Shorting AIM stocks

[Jack o'Clubs]

Anyone have any tips on who to short AIM stocks through? Can't find a spreadbet firm that touches them, and I've been looking through CFD providers, but those I've looked at restrict CFDs to the FTSE350 or so. Thanks in advance...

 

[PurplePerson]

Several spreadbet firms quote for companies with capitalisation exceeding £50million - regardless of whether AIM or main market. Cantor is one such (I have a December upbet on Tanfield (TAN) with them) http://www.cantorindex.co.uk

Some sbet firms happily quote for companies much smaller (£20m or £10m in some cases) if the shares are traded easily. I have bet long and short.

Cantor will quote for small companies (AIM or whatever) as low as around £20m cap if asked (though they don't advertise it). Stock availability will restrict shorting at times on small less liquid stocks.

PP

 

[Jack o'Clubs]

Thanks. I've got a Cantor a/c and couldn't see the stock I was after (mkt cap £190m) on their on-line system, but I will give them a call for a quote.

 

[Racer]

I think GNI might do CFDs for mkt cap above £50million but margin will be high!

 

[Jack o'Clubs]

Thanks Racer. I'll look into that too, as I'm a bit nervous about taking a s/bet price on a (relatively) illiquid small cap.

 

[Racer]

I would prefer to use CFDs to short big caps cos you get interest even if it is a small amount, but beware of special borrow charges for illiquid shares.. and even some not so tight stock can go special borrow at times... so watch the daily charges

 

[PurplePerson]

Jack o,

Yes, sorry - I should have said - majority of smaller stocks are by phone not online. Though they will make some stocks available online on request.

One advantage of phoning is you can haggle; you don't have to accept the first price they offer, they will sometimes move the price a little if it gets them a bet they otherwise wouldn't get.

PP

 

[Jack o'Clubs]

PP,

Thanks. Have you ever noticed that when you have a small-cap position with them, the price to close is significantly adrift from the market price? As I hinted at in my reply to Racer, I would be nervous that in a phone-quoted small-cap, once they had me in a position they could quote what they like for me to close it.

JoC.

 

[PurplePerson]

Have you ever noticed that when you have a small-cap position with them, the price to close is significantly adrift from the market price?

What timespan of bet are you referring to?
Obviously on a distant bet (eg expiring December or March) there is no reason why the quote should be anywhere near the current market. On a daily or rolling bet it should be very close, though not centred exactly on market.

PP

 

[Jack o'Clubs]

Any time span, after adjusting for interest on a future quarter bet - I just mean have you ever found them taking the p1ss? From experience I'm a bit dubious about s/bet firms - on larger cap stuff you're usually okay because if their on-line quote was seriously adrift on something like the FTSE or Vodafone, other traders would take advantage on the other side - but on a phone-quoted stock where you're likely the only client with that position with them, what stops them from adding a few percent (or worse) to the spread once you're in? Sounds like you've not had it happen, so that's good news.

 

[PurplePerson]

The percentage spread they add on top of market spread is a published fixed percentage - and can thus be calculated in advance of requesting a quote - (eg, Cantor add 0.6% of share price, on top of current market spread, for a near quarter bet, and 0.8% on a far quarter bet), so they are not going to get away with quoting an excessive spread without being challenged.

The position of the quote (ie where it is centred in relation to where current market price now is) is something they will be forever shifting, in line with future expectations for each stock. That is normal. If the stock price is regularly climbing fast, the quote will likely be further ahead of current price than if the stock is climbing less fast, and will likewise be skewed to the downside when the stock is falling if such falls look like continuing in a way that shows in the futures market for that stock or its sector.

Again, this is normal.

The interest you refer to is part of the cost of a rolling bet (and doesn't show as a seperate item in a quarterly bet where it is contained within that added-spread percentage) and is nothing to do with how far away the quote is from the current market. They are free to position the quote wherever they wish and free to move it wherever they wish, whenever. The judgment they exercise in doing so will likely include logarithmic formulae relating to both the relevant futures market and to the weight of betting. If they wish to also incorporate a degree of craftiness specific to a prticular bet, and have the time to do so, they are free to do that too

I don't find it a problem. It's a competitive field; the ones who mess people about the most lose custom to those who don't.

PP

PS: It helps to remember that they are bookies, not brokers

 

[Racer]

PP,

Thanks. Have you ever noticed that when you have a small-cap position with them, the price to close is significantly adrift from the market price? As I hinted at in my reply to Racer, I would be nervous that in a phone-quoted small-cap, once they had me in a position they could quote what they like for me to close it.

JoC.

I would prefer not to trade small caps at all because of that very reason, if you have any sort of decent trade, getting in will be difficult but getting out .. they will fleece you if you have the wrong direction

 

[MAmijee232]

Hmm...for some reason, Im more of a 'longer' than a 'shorter'.
Thing with AIM stocks which you all know is the lack of liquidity. I would prefer to short stocks in FTSE which are more liquid. If you shorted AIM stocks from May till now you would have made a nice wager Personally, i think the AIM stocks (which have been down 25% from its peak this year) will regain strength when the FTSE moves above the phychological 6000 barrier. October will be the time when allot of private investors would flood their money back into the market. Well i hope so! lol.

Also dont forget the market makers! they can give you a hard time with those bid/offer prices.

 

[Jason101]

I know this an old thread now.

Hi JoC, I am in the same position as you looking for a safe way to short individual AIM shares.

Did you have any luck? Is this something you have incorporated into your trading?

Does anyone else have anything to add on how to short AIM? And have there been any new developments for shorting AIM since this thread?

Thank you

Jason

 

[MORRIS2001]

I know this an old thread now.

Hi JoC, I am in the same position as you looking for a safe way to short individual AIM shares.

Did you have any luck? Is this something you have incorporated into your trading?

Does anyone else have anything to add on how to short AIM? And have there been any new developments for shorting AIM since this thread?

Thank you

Jason

It's harder now.

Because client funds are now seg then any hedging by the broker is done with their own capital.

All firms are now squeezed for capital as a result and so must think smart over what they will use their money for.

Small cap equities must be hedged one for one. They are also high margin and very low volume. It is in essence a bad market for a broker. This is why many have pulled their equity offer or cut it back severely. Take an fx client, they rarely need hedging and don't sit on positions. The exact polar opposite of an equity client.

Brokers simply do not want to offer equities on margin. If there was no marketing pressure to do so they would pull out. Most brokers are charged higher margins (80% in some cases) than they can charge their client.

Now to the short side. As the positions are hedged then to go short there must be a lend on the stock. Most lending has been pulled in the low vol markets of today and where it hasn't the cost is huge.

The only firm with a balance sheet sufficiently large enough and clearing costs and margins low enough will be IG. Their list of online stocks is on their site and it confirms if a short is available.

 

[CityTrader]

I just shorted an AIM stock this afternoon, could have used either of the 2 SB brokers I normally use. Didnt seem to be a problem...