Try the demo OPEN AN ACCOUNT EN
Try the demo OPEN AN ACCOUNT

Hedging

Protect your stock portfolio or an individual position with CFDs put options or indices against falling markets.

TRY THE DEMO Contact us

Why use hedging techniques to cover your risks

You prevent the market from eroding the value of your portfolio. Rather than taking a hedging position for each individual exposure, you only need to carry out one transaction involving a certain asset. This transaction is designed to offset any fall in the value of your portfolio, and can be completed with a single click. In other words, hedging can be defined as opening a new position to maintain your portfolio’s value until the market recovers, that is  until the downturn is over.

Features

Long equity portfolio
Short-term downtrend expected
Trade: open your hedge

Long equity portfolio

Portfolio of equities traded on a certain index or market, totaling an amount equivalent to the value of the assets in Swiss francs.

Short-term downtrend expected

Uncertainties over price trends are sparked by financial market conditions, the macroeconomic environment and/or geopolitical risks. The visual presentation or technical composition of the indicators will help you by pointing to the beginning of a market correction.

Trade: open your hedge

Pick the right instrument, set the relevant nominal value to be hedged and take the hedging position to be kept open until market conditions change.

A practical example of hedging

Here is a practical example.  Your portfolio is worth USD 100,000 and is made up of shares traded on the Nasdaq (e.g. Amazon, Facebook, Google/Alphabet, Cisco, Intel, Microsoft, Nvidia, eBay, JD.com, Netflix, AMD, Tesla and Apple). You are expecting a correction on the US market and thus need to sell several CFDs on Nasdaq indices worth USD 100,000.

Assuming that the Nasdaq CFD index is trading at 7,100, hedging your USD 100,000 portfolio will require you to sell 14 Nasdaq CFDs (100,000/7,100).

The same calculation applies to all the other stock markets in which you hold a portfolio.

For instance, if you have CHF 75,000 invested in securities traded on the Swiss stock exchange (e.g. Nestlé, Swatch, ABB, Credit Suisse, Lonza Group, Novartis, Roche Holding, Swisscom, Swiss Re, UBS and Zurich Insurance) and you anticipate a corrective fall on the Swiss market, you will have to sell a certain number of CFDs on the SMI index to achieve the equivalent of CHF 75,000.

Assuming that the CFD on the SMI (called “SWISS20.I”) is trading at 9,330, you will need to sell eight CFDs on the SMI to hedge a portfolio of CHF 75,000.

Try out the hedging technique for yourself and protect your portfolio against the vagaries of the stock market.

Contact us for more information on CFDs and our seminars

 

Risks related to investments in these products

All these products, like all derivate instruments, leverage with a higher risk of losing more than your deposit. Therefore, it is important to understand the products and the associated risks, use a moderate approach and keep sufficient collateral in the account when investing in them.