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Thursday, June 20, 2019

Daily Leverage Certificates ( DLCs)


Daily Leverage Certificates ( DLCs)

What is Daily Leverage Certificates (DLCs)?
It is actually a financial instruments that is designed to multiply the Daily Performance of an Underlying Assets with a leveraging effect of example 3x , 5x or 7x DLC .

If the underlying asset moves by 1% from its closing price of the previous trading day, the value of a 3x DLC will move by 3%, and that of a 7x DLC will move by 7%.

Example : If the underlying asset moves goes up by 1% and you have chosen 3x Long DLC would have gone up by 3%. Let say you have bought using 3x Long DLC with $3000 today and the underlying asset price is 100. Tomorrow the price goes up to 101( up by 1%) , your 3x Long DLC value would be increasing to $3090( up by 3%) before the broker commission/other fees etc .

Theoretically you would have generated a gain of $90 excludes costs and fees.

On the other hands, if the underlying assets price drops by 1%, your 3x Long DLC investment value would also drop to $2910( down by 3%) before costs and fees. You have generated a loss of $90.

DLC comes in Long and Short versions. While Long DLC provides leveraged return versus the Underlying Asset, Short DLC provides a positive (and leveraged) return when the Underlying Asset declines.

All the current single stock DLCs have a leverage of 5, while index DLCs come in 3 choices of 3, 5, and 7 times leverage.

Is DLCs suitable for me?
DLCs are designed for active investors or traders who have financial knowledge and experience in trading leverage products and willing to take a higher risk. It is designed for sophisticated investors who are looking for the potential to make enhanced returns from the daily benchmark indices or stock counters.

To be eligible or qualified as a DLCs investors or traders, he or she will need to be SIP qualified before they can start to trade on DLCs product.
Under MAS’ guidelines to enhance safeguards to retail investors, brokers must assess if investors have the relevant knowledge and experience before they can invest in “Specified Investment Products”. SIPs are products that have structures, features and risks that may be more complex and include DLCs.

Investors or traders need to complete a customer account review with their respective broker. The criteria used to qualify the investor in the customer account review consist of Educational Qualifications, Work Experience and Investment Experience. Investors will need to satisfy one of the 3 criteria above to qualify. 

DLCs is a simple financial instrument designed for short-term traders . The holding period of an average trade generally can range from a day to a couple of weeks. If you only want to invest in the most stable stocks and get the regular dividend yield, then DLCs is not really suitable for you. But if you have a short-term view on a stock/index and would like to get a convenient leverage to enlarge the potential return, then you may consider trading a DLCs.
What should I know before I start trading DLCs
DLCs are listed on SGX like a stock, and they are also traded like a stock. If you have a stock broker account that can trade say any single stock share, you can use the same broker account to trade DLCs too. Unlike some other leveraged investment products, there is no margin requirement for DLCs.

The list of DLCs counters are listed on this website.
Below is a snap-shot of the list of DLCs counters and their bid and asking price.

 Costs & Fees
Investors trading in and out of a DLCs in the same trading day will need to pay a brokerage commission and SGX trading fee to their broker, and the spread on the bid & ask prices (the difference between the offer price paid when buying the DLCs and the bid price received when selling the DLCs).

If traders/investors wishes to hold overnight then other charges like Management fees , Gap Premium(is a hedging cost that protects the product from extreme market movements overnight. Without the gap premium, if the underlying asset were to open more than 20% against the intended direction of a 5x DLC, the loss in the value of the DLC could be more than 100% (loss of 5 times 20%) + Funding costs and Rebalancing costs.


Risks of dealing with DLCs
Counter party risk - These products are issued by a third-party and may be guaranteed by a guarantor. Any failure of the issuer or guarantor to perform obligations when due, may result in the loss of all or part of an investment. If the issuer is not incorporated in Singapore, any insolvency proceedings in respect of the issuer will be subject to foreign insolvency laws and procedures.

Market price of the DLC may be affected by many factors -
Investors should note that the market price of the DLC may be affected by different factors, including but not limited to the level, volatility and liquidity of the underlying asset, and its related futures contracts, the currency exchange rates and the credit worthiness of the issue

Investor may lose his entire investment -
If the underlying asset falls to levels such that the cash settlement amount is calculated to be less than or equal to zero, the investor will lose his entire investment. In the event the value of a DLC reaches zero /becomes worthless, the issuer may request that the DLC be suspended and subsequently apply for them to be de-listed.

To summarize the benefits of using DLCs:

Easy to understand – returns can be boosted by a fixed daily leverage; trades like a normal single stock.

Can do both Long or Short DLCs trade to take advantage of the price direction.

Limited losses – losses are limited to the initial capital invested.

Compounded method - the performances each day are locked in and subsequent returns are based on what was achieved the day before.

The Air Bag Mechanism - Air Bag mechanism is designed to slow down the rate of loss on the index during extreme market conditions. The reset takes place over a period of 30mins. This is designed to reduce the impact of any subsequent fall.

To find out more about this DLCs products you may visit the below websites:
Disclaimers :
The above information provided is solely for reading and understanding of DLCs products. And at No instance to be regarded as a investment advice.


