Guide to Advanced Stock Investing for High Returns
In the world of investing, once familiar with basic strategies like buy-and-hold or investing in ETFs, many investors want to go further to seek higher returns. At this point, advanced stock investment methods such as margin trading, short selling, options, arbitrage, or even algorithmic AI trading become attractive tools. However, along with the opportunity for superior profits come significant risks if the underlying mechanisms are not fully understood.
In this article, we will analyze each advanced stock investment method in detail, from its pros and cons, suitable application times, to real-world case studies recorded in the market. Through this, you will gain a comprehensive perspective to decide which strategy is right for you and avoid common “pitfalls” in advanced investing.
Mục lục
- 1. Margin Trading
- 2. Short Selling
- 3. Investing with Rights & Splits Strategy
- 4. Algorithmic / AI Trading
- 5. Options Trading
- 6. Arbitrage (Price Difference)
- 7. Investing with a “Spin-off” and Merger Strategy (M&A Play)
- 8. Penny Stocks / News-based Short-term Trading
- 9. Providing Stock-Related Services
- 10. Securities Lending
- 11. CFD (Contract for Difference) Trading
- 12. Stock Swing Trading with Legal Insider Information (Insider-Informed Trading)
- 13. Fractional Ownership or Stock Tokenization
- 14. Conclusion
1. Margin Trading
Margin trading is a method where investors borrow money from a brokerage firm to buy stocks, using the purchased stocks and the initial margin deposit as collateral. For example, if the required margin is 50%, an investor only needs to use 50 million VND of their own capital to buy a block of shares worth 100 million VND, with the remainder borrowed from the brokerage. This increases purchasing power but also doubles the risk: if the stock price falls, the loss also accelerates.
Pros:
- Increases stock purchasing power even with limited personal capital.
- Can optimize profits in a short period if the stock price rises sharply.
- Capitalizes on market opportunities when there are clear growth signals.
Cons:
- High risk of loss as the loan increases financial pressure.
- May face a margin call (forced to deposit more funds) when the stock price drops significantly.
- Highly dependent on margin loan interest rates, which can erode profits.
Advice:
- Only use margin when you have a clear strategy and strict risk management.
- Avoid using the full margin limit provided.
- Always set a stop-loss at a safe level, typically between 7–10%.
When to use:
- When the market is in a strong growth phase (bull market).
- When there is positive news and favorable business results from the company.
- When margin loan interest rates are low, helping to reduce capital costs.
In 2020, during the strong recovery of the Vietnamese stock market after the Covid-19 pandemic, many investors used margin to increase their profits. For example, an investor used 200 million VND of their own capital and borrowed an additional 200 million VND from a brokerage firm to buy HPG shares at a price of around 17,000 VND/share. After 12 months, the price of HPG rose to nearly 45,000 VND/share (an increase of over 160%).
If only using their own capital, the return would be around 329 million VND (a profit of 129 million VND). But by using margin, the total gross profit reached nearly 258 million VND after deducting loan interest. This is a clear demonstration of how margin can amplify profits if the trend is right. However, during the 2022 period, when the VN-Index fell from 1,500 points to 900 points, many investors using margin faced margin calls, forcing them to sell off their stocks at a heavy loss.
2. Short Selling
Short selling is an investment strategy where an investor borrows shares from a brokerage firm and sells them on the market, expecting the stock price to fall. When the price drops as predicted, the investor buys back the shares at the lower price to return to the brokerage, profiting from the difference. For example: an investor borrows and sells 1,000 XYZ shares at 50,000 VND/share (totaling 50 million VND). Later, when the price drops to 40,000 VND, they buy them back for a total of 40 million VND, making a profit of 10 million VND (before fees and loan interest).
Pros:
- Allows for profit during a declining market.
- Helps investors hedge against risks in their existing stock portfolios.
- Capitalizes on short-term opportunities when there is negative news about a company.
Cons:
- Unlimited loss potential, as a stock’s price can rise indefinitely.
- High costs for borrowing shares, including borrowing fees and interest.
- Some markets (including Vietnam) do not yet permit it or only apply it in a limited scope.
Advice:
- Only engage in short selling if you have experience in technical analysis and good risk management.
- Always set a stop-loss to limit risk when the stock price moves against your expectations.
- Use short selling primarily for hedging risk rather than for excessive speculation.
When to use:
- When the market enters a downtrend (bear market).
- When a company has negative financial news or a sharp decline in business results.
