How To Secure Your Securities Deposit For The Holidays
You’re on vacation, but the rain clouds remain at home – and on the stock market news. But many uncertainties are simmering and can spoil the untroubled holiday mood. You may not leave your depot alone now, especially because many analysts advise to reduce the risk in price increases, i.e. to sell. The thin sales and the many short-term oriented gamblers do the rest. A landslide can happen fast, and how do you secure your deposit?
Secure Depot with Stop Loss
The easiest way is to set a stop-loss, this stock market blog advises. With the stop-loss order, you secure already earned profits, if you already have them, or you limit losses if the speculation does not work out. In the process, a price (about 10% below the current one) is defined in advance, at which the security is automatically sold.
Stupidly, the drawn ripcord does not represent a price guarantee, because when the limit is reached, the security is sold at the next possible price. This is certainly not so problematic for large, liquid stocks, but for an exotic paper, that can be much deeper. One should therefore not set the stop loss at striking, round course points, but rather something above or below. With round sums often stop-loss orders of other market participants are, which can increase the selling pressure. It is also annoying when the stop loss is triggered on weak days, and the stock comes shortly afterward back on track and resumes its rise. Therefore, the stop-loss should not be set too tight. Where exactly, but that is up to each one alone and decides the respective risk-taking. Many online brokers are free to set and retire Stop Loss. In this respect, this is the cheapest variant of the deposit insurance.
Secure Deposit With Warrants
Anyone who takes some money into their hands and owns many stocks from an index such as the Euro Stoxx or the DAX can also hedge against losses with warrants. The idea is quite simple: when prices fall, warrants gain in value. You look at the value of the depot. For example, with a deposit value of $ 20,000 with mainly DAX values, one could proceed as follows: One looks for a put warrant whose base is close to the DAX’s current score, i.e., 12,300 points. Warrants have a subscription ratio that expresses how many units of an Underlying can be sold through a warrant.