Wednesday, June 19, 2019

UOb,Dbs and Ocbc

Chart wise, the three bank counter are showing a reversal patterns as all 3 counters are having quite similar chart patterns.


UOb chart patterns standout amongst the other two counters and close slightly near the overhead resistance at 26.15.
TA wise,looks Bullish !
It is usually quite normal for price not to be able to Pierce through the resistance . With this bullish momentum, I think it may continue to rise further!


Dbs has a very nice Gap up yesterday and close slightly higher at 25.43. It has managed to take out the recent high of 25.40 , looks positive!
Short term wise, I think it may rise higher to test 26.00 then 26.50 - 26.95.
Ocbc also experience a nice Gap up yesterday and close well at 11.18, looks positive!
If it is able to cross over 11.20 smoothly plus good volume then high chance it may rise higher to retest 11.50 again!

Not a call to buy or sell.

Pls dyodd.



Tuesday, June 18, 2019

DBS

Market could be heading higher due to anticipation of the trade saga meeting and may be a deal.
Nothing is certained at this moment! I think it is purely speculation!


Dow jump overnight more than 350 points.
I guess today bank counter may head higher !

Just now saw DBS opening price of 26.04. Is it sustainable! I doubt so!

Yesterday closing price was 24.80.

It may be a bull trap !

Let's see!

Not a call to buy or sell.

Pls dyodd.


Sunday, June 16, 2019

Keppel Corp

Chart wise, looks like it may likely re-captured 6.32 and continue to rise further!


NAV 6.345
Dividend of 30 cents
Yield 4.76 % base on current price of 6.30.

Short term wise, I think a breakout of 6.32 smoothly with good volume that may likely rise towards 6.40 then 6.50 with extension to 6.78.

Not a call to buy or sell.

Pls dyodd.

Saturday, June 15, 2019

Astrea V

Astrea V Bond CLASS A-1 SECURED FIXED RATE BONDS @ 3.85% interest per annum.

Payment of interest mode - half year basis on 20 June & 20 December.

Schedule Call date - 20 June 2024

Maturity date - 20 June 2029.


Do Note that there is NO Capital Guaranteed ..

Application date start from 12 June 9am to 18 June noon time.

Start trading date on 20 June 2019 9am.

I have applied a bit via internet banking to try my luck.

My intention is to make some Kopi money .

You may take a look at their past Cash flow statement.


Also how the payment will be payout from the IPO prospectus.

Not a call to apply/subscribe this IPO.

Not a call to buy or sell.

Pls dyodd.




Koufu

TA wise, looks bearish!
After hitting the high of 82.5 cents, it has since retreated sharply and slide further down to touch 67 cents, looks rather negative.

The current price of 68 cents is hovering near the support level of 67 cents.
Breaking down of this support level at 67 cents, may likely go further down to retest 63 cents.


NAV 16.93 cents.
EPS of 5 cents ( 1.25 x 4)
PE is about 13.65 x base on current price of 68 cents.

dividend of 2.2 cents, yield of 3.23% looks quite decent.

First quarter 2019 results seem not bad.
Achieving a Net Profit of 6.958m an increased of 12.7% versus 6.173m last year.

The vast improvement in their Ops cash flow of 25.7m versus 10.7m last year looks pretty impressive!

Cash-on-hands of 66.5m with less than 5m loan , Net cash per share is about 11.07 cents.


dividend payment of 2.2 cents is about 12m per year.
With their robust Ops cash flow/FCF, I think they can afford to increase their dividend payout of let say increment of 0.5 cents every year for next 5 years to bring the yearly dividend to 4.5 cents .

I think the company robust FCF should be able to support the dividend payout of 4.5 cents a year which is about 24.98m.

Not a call to buy or sell.

Pls dyodd.



Friday, June 14, 2019

How much share to Buy?

Position Sizing - it plays an important role of protecting the trader for being over exposed to a particular trade by minimizing the risk .


The percentage (%) of risk can be measure in terms of 1-5 or 6-10 % that you can afford to loss for each trade.

How to work out the maximum quantity for each trade that depends of each an individual risk tolerance level.




For example, person A can only tolerate a loss of 3% for each trade.

Let's say he has $10000 as capital. 3% risk appetite.


The formula is roughly as follow:-

10000 x 3% ( risk per trade - 1-10%)
--------------------------------------------
Entry Price less Cut Loss price

=             300
    --------------------------
    $1.00(EP) - $0.95(SL)

      300
 =  -------    =  6000 share.
      0.05

Person A capital for his /her trade is 6000 x $1.00 = $6000



For example , person B risk appetite is 5%.

let's say he or she has $12000 as capital , 5% risk exposure.


The formula is roughly as follows:-

12000 x 5% (% risk per trade)
-------------------------------------
$1.10(EP) less $1.01(SL)

      600
=  ---------
      0.09

= 6600 share.


Person B, he/she capital for this trade would be 6600 x $1.10 = $7260



The above example is meant for educational illustration and is not an advice or recommendation for any particular stock trading.

Pls dyodd.