LONDON, August 6, 2012 /PRNewswire/ --
After an IT glitch caused randomised trades for Knight Capital on Wednesday, 1 August, costing them $440 million - the major market-maker announced on Monday 6 August that it had agreed a $400 million rescue deal.
For investors looking to trade on the company's share price, they can do so through a CFD trading account with City Index.
Below, we look at the news out of Knight Capital and how you can trade CFDs on its share price as an alternative to more conventional forms of trading.
'Faulty Upgrade' Causes Volatility in US Stocks
From Wednesday, 1 August to the close of trading on 2 August, Knight Capital's shares price plummeted 75% after an IT glitch caused by a faulty software upgrade caused its trading to go haywire, causing major volatility in the company's shares price.
A major market-maker on the New York Stock Exchange (NYSE) - they receive and carry out buy and sell orders on behalf of their clients.
According to newspaper reports, the glitch is said to have affected the trading algorithms, which are based on market data and client requests, sending out automatic buy and sell orders.
Knight in Shining Armour: 'Reaches $400m Rescue Deal'
Today, Monday 6 August, Knight Capital announced it had reached a $400 million rescue deal with a group of investors including Blackstone Group and TD Ameritrade.
Trade CFDs on Knight Capital Shares
A Contract for Difference (CFD) is an agreement between two parties to exchange the difference between the opening and closing price of a contract.
Through a City Index CFD trading account, you can take a position on Knight Capital shares, irrespective of whether the price is rising or falling, by going long or short, respectively.
In the event you expect the Knight Capital share price to rise following the reported rescue deal, you could go long and buy Knight Capital share CFDs.
If the market moves in your favour - i.e. rises - your profits would rise in line with any increase in the underlying price of Knight Capital shares.
Alternatively, if you expect the Knight Capital share price to fall, then you could go short and sell.
If the market moves in your favour - i.e. falls - you would profit line with any fall in price below your sell price.
However, in both examples, if the market moves against your position you could incur a loss greater than your initial deposit.
Prior to placing a trade, ensure you fully understand the risks involved in trading CFDs and utilise the range of risk management tools on offer at City Index.
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About City Index:
Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.
As a group, we transact in excess of 1.5 million trades every month in over 50 countries. We provide access to a wide range of instruments including margined foreign exchange, CFDs and, in the UK, financial spread betting.
We constantly look to improve the performance of our platforms and expand our range of services. The result is our customers benefit from innovative trading tools with transparent pricing, competitive spreads, and a high standard of customer support. Visit http://www.cityindex.co.uk/ for details.
CFD trading is a leveraged product which can result in losses greater than your initial deposit. Ensure you fully understand the risks.
CFD trading is exempt from UK stamp duty. However, tax laws are subject to change and depend on individual circumstances. Please seek independent advice if necessary.
SOURCE City Index