What’s the ways to have exposure to foreign securities such as Tencent(trading in Hong Kong Stock Exchange)? Of course, one way is to open an broker account in Hong Kong and buy the stock in that broker account. Another easier way is to trade ADRs in US with local brokers.
So what’s ADR?
ADR(American Depositary Receipts) is a stock that trades in the United States but represents a specified number of shares in a foreign corporation. ADRs are bought and sold on American markets just like regular stocks, and are issued/sponsored in the U.S. by a bank or brokerage.
There are 3 types of ADR:
Level 1 – This is the most basic type of ADR where foreign companies either don’t qualify or don’t wish to have their ADR listed on an exchange. They only trade OTC.
Level 2 – This type of ADR is listed on an exchange or quoted on Nasdaq.
Level 3 – This type of ADR is issued a IPO on a US exchange.
Once an ADR is priced and sold on the market, it’s price is determined by supply and demand, just like an ordinary stock. However, if the US price varies too far from the corresponding stock in home country(taking the currency exchange and ratio of ADRs to home country shares into account), arbitrager will come in and make the price close to it’s fair value. So ADRs tend to follow the general trend of the home country stock but this is not always the case.
ADR has it’s own unique risks other than ordinary stock.
Political Risk – The characteristic of foreign government may affect the price of ADR.
Exchange Rate Risk – The currency exchange rate will influence the price of ADR.
Inflationary Risk – This is an extension of the exchange rate risk. Currency of a country with high inflation becomes less and less valuable.
We tend to use continuous rate to calculate forward price because it’s hard to compare forward price if market convention is different. For example, a 4% three-month rate in US dollar market is not the same as a 4% three-month rate in the UK sterling market. This is because USD ear fractions are calculated on an actual/360 basis while GBP rates are calculated on an actual/365 basis.
Here is the formula to convert market rates to continuous rates:
For investment assets, interest rates and storage cost increase forward price, while income reduces forward price. The overall relationship is called the cost of carry for an asset.
The overall future price equation, if all rates are quoted using a continuously-compounded basis, is:
For new option traders, they normally think expiration date = last trading date(time). This is a very common mistake which may lead to huge losses.
Expiration date means on which date options expire, and last trading date(time) means before which date options are able to traded. For regular options, expiration date is the third Saturday of each month, and last trading time is 4:00pm ET of the third Friday of each month. Even with weekly options that expire on Friday, they will expire after after-hour trading time.
Keeping these concepts in mind, you will soon realize that there is a gap between expiration time and last trading time! And you don’t have to be super smart to figure out that you are exposed to risk you don’t have control.
Let’s have an example. Say you sold 10 TSLA “13 Dec 13 (W) 136.00″ call for 4.8 per contract. The stock closed at 135.99 on 13 Dec. 4:00pm ET. You are so happy that you can keep all the premium in your pocket and plan to fly to Vegas on weekends to continue your luck. Then you suddenly get a margin call to ask you deposit 140,000 to your account on Monday. WTF?! What happened last Friday was during after-hour time, TSLA jump to 140.00 and the call option you sold become ITM and got assigned to you. This is not a big move considering how volatile TSLA is.
Nobody want to be in such a poor position and any surprises like this. So my suggestion to retailer trader is always close out your option position before last trade time even though you will lose a penny or so exiting your positions if you don’t really want to exercise your option.
CFDs(Contracts for Difference) have been used for many years. While until recently only large institutions used CFDs, now private investors in Europe have discovered the benefits of the product, particularly the ability to easily short an equity or index, and in the UK it is estimated that 20% of equity transactions are now transacted via CFDs. Here is a table to compare the differences between common stock and CFD.
100% of purchase cost
Margin – initial margin
and variation margin
Typically T + 3
A long holder will usually receive
a percentage of the dividend declared.
A short holder have to pay the dividend.
I use sqlite as my django database, but there are some limitations in sqlite. So I want to switch to mysql or psql(PostgreSQL). Both of them need a little bit more setup than sqlite, but still quick easy.
It works perfectly on dev version of my django site. But when I deploy it to production (served by apache), I realized that css is missing for admin pages. Then I digged a little deeper to see what I could do to solve this issue. It actually quite simple. There are two files you need to modify.
# create 'static' folder in your app if you haven't done so,
# which will be in the same level of your settings.py file.
here STATIC_ROOT will be the folder where django will copy all admin static files. STATIC_URL will corresponding to the alias name in your apache config file. Don’t worry, keep reading and it will be clear to you.
Go to your django site directory and run
This will copy all static files including admin css, image, js files into your STATIC_ROOT. Now check your “static” folder, you should see “admin” folder which has “css”, “img” and “js” sub-folders.
Modify corresponding apache config files under /etc/apache2/sites-available/ folder.
where “/static/” is your STATIC_URL and “/dir/to/your/static/” will be the location of your “static” folder which is your STATIC_ROOT.
You are all set! Restart your apache and checkout your admin page.