Q. “Timon, I'm sorry to ask you on Twitter but I need to know. Where can I ask my trading and investing questions to get answers direct from FSP Invest analysts”
A. You may ask all your questions in the comments in the Q&A section of our Facebook page by clicking here
If you don't have Facebook then feel free to ask your question at email@example.com
. Your question will then be answered and featured in a TTB Q&A article, like todays. (completely anonymous of course).
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Q. “In Monday's article, you mentioned that the price of oil and shale oil will rise. Can you briefly explain what the differences are between the two?”
A. Shale oil is a high quality oil that lies between layers of shale rock, mudstone or siltstone. The oil companies then break down (hydraulically fracture) the rocks where the oil is found. This way they can produce shale oil.
Whereas Brent crude oil is naturally pumped straight out of the ground and remains unrefined until it is processed by the refinery.
Both oils are created from the decomposition of fossils, but shale oil is the cheaper alternative.
Q. ”My friend in Singapore is a multi-millionaire trader. He has made his money through arbitrage trading. Can you tell me what this form of trading is and how it works?”
A. Arbitrage trading is an old concept that has been used for thousands of years. First in the form of bartering, then with money exchange and today in the form of digital transactions.
Investopedia, I believe, has the best definition.
"Arbitrage is the simultaneous purchase and sale of an asset to profit from an imbalance in the price."
Basically, you'll buy and sell the same instrument (shares, commodity, currency pair etc...) on different markets at different prices for a profit.
Here's an example, to explain what I mean.
Let's say you buy TIM Ltd shares at R100 per share on one market. You then find another market is trading TIM Ltd at R105 per share.
There are platforms available for arbitrage traders, where you can buy 100 shares for R100 (R10,000 worth) and sell those 100 shares on the other market for R105 per share or (R10,500 worth).
You would then profit from the difference banking you an instant R500 (R10,500 - R10,000) profit.
Your friend most likely has a number of screens in front of him showing him a variety of instruments with different markets and prices. As soon as there is an imbalance between the prices of the same assets, he will quickly execute a trade to take advantage and to profit from the price discrepancy.
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Q. “I'm a member of Red Hot Penny Shares with Francois Joubert helping us profit from quick rises in price from cheaper stocks. My question comes from an advert I saw on a similar service in America.
The difference is that they used the term 'Pink Sheets'. This has sparked my curiosity. What is the difference between Penny stocks and Pink sheets?”
A. A Penny Stock is a listed company with generally a low market capitalisation and with low liquidity (less volume) that trades under R10 per share in South Africa.
A Pink Sheet is similar as it also has a low market capitalisation and lower liquidity, but trades under $5 (R70) per share.
The key difference is a Pink Sheet is an Over-The-Counter stock. This means you won’t find them listed and traded on the JSE, Alt-X, Nasdaq, NYSE, or any other major stock exchange.
I don't believe there are opportunities to trade these high-risk high-reward type 'Pink Sheet' markets in South Africa like you can overseas. (Not to my knowledge anyway).
“Wisdom yields Wealth”
Analyst, Pick Pocket Trader