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

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

JSE - A CENTRALISED MARKET

JSE – EVOLVING MARKETS From this…

… where you could expect this… JSE – EVOLVING MARKETS … where you could expect this…

… to this. Quiet, calm efficiency 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…

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

JSE - SPREADS

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

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

Parking tickets! Magnus de Wet James Boardman Rudolf Oosthuizen JSE - CONTACT DETAILS Parking tickets! Magnus de Wet James Boardman Rudolf Oosthuizen DerivativesTrading@JSE.co.za +27 11 520 7051 And that’s the very brief story of the JSE and the AltX market. Please feel free to ask any questions you might have and either myself or Noah Greenhill will do our best to answer them.

SSFs are contracts entered into between 2 parties 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%

Standardised contract SAFEX Partially matched orders simply expire! 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)

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

Highly capital efficient Low brokerage Very liquid Earn interest 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.

14% VAT on opening leg and 14% VAT on closing leg 0.912% total 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

Identify the candidate Wait for the breakout 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

Full day workshop (09h00 – 16h00) Fundamental Analysis & Investing 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

Copper, Gold, Platinum & Silver 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 2 point spread = R10 x 2 points = R20 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 40 point spread = R1 x 40 points = R40 5 Contracts x R2 805 = R14 025 Margin = R2805 Exposure = R28 050 Cost R55 per contract R1 per point 100 points move = R100 Buy (Long) @ 30 050 Moves 300 points up = 30 359 300 points move x R1 = R300 x 5 = R1500

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

New Order (ALSI)

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

Trade History (ALSI Buy) Select Trade History Margin Movement

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

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

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 4 Click Submit Step 2 Enter Contracts Step 3 Enter Price (R)

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

Financial History (REM Buy) Select Financial History Margin & Brokerage R309.03 Brokerage = Exposure R65 750 x 0.47% (VAT incl) = 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 4 Click Submit Order Step 2 Enter Contracts Step 3 Enter Price (R)

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

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

Educational enquiries 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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Thank You shaunvdb@psgonline.co.za 011 996 5200