- When the market or a specific industry is at risk of a crisis (e.g., real estate crisis, banking crisis).
During the 2008 financial crisis, many hedge funds used short selling strategies to make enormous profits. A prime example is John Paulson, founder of the fund Paulson & Co. He bet on the collapse of the U.S. housing market and real estate-related securities. Through short selling and the use of derivatives (CDS – Credit Default Swaps), Paulson earned $15 billion in profit in 2007 alone, while the global market was in turmoil.
A more recent example occurred in 2021, when GameStop (GME) stock became a focal point. Many large U.S. hedge funds shorted GME, expecting its price to fall. However, a community of retail investors on the Reddit forum (WallStreetBets) collectively bought the stock, causing GME’s price to surge from under $20/share to over $400/share in just a few weeks. As a result, some funds, like Melvin Capital, lost billions of dollars and required a bailout. This is a classic example of the “short squeeze” risk in short selling.
3. Investing with Rights & Splits Strategy
A Stock Split is when a company increases the number of outstanding shares by dividing existing shares, for example, splitting one share into two or three. However, the market capitalization and the investor’s ownership value remain unchanged. The purpose is usually to lower the trading price on the market, making the stock more accessible to many retail investors.
Meanwhile, a Rights Issue allows existing shareholders to purchase new shares at a preferential price compared to the market price, aiming to raise capital for the company. If shareholders do not wish to exercise their rights, they can sell these rights on the market.
This strategy often attracts medium to long-term investors because it offers both the potential for increased profits when the stock price recovers after the split/issuance and the opportunity to buy at a lower price.
Advantages:
- Increases liquidity as the stock price drops to a more “affordable” level.
- Rights issues allow existing shareholders to benefit from a discounted price, typically 10–20% cheaper than the market price.
- Creates an incentive for investors to hold shares long-term, increasing their commitment to the company.
Disadvantages:
- A split does not change the company’s intrinsic value; it’s merely a “financial technique.”
- With a rights issue, if the company issues too many new shares, it can dilute the earnings per share (EPS).
- If the company lacks a solid business plan, the additional issuance puts investors at risk of a stock price decline.
Advice:
- Participate in a rights issue when the company has a strong financial foundation and a clear plan for using the capital.
- Only choose stock splits from companies with stable growth and financial transparency.
- Avoid following the FOMO effect, as there are many cases where the stock price does not rise after a split and may even fall due to supply and demand factors.
When to apply:
- When the market is in a growth cycle (bull market).
- When the company announces a transparent plan for capital use, such as investing in production or business expansion rather than just paying off short-term debt.
- When the stock price is too high for retail investors to trade easily (e.g., over 1,000,000 VND/share).
A notable example is Apple (AAPL), which executed a 4-for-1 stock split in August 2020. Before the split, AAPL’s price was around $500 per share. After the split, the price dropped to about $125, making it more accessible to many retail investors. Within 12 months after the split, AAPL’s price rose to over $145 per share (an increase of ~16%), demonstrating how positive psychological effects and higher liquidity supported the stock price.
In Vietnam, Vinamilk (VNM) once issued a rights issue in 2014 with a preferential price about 20% lower than the market price. Investors who held and exercised their rights saw good returns as VNM’s stock price recovered and continued to grow during the 2015–2016 period.
Review your knowledge about what a joint-stock company is in this article.
4. Algorithmic / AI Trading
Algorithmic Trading or AI Trading is an investment method where investors or financial institutions use algorithms and automated computer systems to make decisions on buying and selling stocks. These algorithms can be based on technical analysis, statistics, machine learning, or real-time market data. The strength of this method is its processing speed and ability to analyze vast amounts of data in a very short time, something that is difficult for humans to achieve.
Advantages:
- Executes trades faster than humans, capitalizing on opportunities that exist for only a few seconds or milliseconds.
- Minimizes emotion in investment decisions, adhering to trading discipline.
- Can analyze and process huge volumes of data from multiple sources (market, news, social media).
- Increases market liquidity due to high trading volume.
Disadvantages:
- The initial investment cost for technology infrastructure and algorithm development is very high.
- Systemic risk: if the algorithm has errors or is exploited, investors can suffer significant losses.
- Requires in-depth knowledge of technology, programming, and data analysis.
- Can cause extreme market volatility phenomena (flash crashes).
Advice:
- Should be applied to large portfolios or when there is the capability to develop or hire a financial technology (fintech) team.
- Always have risk control mechanisms, monitor algorithms, and set automatic stop-loss levels.
- One should not rely entirely on AI, but combine it with fundamental analysis and human oversight.
When to use:
- When the market has high liquidity and large trading volumes (e.g., the HOSE in Vietnam or the NYSE, NASDAQ in the US).
- When the business/organization has sufficient financial resources to maintain the system.
- When needing to leverage a short-term competitive advantage, for example: High-Frequency Trading (HFT).
A prominent example is Renaissance Technologies, a quantitative hedge fund (quant fund) famous for its Medallion Fund. By applying algorithmic and AI trading, this fund achieved an average return of about 39% per year after fees from 1988 to 2018, a figure that far surpasses most other investment funds in the world.
Another case is the “Flash Crash” phenomenon on May 6, 2010, in the US. Within just 36 minutes, the Dow Jones index dropped nearly 1,000 points (equivalent to 9%) and quickly recovered. The cause was attributed to abnormal activity from high-frequency trading algorithms. This event demonstrates the significant benefits of algorithmic trading, but also warns of the risks if the system loses control.
5. Options Trading
Options Trading is an investment strategy where an investor buys or sells the “right,” but not the “obligation,” to buy or sell a stock at a specified price (the strike price) on or before a specific future date. There are two basic types of options: Call Options and Put Options. Investors can use options for hedging against risk or for speculation.
Advantages:
- Allows for hedging against stock price volatility, helping to preserve capital.
- Leverages financial power: only a small fee (premium) is required to control a larger value of the underlying asset.
- Flexible, allowing for the application of many combined strategies (straddle, strangle, spread…) to adapt to the market.
- Opportunity to profit even when the market is declining (thanks to Put Options).
Disadvantages:
- Requires in-depth knowledge and complex analytical skills.
- Risk of losing the entire option premium if the market trend is predicted incorrectly.
- High volatility in option prices, easy to “burn an account” if leverage is used excessively.
- Not suitable for new, inexperienced investors.
Advice:
- Should only participate if you have experience with underlying stocks and good risk management skills.
- Always pre-determine the maximum loss (which is the option premium paid) and do not invest beyond your risk tolerance.
- Use options as a tool for hedging risk rather than speculating with the entire portfolio.
When to use:
- When the market is highly volatile and investors want to hedge their portfolios.
- When there is a strong forecast of stock price fluctuations or major events (business results, stock splits, macroeconomic news).
- When you want to leverage but still control risk within the limits of the option premium.
A famous example is during the 2008 financial crisis, when many investors hedged their risks by buying Put Options on the S&P 500 index. When the market plummeted, the value of these options increased manifold, helping them significantly minimize their losses.
Notably, Michael Burry’s Scion Capital (the main character in the movie The Big Short) used credit default swaps (a type of derivative option) to bet against the US housing market. As a result, when the real estate bubble burst, Burry generated a return of over 489% for the fund from 2000–2008, while the S&P 500 only grew by 3% during the same period.
A more recent example is in 2021, during the GameStop (GME) stock event, many individual investors on the Reddit forum used Call Options to create a “short squeeze” effect. The price of GameStop stock surged from $20 to nearly $480 in January 2021, bringing enormous profits to some retail investors, but also causing many short-selling funds to lose billions of dollars.
6. Arbitrage (Price Difference)
Arbitrage is an investment strategy where a trader capitalizes on the price difference of the same asset or equivalent assets across different markets. For example, the same stock might be listed on both the New York Stock Exchange (NYSE) and the London Stock Exchange (LSE), but at any given moment, their prices could differ by a few dollars due to time zone differences, exchange rates, or liquidity. An investor would buy in the market with the lower price and immediately sell in the market with the higher price, thereby earning a nearly risk-free profit from the difference.
Advantages:
- Low risk as it usually happens almost instantaneously and the profit comes from the price difference.
- Not heavily dependent on the overall market trend (arbitrage is possible whether the market is rising or falling).
- Helps make the market more efficient as these transactions quickly reduce price discrepancies.
- Can be applied to many types of assets: stocks, bonds, commodities, currencies, and derivatives.
Disadvantages:
- The profit per transaction is very small, often only a few percent or even a few thousandths.
- Requires large capital and a high-speed trading system to secure profits.
- Fierce competition from hedge funds and high-frequency trading (HFT) firms.
- Legal risks can arise when arbitrage involves market discrepancy regulations or cross-border transactions.
Advice:
- Arbitrage is more suitable for financial institutions, investment funds, or investors with high-speed trading technology and large capital.
- Small retail investors can participate through intermediary platforms or focus on less competitive “niche” arbitrage (such as forex or crypto arbitrage).
- Always calculate transaction costs and taxes as they can wipe out the small profits from price differences.
When to use:
- When the market is highly volatile or an event causes a supply-demand imbalance, often creating arbitrage opportunities.
- When there are differences in time zones and regulations between markets (e.g., stock arbitrage between the US and Europe).
- When there are exchange rate discrepancies or unusual currency fluctuations.
A classic example is the “Royal Dutch Shell Arbitrage” in the 1990s. The oil and gas corporation Royal Dutch Shell was dually listed in the Netherlands (Royal Dutch) and the UK (Shell Transport & Trading). Although essentially one company, the two stocks frequently had a price difference of up to 8–10% due to market disparities. Arbitrage funds bought the stock in the cheaper market and sold it in the more expensive one, reaping large profits until the market became more efficient and the price gap narrowed.
A more modern example is in the cryptocurrency market, where arbitrage occurs daily. For instance, in 2017, when Bitcoin boomed, the price of Bitcoin on South Korean exchanges (Upbit, Bithumb) was 20–25% higher than on US exchanges (Coinbase, Kraken). This gap was known as the “Kimchi Premium.” Many international traders took advantage of this arbitrage, buying Bitcoin in the US and selling it in South Korea, earning huge profits until the South Korean government tightened regulations.
You can learn more about the most popular basic stock investment methods today here.
7. Investing with a “Spin-off” and Merger Strategy (M&A Play)
The “Spin-off” and Merger (M&A Play) strategy is how investors capitalize on major corporate events like spin-offs, mergers, or acquisitions. When a corporation spins off a business unit into an independent company, the subsidiary’s hidden value is often re-evaluated by the market. Conversely, in M&A deals, investors can benefit from the stock price increase of the acquired company or from the synergy created when two companies merge.
Advantages:
- Significant profit opportunities due to strong stock price volatility when M&A or spin-off news is announced.
- Ability to capitalize on market “re-valuation,” especially in spin-offs where the subsidiary operates more efficiently than the parent company.
- Often attracts large capital flows from investment funds and financial institutions, improving liquidity.
Disadvantages:
- High risk if the merger fails or the spin-off performs poorly.
- The process can take many months or even years to complete.
- Stock prices can be overly inflated during the rumor phase, making it easy for retail investors to fall into the “buy the rumor, sell the news” trap.
Advice:
- Thoroughly analyze financial statements and the strategic rationale behind the spin-off or M&A to determine its true value.
- Avoid investing based on rumors; only participate when the deal has been officially announced.
- Diversify your portfolio; do not bet all your capital on a single M&A deal.
When to use:
- When a parent company is restructuring to increase efficiency and decides to spin off a subsidiary.
- When there is confirmed information that a merger/acquisition deal has been approved by all parties.
- When an industry is trending towards consolidation, creating many M&A opportunities (e.g., banking, technology, pharmaceuticals).
Successful Spin-off: PayPal from eBay (2015): In 2015, eBay decided to spin off PayPal into an independent company. Immediately after the spin-off, PayPal’s stock (PYPL) was highly valued by the market due to its independent growth potential in the online payments industry. PayPal’s stock price rose from about $36/share (2015) to over $300/share (2021), an increase of more than 700% in 6 years. This is a classic example of a spin-off unlocking corporate value.
Successful M&A: Disney acquires Pixar (2006): In 2006, Disney spent $7.4 billion to acquire Pixar. Many investors were initially skeptical of this deal, but it ultimately helped Disney dominate the animation industry with blockbusters like Toy Story, Finding Nemo, and Frozen. Disney’s stock (DIS) rose from $25/share in 2006 to over $180/share in 2019, demonstrating the power of M&A synergy.
Failed M&A: AOL and Time Warner (2000): In contrast, AOL’s $165 billion acquisition of Time Warner in 2000 is considered one of the biggest M&A failures in history. After the dot-com bubble burst, AOL’s value plummeted, causing the combined corporation’s stock to collapse. Investors who participated in this deal suffered heavy losses.
8. Penny Stocks / News-based Short-term Trading
Penny stocks are stocks with very low prices, typically under $5 per share (in the US) or under 10,000 VND (in Vietnam). These are small-cap stocks with low liquidity but high volatility, easily influenced by news. News-based short-term trading means investors capitalize on hot events like financial reports, M&A rumors, leadership changes, etc., to buy/sell quickly, aiming for short-term profits.
