Contra Trading, is the act of
1) buying a stock and selling it before payment date
2) selling a stock and buying it back before payment date
In Singapore, after a trade is executed, you have three working days before you need to pay the total cost of the stock.
If you buy a stock on Monday, you are only required to pay the total cost of the trade on Thursday.
However, in contra trade, you sell the stock before you are required to pay on Thursday.
You can sell on Monday, Tuesday, Wednesday or Thursday.
This effectively means you do not have to fork out a huge amount of money to pay for the stock.
In this scenario, you earn or pay the difference between the selling price and the buying price.
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Example 1: Normal Buying and Making a Profit