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CFD trading volumes spike on banking stock volatility

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The turmoil within the global banking sector has actually seemed to reinvigorate interest among CFD traders. This is according to the findings of the Q1 2023 Pulse Report published by high-growth trading platform Capital.com.

Traders took advantage of lower bank valuations to buy the dip while simultaneously selling off the back of negative news flows. The CFD broker said that retail trading volumes in Contracts for Difference based on SVB shares increased by more than 8,000% in Q1 from the previous quarter. Contracts for Difference allow traders to easily take short positions on stocks much like a hedge fund would.

Over the same period, total CFD trades on Credit Suisse shares climbed by 9,644% while UBS shares saw trading volumes grow by over 4,000% in Q1 vs Q4. Meanwhile, the now failed bank, First Republic, saw CFD trades on its shares climb by a staggering 314,467% in Q1 2023 from Q4 2022.


Daniela Hathorn, Senior Market Analyst at Capital.com, said: “After a bout of banks breaking down, borrowing and eventually collapsing, our traders turned their attention to global banking stocks. This renewed interest was particularly noteworthy after the fall of Silicon Valley Banks on 10 March 2023. Prior to the collapse of SVB and the rout across the banking sector, Capital.com traders have typically paid little attention to this segment of the market.”

Confidence in smaller banks is rocking

Reflecting on the US banking sector crisis, Hathorn added: “The fragility of the banking system and the fact that interest rates have affected lenders in the US economy have really come to bear with the collapse of SVB, Signature Bank and most recently First Republic. Nonetheless, so far markets seem to be little fazed by this. They have confidence in the Fed and they believe their first concern should be tackling inflation and making sure growth can continue. That said, confidence in smaller banks is rocking and that will reflect in their share price. The thing is that bigger banks are deemed too big to fail so they have less flight risk in deposits, meaning that investors may decide to avoid the risk of smaller lenders.”

Tesla tops the list of most traded single-stocks in Q1

According to data from the Q1 2023 Pulse Report, Tesla [NASDAQ:TSLA] maintained pole position as the most-traded single stock for the quarter, which remained true for both long and short trades. This is the fourth consecutive quarter where Tesla held onto its most-traded position on the platform.

After Tesla, Bed Bath & Beyond [NASDAQ:BBBY], e-com giant Amazon [NASDAQ:AMZN] and tech titans Nvidia [NASDAQ:NVDA] and Apple [NASDAQ:AAPL] were among the top five most traded stocks in Q1 2023.

AMC Entertainment [NYSE:AMC], Coinbase [NYSE:COIN], GameStop [NYSE:GME], Meta Platforms [NASDAQ:META] and First Republic Bank [NYSE:FRC] comprised the last five of the top ten.

Commenting on the list of top-traded single stocks in Q1 2023, Hathorn said: “Popular names and meme stocks stayed at the top of the most-traded list in Q1, as traders speculated on their performance. Tesla has the potential to maintain trading interest as the company is in news headlines more often than not, and with a charismatic front-man there is always appetite to get behind the stock. BBBY and Nvidia have fallen into the trap of Reddit investors and therefore they are subject to increased volatility, which could attract further demand.”

Other key findings from the report

Trading volumes reached more than $300bn in Q1 2023,12% higher than Q4 2022. The biggest contributors were the Middle East and Australia, where overall client trading volumes were up by 40.8% and 53.8% respectively in Q1 compared to Q4 2022.

The NASDAQ 100 garnered the most global interest from European, UK and Australian traders. Crude Oil and natural gas also saw plenty of interest as the popular commodity navigated its way through the winter.

There were no changes to stop-loss use from the previous quarter’s record high of 12.9%, indicating a continuing air of cautiousness among traders.

“While it seems like the worst has been avoided with the banking turmoil, the extent of interest-rate rises in 2022 and the first quarter of this year is still expected to have a damaging effect on growth and profitability,” Hathorn added. “So far traders remain in high spirits, bolstered by solid Q1 earnings and economic data that shows resilient economies.”

It is still uncertain when and where terminal rates will be achieved, and if these will be held unchanged until the end of the year. Hathorn thinks that in the US, markets are not convinced the Federal Reserve will be able to hold rates above 5% by December, meaning that this divergence in the market-implied rate curve and the markets may feel the effect of the Fed’s rate curve in the next few months.

The Pulse report captured data on all executed trades on the Capital.com group platform between 1 January 2023 and 31 March 2023.

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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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