Newb question about SSFs

If you don't think there is an advantage to shorting on a downtick you really should learn more about it.

 

I've been studying SSF's for a while and this is what I have come up with:
Advantages:
- You have 5x leverage (20% margin requirement)
- You can trade stocks that you know (the price action remains pretty close to the actual underlying stock because of arbitrage opportunities that may arise)
- You can buy and sell whenever you want (downtick rules doesn't apply)
- You have no PDT rules for those who are concerned about being undercapitalized (although I truly discourage you from daytrading if you are undercapitalized)

Disadvantages that I foresee:
- Lack of liquidity for a little while (until everyone catches up)
- Large spreads (which is a direct result of lack of liquidity)

That's it I believe.

 

I think the daytrading restrictions have created an instant market for SSF.

I sure think it's suspicious that the regulations creating daytrading restrictions and the regulations allowing SSF trading came about at very much the same time.

May be sheer coincidence. But it sure seems peculiar.

 

I have a feeling that it won't be long before there's a PDT rule on SSFs. Enough people easily blew out their accounts with no margin ... imagine how fast and furious they'll blow out with 5:1 margin!

It will only be a matter of time before the unwashed will claim ignorance and say it wasn't their fault and it wasn't fair and you'll have just as ignorant legislation to follow.

My opinion of course.

 

Are SSF's called "futures" because these guys who have been trading stocks are really going to check first to see where the SSF is going?

I don't think stocks will ever follow the SSF's.

 

so far , SSF=Boring

Might be able to use them for a short, but that will be more useful when less liquid names get listed.


Where we might have something, is the SSF Baskets, that have not traded yet. 4 or 5 stocks in a mini-index. There you can buy and sell a sector easily, and play other arb, hedging games.

 

SSF should trade after hours if they're going to really be futures.

 

On Friday, Nov. 22, OneChicago will offer futures on 22 more single stocks, plus futures on the DIAMONDS (DIA) Exchange Traded Fund. The new contracts are in addition to the 21 futures on single stocks that have been trading at OneChicago since Nov. 8.

The new contracts include futures on: Amgen Inc. (AMGN), AOL Time Warner Inc. (AOL), Applied Materials Inc. (AMAT), Cephalon Inc. (CEPH), ChevronTexaco Corp. (CVX), Cisco Systems Inc. (CSCO), DIAMONDS (DIA), Dupont (DD), eBay Inc. (EBAY), Ford Motor Co. (F), General Motors Corp. (GM), Halliburton Co. (HAL), Honeywell International Inc. (HON), IBM (IBM), Intel Corp. (INTC), Maxim Integrated Products Inc. (MXIM), McDonald’s Corp. (MCD), Micron Technology Inc. (MU), QLogic Corp. (QLGC), SanDisk Corp. (SNDK), Starbucks Corp. (SBUX), Tyco International Ltd. (TYC) and Wal-Mart Stores Inc. (WMT).