I've been papertrading the Australian Stock Index Futures and I think I am beginning to get the hang of it. This is daytrading. The contract is very big - more than $A150k and I wouldn't be happy trading it overnight any time soon I think. So now I have a model for the Australian market I started looking for an instrument to trade it. My first thought was individual large cap Australian stocks such as Commonwealth Bank, Woolworths, and AMP. I have done this before but it is too expensive.
The next obvious idea is to trade an ETF - STW - which tracks the SP/ASX 200 Index. To trade $A60,000 it would cost me $82 in fees each way in my margin account plus margin interest. The average model trade yields around 1% - so this is a big chunk of the expected $A600 profit. This amount by the way is roughly the value of an ASX SPI Mini Contract which is 2/5 the size of the full size contract. Unfortunately IB doesn't allow trading of this contract.
As is often the case in Australia, the solution is to go to the options or warrants (investment bank issued options that trade like stocks) markets. I would look for an in the money warrant that has little time premium to get as close as possible to trading a futures contract. Trading $A60k of underlying stock would involve a premium of $A3-4k. I would plan to trade this in an old non-margin account I have at Commonwealth Securities, which is linked to my Adelaide Bank CMT (money market fund). For trades under $A10k the fees ($29.95 each way) are the same as in my margin account but I avoid paying a little interest (the difference between the margin and savings rates). I've set up my trading screen there with the relevant warrant codes.
I'll let you know if and when I do this for real. If I do, I'll include this Australian account in my monthly trading statistics.
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