XETRA Stocks request

Xetra Stocks requests - @Team212

AHLA Alibaba Group Holding Ltd.
NVD NVIDIA Corporation
BAC Verizon Communications, Inc.
2PP PayPal Holdings, Inc.
ADB Adobe Inc.
CTP2 Comcast Corporation
XONA Exxon Mobil Corp.

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@Enlil Just curious for my own education. What is the advantage of being able to own one of these compared to owning the company stock on a US exchange? Is it only a difference in trading hours? As I understand it, depository receipts incur extra costs, which mean that long term the return from owning them is not as great. These look to me to be useful only if there were a significant cost to EUR to USD exchange, or one wanted to trade actively while US market is closed. But then low liquidity will mean larger than usual spread.

@Richard.W
I don’t use them to invest but to do swings :slight_smile:
Three reasons I do so:

  • When the dollar is getting stronger and stocks are going up, buying in EUR increases profits,
  • Buying in EUR saves me the exchange fees
  • Buying in the eurozone saves me administrative paperwork.

I agree there might be some downsides to these instruments depending on your goals - the biggest one being an unfavorable long-term EUR/USD trend.
Based on my experience, liquidity isn’t an issue on those stocks.
I don’t know much about depository receipts extra costs but if you’re willing to pay for management costs when buying ETFs I wouldnt worry too much about those.

The above is just my own opinion of course. This is how I see it for now but it might change one day…

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Thank you for taking the time to explain your thinking. Just some thoughts:

  • How? 10 shares of 2PP and 10 shares of PYPL will always be worth to within a tiny amount the same in euros. Currently the prices are

€ 173.58 and $ 205.18 x 0.8481 = € 173.99

a = b * c. If c decreases (USD depreciates against euro) then a will decrease to maintain the equality. You will be no better or worse off in euros by holding one rather than the other. If this = did not hold then there would be easy money to be made (by computers) through buying 2PP and selling PYPL or vice versa.

  • Trading 212 has minuscule exchange fees. Such as they are, they are orders of magnitude smaller than the buy/sell spread cost that trading in and out of positions involves.

@Richard.W

When you trade a product that reproduces in EUR the performance of a share in USD, you trade at the same time the share and the exchange rate.

Let’s say 1 share of X is 200$ at NYSE
The exchange rate at the time is 1EUR=2USD
1 share of X would therefore be 100€ at Xetra
You buy 1 share @ 100€

Next month, 1 share of X is 400$ at NYSE

If the exchange rate is still 1EUR=2USD, you have now a share worth 200€.
If the exchange rate is now 1EUR=1USD, you have now a share worth 400€.
If the exchange rate is now 1EUR=4USD, you still have a share worth100€.

Massive difference even though at any given time the value of 1 share in EUR is equivalent to the value of 1 share in USD.

That’s the reason why currency hedged ETFs exist btw.
Look at the difference below. That is due to the collapse of the dollar during the crisis.
S&P500 standard vs S&P500 hedged

Are any of those stocks you requested on Xetra currency hedged? Perhaps I misunderstand. I thought they were not. 2PP is just the same as PYPL except has a price quoted in euros. I agree with your analysis if we are talking about a currency hedged product. But are those stocks currency hedged? I can’t find anything that says they are. In fact, 2PP and PYPL have the identical ISIN US70450Y1038.

There are about 1.17B shares of Paypal outstanding. Each could be equated to a certain number of milligrams of gold or milligrams of silver. But the absolute value of a 1/1.17B ownership of PayPal has nothing to do with how many grams of silver have equal value to a gram of gold.

Yes, you would have a share worth either 400€ or 100€, but irrespective of whether you had initially purchased that share as PYPL or 2PP.

@Richard.W

Yes but what would you prefer +300€ or +0€ ? :smiley:
The american investor doesn’t care: for him it’s always gonna be +200$. But you have to take into account the exchange rate trend if you want to make profits in EUR. If the USD is in free fall, you’ll be better off trading european stocks.
Think of it in terms of entry & exit points as well
A good entry point on the US version of a stock for USD accounts might not be a good entry point if you want to cash in EUR.
Why ? Because the exchange rate variation could still be pushing down the price in EUR when the price in USD is stabilizing. You might even see the USD price going up but the EUR price going down.
So basically by trading the US version, you might think you are making a perfect entry when really you are getting screwed by the exchange rate moving against you.
You have a EUR account not a USD account so what you want is the best price in EUR not the best price in USD.
Tops and dips don’t happen at the same time on original USD stocks and their non-hedged EUR counterparts due to the exchange rate moving independently from the stock price. (it also implies a difference in the amplitude of variations)
Watching the EUR version trend while keeping an eye on the EUR/USD rate will allow you to find the most appropriate entries and exits to make profits in EUR (surfing on both stock and currency rallies and benefiting from both).
If you trade US stocks like an american would, you will underperform because signals won’t match.
That’s why I sent you the S&P500 vs S&P500 hedged charts. So you can see by yourself how US non-hedged products can have average returns in EUR yet good returns on USD counterparts or hedged versions because of the way currencies move relative to one another.
Do you understand what I mean ? :sweat_smile: :smiley:
Again I’m not sayin that at any point you would end up with less because you hold an american version rather than a european version of a stock. I know this is what you think I’m thinking. But no. My previous message was a failed attempt (lol) to underline the fact that profits in EUR on USD-based instruments can vary greatly due to the exchange rate variation. (which is something to be taken into account to maximize profits).

