For the other parts or the whole derivatives guide please read the attached post on my profile.
Practical basics (subjective! )
7) Basic requirements
Of course, anyone who has access to a broker can trade derivatives. However, it is so difficult to make a profit with them in the medium and long term that some prerequisites should be fulfilled beforehand.
1. strategy
Only with the help of a trading (/ hedging) strategy can the use of derivatives lead to profit opportunities. This consists at least of a defined target and various scenarios according to which long or short derivatives are traded.
2. market understanding (macro)
If you do not prepare for the market influence, you will often experience surprises which, in the case of derivatives, often end in total losses. Questions you should ask yourself, for example
What effect do key interest rate hikes have?
What are other ways in which the central bank can intervene in the market?
Current political situation?
Issuer situation?
Influence of exchange rates (currencies)?
Witches' Sabbath? When, where and what can happen?
3. basic TA understanding
No one needs to be able to draw the one-legged gorilla in the chart, but I think it is naive to use short-term derivatives without a basic understanding of support and resistance. However, I am equally critical of a strategy based solely on TA.
4. product understanding
I have not yet explained many situations that can arise with derivatives. Personal research is just as relevant here as in the acquisition of individual shares.
5. risk management
Before the first trade is executed, it is not a disadvantage to have a plan for both the take profit and the stop loss (yes, you can also set a stop loss above the knockout for knockout products). This way you can also influence the risk after choosing the warrant. This, the choice of derivative and the position size are the most relevant risk management factors.
If you ignore one of these factors, you are probably a child of the Wall Street and will either become a gambling addict or lose everything in the long term. Or both. @getquinfuermerchverkauft <3
If you are interested in the basics of TA, risk management, a trading strategy, etc:
https://www.amazon.de/Trading-mit-Hebelprodukten-Schritten-erfolgreichen/dp/3898798615
I don't get anything for it and I don't know the author, the book just helped me a lot at the beginning.
7) Examples
So where to start?
You can usually trade derivatives with the most common neobrokers, special trading brokers or CFD brokers. In the beginning, I would not pay much attention to this in order to gain a basic understanding. Basically, the selection at Trade Republic or Scalable is sufficient.
It is possible to set up demo accounts on some platforms to "test" investing. This is only useful for one aspect: to test your strategy.
With regard to TA: if you use Tradingview Papertrading, you can test your strategy with simple long and short trades before implementing it, regardless of the type of derivative.
Otherwise, the greatest danger (even more so with derivatives than with share purchases) is that emotions can influence the sale or purchase. "It's bound to go up" is no reason for a long certificate, "the figures are bound to be bad" is no reason for a put warrant.
If you use the demo accounts, the emotions do not really come to light, as there can be no real losses. They therefore fail to serve their purpose of preparing you for a real trade.
To better understand all the dry theory, here is a trade in practice that worked out wonderfully:
Approach:
At the beginning of the war in Ukraine, the defense stock Hensoldt rose from €14 to €28. This was followed by weeks of high volatility and a sudden focus on defense stocks.
On March 3, the Hensoldt share price was €21, TA not clear.
The war had only just begun, the oil price was on an upward trend and there were hardly any public assessments of the length of the war. Days before, the 100 billion package was announced; Hensoldt was to receive small contracts, but at the same time was supposedly working on a project with the White House. Market capitalization 2 billion, rather niche business, but would benefit from increased military spending.
Assumption: Oil-dependent shares will be punished, armaments rather constant/rising, should the crisis continue. Private investors would jump on the arms bandwagon.
Implementation:
First approach:
Call warrant that is in the money, as it is difficult to estimate the duration of the whole thing -> rather longer term
Actual execution:
Open End Turbo, news on defense stocks increased more and more on 03.03. + probability for good news/ new orders/ hype of the stock increased
Trade size:
Risky trade, as it is only based on news and TA, therefore 4% position size (in relation to the portfolio) when buying the derivative (should never be more than 6/7% anyway with sensible risk management)
Knockout underlying:
Choose derivative so that the knockout is slightly below 5% below the next support= 16,40€, as a support at 17,50€ can still hold the stock in case of a sell series.
(I (personally) do not choose the leverage, but the amount of the knockout)
Stop loss:
At €17.20, (if the price falls below the support -> damage limitation)
Take profit:
Profit is taken at the previous high (because then bearish TA/profit taking)
Result:
Ran longer than planned, thus the base value of the Open End Turbo was raised (see pictures: Long @16.40 -> Long @16.43), but since the course up to then was fine and the situation has not changed-> SL pulled higher and let it run.
Sold on 25.03. because previously determined take profit was reached. (see picture 3)
Follow-up plan:
If the price rises above € 30 -> new bull chart signal, possibly new trade
If the price falls again -> bearish chart formation, cooling of the trend, possibly wait for the market situation,
Since then, no more Hensoldt trades have been created
And how not to do it/ Why emotions are dangerous:
Palantir short (see picture; above purchase price, below selling price)
I had already given the premonition (short justification) here: https://app.getquin.com/activity/tzxiDVkAjc
Why did I sell it a day later?
THERE IS nOt ANYtHING THAT HAPPENS THEN BECAUSE OF SUCH AN INCREASE IN LIFE.
If I had acted rationally, it would have been a nice profit.
