No problem Yellowcake. I use IG Markets and find them to be very...

No problem Yellowcake. I use IG Markets and find them to be very good. Their interest rate is slightly higher, but they don't charge as many fees so they end up being the same price as the others. You can trade on the ASX 300 with IG Markets, as well as other foreign shares/options/currencies, etc ,etc
www.igmarkets.com.au

CFD's are very helpful for situations like AWB.
They do have their risks, but the risks can be completely controlled, which is what I love about CFD's.

AWB is leveraged with a 10% deposit. Therefore all you need to do is put 10% down, and the CFD provider will lend you the remaining 90% to purchase the shares.

Let's write an example: Since you want to go short on AWB then you are profiting from the share price going down from your initial entry point. The CFD is priced at the same price that the actual AWB stock is priced. Conversely, you can go long on contracts and profit in the same way that you would on shares on the stock market (by the price going up).

Now say you want to take out a short contract on AWB. Below is an example.

As said above, IG Markets only require you to put down a 10% deposit on that stock, and IG Markets will lend the remaining 90% of capital to you. You can ensure that you cap any potential loss to a maximum, by using a guaranteed stop loss (For myself, I do not allow myself to lose more than my initial deposit). Therefore you can set the stop loss 10% higher than the entry point to ensure that the max loss is the 10% deposit only. Note ... it takes alot for a company like AWB to put on 10% in adverse conditions like what they will be under.

As a bonus, because you are going short, you will receive interest at the rate of 3% p.a, calculated daily on the contract value at the end of each day.

So, for example if you take out a short contract on AWB shares at say, $6.30 per share and buy $40 000 worth then the number of shares you would have in that short contract is approximately 6526 shares. That's not rocket science. The only outlay that you would have to put down is the 10% deposit, which would amount to a value of $4,000.
Now ... because you are going short you will receive interest (and you won't have to pay interest) at the rate of 3% p.a calculated daily on the contract value. The reason you RECEIVE interest, is becaluse the person on the other side going long on AWB shares is paying 8% P.A daily, and IG Markets will take 5% of that and give you the remaining 3% P.A.

The risks? ... well you can set a guaranteed stop loss to ensure that you exit the contract where you will feel comfortable with the loss. Unlike shares, the guaranteed stop loss ensures that you receive the exit AT and I repeat AT that price! This means that if the price of AWB starts going up, then you can ensure the maximum you are going to lose is the initial deposit or less! I should emphasise that you can exit the contract anytime, and take whatever current profit or loss you are making (same as the stockmarket).

The good part:
So ... AWB ... short contract .. 10% deposit ($4000) will get you $40,000 worth of AWB shares where you profit from them going down.

The costs: Guaranteed stop loss = 0.3% of 40 000 = $120. Very good to have and I'll show you why later!

IG Markets brokerage fee is 0.2% per buy/sell. So cost is 0.2% of 40,000 = $80. since you will need to exit the position then cost of buying and selling is $160.

So the total cost is Guaranteed stop loss + brokerage
= $280.
Therefore, all you need to do is clear $280 and you are PROFITING.

As a nice prediction ... let's calculate our profit!

IF AWB go down ...
if they go to, say, $4.50 when the enquiry is in full swing and the company is in tatters.

That means that you have made:
(Difference from opening price)* no. of shares
= (6.30-4.50)*6526
= $11,746.80! (A quiet killing) How come? Because a contract is an agreement that no matter what the current share price is, then you will receive $6.30 for it!
So if it's worth only $4.50 per share, then you are still getting $6.30 for it ... and hence you will receive the difference per share to make up for the short fall!

So deducting the fee of $280 leaves you a net profit of $11,466.80. Then there's interest payed to you for the period that the contract is open.

Oh and you get your initial $4000 deposit back!

Why's it good to have a guaranteed stop loss? BECAUSE YOU CAN SHIFT IT DOWN (in a short contract) TO LOCK IN PROFITS!!!! (or up in a long contract) So ... as the price slides, you can move the stop loss down (GUARANTEED AT THE PRICE YOU SET) too, to lock in profits you've made.

I love CFD's. They are perfect for situations like AWB. Juist wait until the initial bad news starts and you will be safe IMHO!