I think from what you say I now understand how to put the case for a euro priced version of a US stock like 2PP for PayPal.

Consider two traders. Trader A trades PYPL and Trader B trades 2PP. If they enter and exit positions at the same moments then both will make the same euro profit or loss.

However, B has the convenience of watching a chart that has the fx impact made explicit and so will find it easier to choose his points of entry and exit. Trader A could achieve nearly the same thing as B by watching the chart of 2PP but then trading PYPL on the 2PP chart’s signals, but he would find it more convenient to trade the same instrument as whose chart he is watching.

Here, for example are the Morningstar charts of PYPL and 2PP with both displayed in USD. When shown in the same currency we can clearly see that in terms of available profit there is no difference.

and here are the same two charts but now both shown in euros. Again, no difference in swings or potential profits, but perhaps providing different signals to a trader than do the USD charts above.

@Richard.W
I’ve been reading our entire conversation again and its kind of amazing how I drifted from “impact of products currency on profit” to “impact of currencies on profit” in an almost sophistic way. I’m not proud :partying_face:

More seriously, you’re probably right about the products currency. It might not really change anything when it comes to profits except maybe the fact that EUR charts enable better entries and exits (in my opinion anyway).

I was under the impression that some short-term moves were more pronounced on the EUR instruments (especially when I was trading the S&P500) but I might be wrong. How do your charts look on a smaller timeframe like 1D or 1h ? Any suspicious swings ? I don’t know…

What can I say ? I like it in EUR :+1:t2:

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I appreciate the acknowledgement in your last message that you may have learned something. I too have learned that euro priced version of an instrument, while not really offering different profits, can be more helpful for deciding entry and exit points to someone looking to measure their profits in euro.

I do not know any source of short time frame charts like those that I took from Morningstar. It would be interesting to find such.

Of course all of this currency conversion stuff is easy for a computer or robo trader. My guess is that such machines will be taking advantage of any relative short term mispricing between instruments such as PYPL and 2PP, leaving no currency effects advantage from which humans can profit.

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I’ll have a look around later on today. It would indeed be interesting to see if it holds true on shorter periods. As you said, it will probably be the case with super fast computers operating in the background but who knows… If I find anything I’ll post screenshots here.

@Richard.W
I figured it out. I knew I wasn’t crazy after all :slight_smile:
You can indeed make more profits on one or the other instrument depending on the trend during trading hours (which are different for each).

Here is an example (all prices are is USD - price is fantasy):

Day1 -10 pm (UTC+2) - PYPL closing @ 200$
Day2 -09 am (UTC+2) - 2PP opening @ 150$
Day2 -03:30 pm (UTC+2) - 2PP is @ 170$ ; PYPL opening @ 170$
Day2 -05:30 pm (UTC+2) - 2PP closing @ 180$ ; PYPL is @ 180$
Day2 -10 pm (UTC+2) - PYPL closing @ 190$
Day3 - 09 am (UTC+2) - 2PP opening @ 175$
Day3 -03:30 pm (UTC+2) - 2PP is @ 185$ ; PYPL opening @ 185$

Il you buy Xetra at D2 opening and you sell at D2 closing = 30$ profit per share
If you buy Nasdaq at D2 opening and sell at D2 closing = 20$ profit per share

Of course things can go the other way around and you’ll have a better trade buying in the USA rather then Europe. And in the long run it doesn’t really matter as shown on the morningstar charts.
The best would be an instrument like futures that you could trade all the time so you can benefit from all opportunities :slight_smile:

Sorry Im making a ton of edits on my posts…

Yes, as I said in my first reply, these securities have different hours of trading and perhaps that could be advantageous in some circumstances. However, I doubt one could consistently come out on the winning side of such trades. I prefer to buy and sell US stocks when the US market is open since that is when there is greatest liquidity and so I am likely to incur least cost in market maker buy/sell spread.

I don’t think there is anything that you can trade at all times, in either a stock or currency or commodity. Sounds like something for insomniacs.

I know you did. I just didn’t make the connection with some of my unusually successful trades. Slow brain… What can I do ? :sweat_smile:

Fair enough. If you feel comfortable doing it like that why shouldn’t you :slight_smile:

It’s a way of seeing it yeah :laughing: