Shorting a share

*JS*

I’m looking for a bit of help if possible to help me short a stock on the FTSE100. Basically I work for a large FTSE100 company and I have a share save due to mature in December. It’s a 5yr plan and I’m set to double my money based on the current share price. I’m conscious though that should the share price go south in the next 3 months it could considerably eat into my profits. For each 1p the share price goes up/down I stand to gain/lose £20. As such I was looking to short the stock for £10-£15 per 1p to lower the short term volatility.

My query is around how exactly to do this as I haven't done this sort of thing before. I had a look on igindex and they had a daily price and then a price for Sep,Dec and Mar. I need to be able to close my position on the same day I cash in my share save so is this not possible with IG? It’s not clear from the site when exactly in Dec the position will automatically close?

Any thoughts on the easiest way for me to do this would be appreciated.

Perelandra

igindex would, indeed, be a suitable place to do this.

The dates (1,2, 3 months) represents the latest position that you can close your position; you can manually close it at any point up to that date, at any time.

IronWolf

The cheapest way to do it is via CFDs or spreadbetting rather than actually shorting shares.

Bear in mind you will have to pay borrowing costs regardless of which method you use, as well as pay any dividends that come due during the period you are short.

*JS*

I've looked on the help section on IG but its not obvious, would I need to deposit to my maximum liability or can I pay any balance upon closing my position?

*JS*

Think i've answered my own query by downloading the demo on the website. Cheers for the response though Perelandra & IronWolf

gadgetmind

My company's employee share dealing policy does *not* allow employees to take short positions. You might like to check yours.

bowlhead99

gadgetmind wrote: »

My company's employee share dealing policy does *not* allow employees to take short positions. You might like to check yours.

All the big FTSE companies will have rules designed to stop insider trading and market abuse. Not all will have blanket bans on shorting and derivatives, but many will, and apply it to all employees rather than just directors /PMDRs like Gadget. It is negative for the company's share price if people are selling it short, and that is bad for shareholders, whose interests the Board have a duty to protect.

Also, obviously you are prohibited from dealing (buying or selling) when you're in possession of price-sensitive information (unless you're simply making a pre planned ongoing contribution to SAYE or similar). Even if your reason to trade wasn't the information you held, and just wanted to hedge a risk, good luck proving that in court when other genuine bad guys are getting done and you are caught in the net.

There are also certain times of the year when the company will be in a "closed period" e.g. just prior to results or if an acquisition is going on. Again, some companies may extend a ban on trading to all staff during those periods, not just execs/PMDRs.

So if you are not sure, may be time to dig out a staff handbook, code of good business practice or whatever your employer calls it.

Biggles

Shorting is a dangerous game if you're inexperienced at spread betting. An upward blip in the share price could result in a margin call, probably wiping you out, but the share price could still fall again after that, costing you both ways.

It seems that you've been happy to watch the price for 4¾ years but that you're getting risk-averse about the last three months. Maybe there's a reason for it, and you can't tell us about the company, but FTSE100 companies aren't usually too volatile.

Unless there's a good reason, I'd stick with it; if the trend is upwards, you're at least as likely to gain as lose by sitting tight.

gkerr4

surely all you are doing here is guaranteeing a worse return from your "now doubled" share investment?

if its up 100% and falls 10%, you're still 90% up - all you do with shorting is negate any further gains and not even protect 100% the risk of any decline!

just let it ride, cash it in when you can and stop being greedy!

re the IG question - you can close your position at any time - as you would need to if your company share price goes up any further!