extended Settlement (ES) Contracts |
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tradersgx
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19-Dec-2009 00:26
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CoscoCorp.ES.0912 - Extended Settlement (ES) Contracts http://www.nextview.com/sor/ Introduction to Extended Settlement (ES) Contracts ( http://www.sgx.com/wps/portal/marketplace/mp-en/products/securities_products/extended_settlement) An Extended Settlement (ES) contract is a contract between two parties, to buy or sell (a) a specific quantity (eg. 1000 shares) of (b) a specific underlying (eg. SIA) at (c) a specific price (eg. $19.70) for settlement at (d) a specific future date (eg. last business day of the month) when the contract matures or expires. ES contracts have fixed expiry dates (about 35 days from listing date) and there is no need for daily settlement, as the contract is settled on maturity. Benefits of Trading Extended Settlement (ES) Contracts a) More efficient use of capital When investors enter into an ES contract, they only need to put up a margin, which is a small fraction of the full contract value. This allows investors to free up cash as margins allow them to trade multiple exposure. As compared to margin financing which provides 3 times leverage, ES contracts can provide you with higher leverage ranging mostly from 5 times to 20 times depending on the volatility of the security. b) Ease of Taking Short Positions If investors hold a bearish view of the market, ES contracts will allow you the oppportunity to gain from downward movements of stock prices by taking short positions. The transactional costs are greatly reduced as compared to borrowing shares for gaining a short exposure unless you hold your position until settlement. c) Risk management and hedging The aim of using contracts, like ES contracts, in risk management or hedging is either to achieve price certainty by locking in prices in advance or to protect against adverse price impact on the value of one’s assets. Hedgers can aim to reduce price risk by buying ES contracts to create a long hedge or selling ES contracts to create a short hedge. d) Longer view of market Investors have more than one month to offset their positions. In comparison to the ready market, this will allow investors to take a longer view of the market. e) Greater flexibility to structure investment strategies ES contracts also offer investors unique trading opportunities such as calendar spreads and stock spreads. f) Arbitraging ES contracts will provide opportunities for arbitraging between the ES contracts and the ready market. -------------------------------------------------------------------------------- Risk of Trading Extended Settlement (ES) Contracts a) Leveraging The leverage exposure provided by ES contract can lead to substantial losses. If the market moves against the investor, the losses suffered from trading ES contract will be greater in percentage terms of the initial cost or capital outlay needed to enter into an ES contract position, ie., the margin deposit, against the price movement in the underlying asset. b) Overexposure and overtrading There is a danger that investors tend to look only at the margin required and often fail to appreciate and take into account the full contract value. This can result in overexposure when investors trade in a large number of contracts, which may be significantly beyond their financial resources. c) Margin Calls If the market moves against the investor, the losses will be debited from the margin account. This is done on a daily basis. If the margin account falls below the required margin, a margin call will be initiated which requires a top–up back to the initial margin + variable margin, or to reduce the number of open contracts. Failing which, the broker may force–liquidate the position. d) Buying–in Should an investor hold a short ES contract position till expiration, he or she is obligated to physically deliver the stock for settlement. If an investor does not have the required shares in his or her account on the due date (the third market day following the expiration date), CDP will buy–in shares on the market to satisfy the delivery obligation. Buying–in starts the day after the settlement day (LTD+4). The buying-in bid price, as determined by CDP, will be 2 minimum bids above the highest of the closing price of the previous day, the reference transacted price or the reference bid price. The reference transacted price and the reference bid price will be any of the last transacted prices and bid prices in the 1 hour preceding the commencement of buying-in, as determined by CDP. In addition to the current processing fee for buying-in, there will be a penalty of 5% of the value of the failed trade subject to a minimum of $1,000". |
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yongjp
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18-Dec-2009 17:25
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Bump |
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yongjp
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18-Dec-2009 15:30
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Hi, As per title. Whats CoscoCorp.ES.0912? Bond? Warrant? When does it expire? How much does it pay? Why can't I find any information on it? |
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