Advantages:
- Very high profit potential, with possible gains of 50% – 200% in just a few sessions.
- Low initial investment capital, suitable for those with limited funds.
- Capitalizes on crowd psychology and strong volatility from news.
Disadvantages:
- Extremely high risk: prices can drop 30 – 50% in a single day.
- Poor liquidity, making it easy to get “stuck” with shares when trying to exit a position.
- The market is easily manipulated by fake news or speculative groups.
Advice:
- Only allocate a small portion of your capital to penny stocks (under 10 – 15% of total capital).
- Always set a tight stop-loss, for example, at 7 – 10% of the investment value.
- Follow news from official sources and avoid chasing rumors.
- Combine with technical analysis to determine reasonable entry and exit points.
When to use:
- When there is a strong wave in the penny stock group (often occurs after a general market recovery period).
- When there is special news related to a small company: being acquired, issuing additional shares, a sudden surge in profits, etc.
- During short-term speculative periods; not suitable for long-term holding.
In Vietnam, in 2021, FLC stock (before being delisted) had many consecutive sessions hitting the price ceiling based solely on rumors about expanding its airline and real estate segments. The price surged from around 4,000 VND to 24,000 VND in just over 6 months (a 6-fold increase). However, after the information was refuted and the leadership was involved in violations, the stock price plummeted back to the 3,000 VND range, causing heavy losses for many investors.
Conversely, also in 2020 – 2021, the penny stock HAI (H.A.I Agrochem) increased from 1,200 VND to nearly 7,000 VND in just 3 months, driven by expectations of investment in the clean agrochemicals sector and the effect of speculative cash flow. Some investors who took profits early achieved returns of over 300%. But those who bought at the peak were stuck with the stock long-term.
This shows that penny stocks and news-based trading can generate huge profits in a short time, but can also lead to a total loss for investors who lack risk management discipline.
Beyond direct investment, many investors or businesses also profit by providing stock-related services. These can include investment advisory, stock brokerage, portfolio management, trading platform leasing, market data provision, or financial analysis services. Instead of ‘betting’ on the rise and fall of stock prices, they earn money from service fees or commissions on client transactions.
Advantages:
- Generates stable cash flow from service fees, with less dependence on stock price fluctuations.
- Can be scaled using technology (apps, online platforms).
- Capitalizes on the growing demand in the stock investment market.
- Reduces direct risk from market volatility.
Disadvantages:
- Requires initial capital to build a brand, platform, or obtain licenses (for securities firms).
- Requires a team of financial experts with extensive experience and knowledge.
- Fierce competition, especially from large securities firms and fintech companies.
- Dependent on the overall development of the stock market – when the market is sluggish, demand for services decreases.
Advice:
- Suitable for those with deep financial knowledge and market analysis skills.
- If participating as an individual, it’s advisable to start on a small scale, such as providing analytical data, writing reports, or offering investment training.
- For businesses, a long-term strategy for building trust and credibility is needed, rather than just chasing short-term trends.
When to use:
- When the stock market is growing strongly and many new investors are participating → demand for consulting, analytical tools, courses, etc., increases.
- As fintech and online trading develop, providing digitized services helps to rapidly expand the customer base.
A prime example is SSI (SSI Securities Corporation) – currently one of the largest securities firms in Vietnam. SSI not only engages in stock brokerage but also provides investment advisory, market analysis, asset management, and financial product issuance services. In 2021, when the Vietnamese stock market boomed, SSI’s pre-tax profit reached over 3,300 billion VND, an increase of 72% compared to 2020, largely from service and brokerage fees.
Globally, another example is Robinhood – an online stock brokerage platform in the US. Robinhood does not invest directly but offers a “zero commission” trading service and primarily earns money from Payment for Order Flow (PFOF) – the fee that trading firms pay for the right to execute user orders. In 2020, Robinhood’s revenue exceeded $958 million, nearly a 3-fold increase from 2019, thanks to the boom in trading from individual investors during the COVID-19 period.
This shows that providing stock-related services is a reliable and stable approach if you have a solid foundation, and it can also grow strongly when the market is active.
Let’s review what stocks are here; the knowledge in this article will outline the main ways to make money from stocks.
10. Securities Lending
Securities Lending is an activity where an investor (the lender) allows another party (the borrower – typically a financial institution, investment fund, or short seller) to borrow stocks for a specific period. The borrower pays a fee (securities lending interest rate) and usually must deposit collateral to ensure security.
