What is Block Trade?
Block Trade is a method of pairing and trading Single Stock Futures at the agreed price and contract amount. To help with insufficient liquidity Which will refer to SSF before understanding the place where it came to be the current block trade
Single Stock Futures (SSF) was originally started as Trading of futures contracts of reference stocks that we are interested in Most of these references are mostly members of SET50. And add another part to SET100 shares, which when combined Currently, there are a total of 69 underlying stocks that we can choose to sell Long-Short using Single Stock Futures as an aid to increase the rate of our portfolio.
But SSF trading is not as smooth as it should be … The reason is because most players in this field are general investors. Who come to buy and sell themselves, causing “liquidity” of this type of product is less, resulting in investors unable to trade easily For this reason, making SSF less popular. And investors do not pay much attention due to low liquidity problems
Until about 2 years ago, the securities companies took part in increasing liquidity for the SSF market. The method is that these securities companies will act as partners for all buyers. Provided that The buyer must purchase a minimum amount of SSF contract according to the criteria set up by the stock exchange.
Contracting of buyers And this securities company is called “BLOCK TRADE” where, if the player wants to open the LONG status, the securities company will come to accept as a contract party.
Therefore, in the event that the stock price moves up Players will be profitable. And the opposite of the securities company will have to suffer losses But securities companies do not want to open this risk here. Therefore use risk prevention methods By buying “Real stock on the board” is equal to the amount that is a contract for the player. Therefore, the securities company will “No interest” from being a contractor with investors Only act as an intermediary for investors to take advantage of the rate of this product.
Example of the process of Block Trade (hypothetical numbers)
Players contact the private markers to request to block a 100,000 CBG stock.
Margate sends an order to open a long CBG 100 contract to a securities company that is a counterparty.
Securities companies purchase 100,000 CBG shares from the main board in order to prevent risks as mentioned above.
Customers have a long CBG status of 100 contracts or equivalent to having 100,000 CBG shares. *** All events take about 1-2 minutes. ***
Note: This transaction The securities company will have the cost of hedging. Therefore, the securities company will collect the player fees as a fee in this part as well.
After having the broker become an intermediary in this transaction SSF trading volume through Block Trade channel has grown 10 times within the last 3 years. Traditionally, with an average of 10,000 SSF trades per day in the BlockTrade period, when BlockTrade was done, the average value was up to around 80,000 contracts per day. On the day of trading, the amount of contracts Ever up to 150,000 contracts per day Why do players come to trade a lot of Block Trade !!
The possible reasons for causing players to enter Block Trade transactions are as follows:
The shares that can be made to block trade will be shares in SET50 and SET100 that have both foreign funds and proptrade as players. Therefore, the use of Technical Analysis in reference is based on the theoretical principles rather than playing stocks. Small Cap general
Choose the direction in both LONG and SHORT. Therefore, no matter how the market is up, down. Or even sideways There are always opportunities for players.
Block Trade uses less money compared to buying shares in the market.
So with the same amount of money If forecasting the price direction correctly, it will yield more return than buying the stock. (Of course, if the wrong way is hurt, too)
Example: Investors want to buy 100,000 CBG at a price of 60 baht if we actually buy stocks. We have to spend up to 6 million baht. But if we buy a CBG by doing “Block Trade”, we will place a minimum of 532,000 baht in the block trade only. That means we use 532,000 baht to buy a product worth 6,000,000. Once calculated, the purchase of CBG with Block Trade Will be able to provide a rate of up to 11.28 times (resulting from 6,000,000 / 532,000)
Therefore, if the CBG stock is up 1%, then we will get 11.28% profit from BlockTrade and if it comes down to 1%, we will be negative by 11.28% as well.
Block Trade is to buy shares by placing only a part of money. With a rate of 5-25 times
Block Trade has gained more popularity. With an average trading volume of around 80,000 contracts per day (or equal to 80 million shares per day that is traded through Block Trade)
Not everyone is suitable for Block trade, but the person who is suitable for buying shares with Block Trade method is that the players themselves should Understand the product at a good level And can take risks