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How to Profit from Bullish and Bearish Markets with UBS’ Daily Leverage Certificates (DLCs)

How to Profit from Bullish and Bearish Markets with UBS’ Daily Leverage Certificates (DLCs)

This post was originally posted here. The writer, Jun Yuan Lim is a veteran community member and blogger on InvestingNote, with a username known as @ljunyuan and has close to 2000 followers.

I still remembered back when I started off trading in the stock markets in 2017, I only knew how to “long” the market – meaning buying stocks at a lower price, and then selling at a higher price, with profits being the difference between the buy and sell price.

However, if the markets trend lower, then I am unable to get into trade – even though I can “short sell” (meaning to sell the stock first, and then buy back at a lower price – provided if the share price trends lower), but the problem with doing so is that, if the share price do not go in the intended direction (i.e. lower) but instead gaps up suddenly, then I will risk suffering from huge losses (because I will have to buy back the shares at much higher prices.)

That was before daily leverage certificates (or DLCs for short) came along – today, retail traders can make use of it to go “long” as well as “short” – in fact, one of the best things I like about DLCs is that, I do not need to worry about suffering from massive losses if I want to “short” a particular counter, as losses are capped (where the maximum amount of money I will lose is the amount of money I put into buying the DLC.)

Speaking of DLCs, UBS, which is currently the #1 in warrants and CBBCs (Callable Bull Bear Contracts) issuer in Hong Kong, have a total of 74 DLCs on 29 Hong Kong counters and a US index (Nasdaq-100 index) for retail traders to trade in, and potentially generating profits in both bullish as well as bearish market conditions.

If you are new to DLCs, not to worry – in this post, you’ll learn about the basics you need to know about them, including more information on what these DLCs are, how to trade them, the 29 Hong Kong counters and 1 US counter you’re able to trade DLCs on, debunking on 2 of the most common misconceptions people have about trading DLCs, pros and cons about trading DLCs, and finally, what you can do if you want to get your feet wet in trading DLCs without using your own money.

Let’s begin:

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Should You Leverage Up Your REIT or Stock Portfolio? (Guest Post)

Should You Leverage Up Your REIT or Stock Portfolio? (Guest Post)

There is emerging trend of experts teaching folks to build wealth with the aid of leverage. Leverage means, using other people’s money, in a lot case the banks money, to aid you in building your asset base.

Image result for leverage

After the large DFA article last week, I do not really feel like writing a lot of stuff. There is probably a lot of other stuff I need to catch up upon then to do one humongous article every week.

So this week one is a little breather. It is some numbers that I ran some time ago.

I think I decide to bring it out.

This post was originally posted here. The writer is a veteran community member and blogger on InvestingNote, with username known as kyith and 700+ followers.

You have folks like Kim Eng who is able to give to loan you currently a 3.28% interest rate loan on your shares. This enables you to buy shares more than you can afford to and speculate on them. When you earn as you sell off the shares, you earn a lot more. Conversely, if you lose as you sell off the shares, you lose a lot more.

Now, the idea for a lot of people is not to do leverage irresponsibly. We all want to do the sensible thing, but to make use of what is available to us so that we can accelerate our wealth building.

So basically, rather conservative wealth builders wish to use leverage to step up and build their wealth. It makes me wonder how conservative we are.

Here is the Setup

We are going to invest in good blue chip stocks and Real Estate Investment Trusts (REITs).

And we are going to choose to invest in 1, or more of these, to form a portfolio that gives us a 7.5% per year compounded rate of return (hypothetically). If you want to take a look at whether its achievable, you can take a reference on the dividend yield that you can get on my Dividend Stock Tracker. Those are dividend yields, and do not show the future compounded growth rate. The growth rate can be +2 to 5% or -2 to 5%, depending on which you choose. Not all stocks are appreciating over time.

Let’s say we make use of Kim Eng’s margin financing which enables us to invest in selected stocks and REITs at a rate of 3.28% (this rate used to be 2.88%. When the global interest rate moved up, it also gets shifted up. This gives you an idea that these rates do not stay stagnant).

According to the strategy, we want to use leverage to build up our financial assets.

However, we do not want leverage to kill us. So at some point, we will pay back the debt.

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Margin, Leverage and You

Margin, Leverage and You

Trading (or investing) is not exactly a simple thing. Trading involves taking certain risks and using capital. For those who are cash-strapped or expect a higher absolute return, there is the option to borrow.

Borrowing capital for trading is known as margin trading or contract for differences (CFD). 


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