CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 81% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 81% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

3 Strategies for Trading on the USFANG

  • Stocks
  • CFDs
2 minute(s)
In this article, we present three ways to use USFANG CFDs that are based on the NYSE FANG + index.

Tech stocks like Apple, Facebook or Netflix are not only among Wall Street's top assets, but they have also transformed the way we live. As its prices soared, skeptics began to argue that a new bubble was being created. As a result, the FANG index was created. While FANG stands for Facebook, Apple, Netflix and Google it is actually made up of 10 technology stocks in equal proportions. In this article, we present 3 ways to use USFANG CFDs that are based on the NYSE FANG + index.

Strategy 1 - Portfolio of Stocks

The CFD index has the two main strengths: leverage and scalability. If you want to invest in the top 10 tech stocks - Alibaba, Alphabet, Amazon, Apple, Baidu, Facebook, Netflix, NVIDIA, Tesla, and Twitter - you'll need a lot of capital. But with USFANG, you not only have them included in an index, you will also only need a deposit of 10% of the investment to take a position thanks to the leverage. Scalability allows you to get the largest position you want. One lot represents a point value of $50, so if the index is at 2,600 points, that would mean $130,000. However, if you want your position to be $50,000, you can invest in 0.38 lots. To do that, you only need to have a deposit of $4,940.

Please note that while leverage can magnify your profits, your losses are also magnified in the same way. So, if prices move against you, your losses could exceed your initial deposit - so it’s important to understand how to manage your risk.

Strategy 2 - Totally Short

While you can buy 10 stocks separately, this is only profitable if prices go up. What if you think tech stocks are overvalued? Taking a short position on the USFANG CFD is one possible way to take advantage of that valuation. In this case, your trade would make a profit as USFANG declines. Again, you are taking advantage of leverage and scalability just like with Strategy 1.

NYSE FANG

Despite the strong correction in 2018, the NYSE FANG + returned 23.3% annually between September 2014 (start date) and the end of February 2019. FANG.US is a CFD based on that index that is available on the xStation platform. 
Please note that the data presented refers to past performance and therefore does not guarantee future returns.
Source: xStation

Strategy 3 - Speculative Hedging

This strategy can be used for investors who already have a portfolio of stocks. If you have a portfolio of stocks that is worth, for example, $20,000 and you like the stocks you have, but think the tech stocks are overvalued, you may consider shorting the FANG.US CFD (0.15 lots that would represent $ 19,500 with the index at 2,600 pts). Such a transaction simply assumes that your portfolio of stocks will perform better than stocks included in the NYSE FANG +. You can even make a profit during market downturns if the FANG.US CFD loses more than your portfolio.

Data sources: Bloomberg, xStation, XTB Research

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