A trading method whereby traders take advantage of the delay in settlement– i.e., the period of three days (known as the contra period) after the trade is executed (T+3). A trader would buy and resell shares within the same settlement period to avoid making any payment (cash upfront). Contra-trading is typically commonplace in day trading, where a speculator buys shares during the day and resells them before the close of trading; both transactions settle on the same day (e.g., T + 3) with the speculator having no gross cash outflow (capital outlay). With contra trading, speculators can make a profit without having to fork out capital.
June 12, 2024
