GEOPOLITICAL EVENTS SHAPE WORLD MARKETS

Syrian Conflict at the Forefront of World News

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Key political figures in the US are backing President Barack Obama’s push to strike Syria. The US has accused President Bashar Assad of deploying chemical weapons against the Syrian rebels. The deployment killed over 1,000 people. Assad, along with Russia and Iran, declared the regime did not use the weapons. America has been warned against striking Syria. Its allies were included in the warning.

Obama has hinted at a light strike on Syria while evidence looms that a strike on Syria could be the beginning of a domino effect to World War III. America faces opposition from Syria allies, but US political figures are standing behind Obama. Secretary of State John Kerry said the chemical weapons were indeed used. Samples from blood and hair of the injured inside Syria suggest sarin was the culprit. Sarin a powerful nerve agent.

Kerry said the evidence would gain support from Capitol Hill and European allies for the U.S. Votes on if military action is needed in Syria will be held during the week beginning Monday, Sept. 9. Obama’s administration has been pitching their case to lawmakers, and this week Kerry and Secretary of Defense Chuck Hagel were scheduled to testify at a public hearing Tuesday and Wednesday, respectively.

Meanwhile, a Tennessee senator is calling for the administration to explain why America should strike Syria and how the action will be limited to prevent America from becoming more involved in the conflict.

How the Syrian Conflict Impacts Investors
Investors will also be watching to see if Obama receives the go-ahead from Congress. Chances are, they’re already paying close attention. Major events like these shake up the market and subsequently individual portfolios. America’s involvement could lead to more turmoil in other countries, such as Iran and Israel. The United States does not have the backing of at least two countries, and it well known Iran does not agree with the U.S. on foreign policy.

Obama may or may not have Saudi Arabia’s support. That country is in favor of forcing Assad out of business, however, admitting it publicly is another story. Obama said Assad must be punished for the shelling of Eastern Ghouta, which is a suburb of Damascus, at approximately 2 a.m. Aug. 21. Residents there suffered convulsions and choking before they died. Hospitals were makeshift and rapidly filled up as volunteers had to pour water on the injured to prevent contamination. The death toll was at 457 and climbed as high as 1,300. As many as 3,600 people were treated.

All of these factors must also be taken into account when thinking of the market’s future. There are available alternatives.

Alternatives for a Healthy Portfolio – CFDs
Amidst the uncertainty, traders are looking towards other options. One such option is the Contract for Difference (CFD). This is a method of trading shares and other instruments. Investors simply purchase or sell a contract of the underlying market using a quoted price. The contract covers the financial instrument in the underlying market and operates according to the value of the instrument at the time of the contract’s opening and closing. The exchange made is the difference between opening and closing times.

In other words, investors select their market and open a CFD instead of making a full purchase. The contract will reflect profit and loss of the purchase or sale. For example, an investor wants to purchase 1,000 BP shares. The investor supplies a margin deposit in case of loss, and purchases the shares in CFDs. They may sell their shares at a bid price if they go short. Investors who want to hedge portfolios select CFDs, which are also used in the foreign exchange market and energy contracts.
Before looking into using CFDs as a hedge, investors need to research the risk to fully understand how CFDs work.
On the most basic level, CFD trading is the buying of one asset and the selling of another. Strategies are much like the common angles investors use on the stock market. Investors call purchasing an asset the long position under the expectation it will rise in value during the investment contract’s time. Short positions are taken when investors feel the asset will fall during the contract’s life.

Alternatives for a Healthy Portfolio – Spread Betting
An easy and tax-free method of building portfolios is spread betting, or predicting how points will move in the underlying market. In spread betting, spread means the price a financial instrument is sold for and the price it is bought for. Investors do not buy shares or futures with spread betting. Instead, they wager on which path their chosen markets will take. Many wager just one dollar on each point, which moves in between the buy and ask prices on the live or estimated future underlying market.

If the market falls, and investors predicted it would fall, investors make a profit. Likewise if the market rises and it was predicted to rise by investors. Investors will have to account for losses because the market could move opposite of their predictions. One way to manage losses is through stop loss, which is a previously determined stop point investors put into place.

An Example of Spread Betting
If the underlying market FTSE 100 index is currently at 5341.6 and the sell price is 5341.1 with the buy price at 5342.1, the spread is one point. Investors predict if the FTSE will rise or fall. If it falls, investors should sell at 5341.1. If it rises, investors should buy at 5342.1. The two predictions are called the down bet (for falling) and the up bet (for rising).
If the market falls, investors could decide to realize their profit. Say the FTSE 100 is at 5218.6 and the quote is 5218.1 to 5219.1. Investors would have to purchase 5219.1 to close their original sell bet. The profit from the purchase reads like this: 5341.1 – 5219.1 = 122 x £5 to equal a profit of £610. If the market rises above the level the investor sold, a running loss will be incurred. The calculation is the same as the profit.

Investors determine how to apply spread betting through trends, breakouts, reversals or, as in the case of the Syrian conflict, news. The news trading strategy requires investors to understand macro-economics and how to accurately interpret news headlines. News trading has the potential to pay off large for investors if it is applied correctly.

Author’s Bio: Brett Chatz was born in Johannesburg, Gauteng, South Africa. He attended the internationally accredited University of South Africa, where he completed the prestigious Bachelor of Commerce degree, with Economics and Strategic management as his major subjects. Nowadays Brett contributes his expertise and knowledge for the leading UK spread betting and CFD trading provider, InterTrader.com.

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