This mechanism helps the market operate more efficiently by providing liquidity for transactions such as short selling, hedging, or executing arbitrage strategies.
Advantages:
- Generate passive income: Investors can earn additional profit from their long-term stock portfolio without selling.
- Increase market liquidity: Helps support derivative and short-selling transactions.
- Diversify profits: In addition to waiting for dividends or price appreciation, there is also income from lending fees.
Disadvantages:
- Counterparty risk: If the borrower defaults, the lender may be affected.
- Temporary loss of voting rights: While stocks are on loan, the investor may not be able to exercise voting rights at the Annual General Meeting of Shareholders.
- Liquidity risk: In the event of strong market volatility, recalling the stocks to sell them may be difficult.
Advice:
- Suitable for investors holding long-term stock portfolios, especially institutions (investment funds, insurance companies).
- Individual investors should participate through reputable securities firms to ensure a transparent legal process.
- Always monitor the lending fee rate, as this is the determining factor for profit.
When to use:
- When investors have no plans to sell stocks in the short term and want to optimize portfolio returns.
- When there is high demand for short selling in the market (e.g., the stock is overvalued or experiencing high volatility).
A prime example is BlackRock, the world’s largest asset management company with over $10 trillion in AUM (Assets Under Management). BlackRock has implemented Securities Lending as a key part of its strategy to optimize returns for its ETF funds.
According to a 2020 report, BlackRock generated $589 million in revenue solely from securities lending activities, accounting for a significant portion of its profits beyond management fees. Of this, about two-thirds of the revenue was returned to clients’ ETF funds, helping to increase net returns for investors.
In Vietnam, securities lending is still in its nascent stages but has been trialed in derivatives trading and controlled short-selling services. It is expected that as the market develops further, this will become a significant additional income stream for large investment institutions.
11. CFD (Contract for Difference) Trading
A CFD (Contract for Difference) is a financial derivative that allows investors to speculate on the price movements of an asset (stocks, indices, commodities, currencies, crypto, etc.) without owning the underlying asset. Profit or loss is calculated based on the difference between the opening and closing prices of a position.
For example: If an investor opens a long CFD position on Apple stock at $180/share and closes it at $190/share, they make a profit of $10/share (multiplied by the contract size). Conversely, if the price drops to $170, they will incur a loss of $10/share.
Advantages:
- High leverage: Allows trading with a small amount of capital while gaining exposure to a large position. For example, a 10% margin can control a 100% position.
- Two-way trading: It’s possible to profit from both rising prices (buying CFDs) and falling prices (selling CFDs).
- Diverse products: Besides stocks, CFDs are also available for forex, gold, oil, crypto, etc.
- No ownership of the underlying asset: This saves on custody fees and taxes, and provides easy access to many global markets.
Disadvantages:
- High risk of loss due to leverage: Losses can exceed the initial capital.
- High transaction costs: Includes spreads, overnight fees, and commissions.
- No ownership rights: Investors do not receive actual dividends or voting rights.
- Risk of fraud: Some international CFD brokers operate without strict regulation, posing legal risks.
Advice:
- CFDs are suitable for experienced investors who are knowledgeable in technical analysis and risk management.
- You should choose a broker regulated by a reputable financial authority (FCA – UK, ASIC – Australia, CySEC – Cyprus).
- Always use a stop-loss to limit risk.
- You should not invest all your capital in CFDs; they should only be a small part of your portfolio.
When to use:
- When the market is highly volatile with a clear short-term trend.
- When you want to trade a variety of assets (e.g., gold + stocks + crypto) without direct ownership.
- When investors want to capitalize on opportunities from short-term news (earnings announcements, interest rate policies, geopolitical news).
A notable example occurred during the oil price volatility in April 2020 when the COVID-19 pandemic broke out. The price of WTI oil at one point fell to a negative -$37 per barrel due to supply exceeding demand. While traditional investors suffered heavy losses, many CFD traders took the opportunity to short sell and made significant profits.
According to a report by IG Group – one of the world’s largest CFD brokers – the trading volume of oil-related CFDs during March–April 2020 increased by over 400% compared to the same period the previous year. Many retail investors in Europe recorded profits of over 200–300% in just a few weeks, thanks to the flexibility of two-way trading with CFDs.
However, there were also many cases of traders losing their entire accounts due to using excessive leverage without setting a stop-loss order. This shows that CFDs are both an opportunity for quick profits and a high-risk instrument if capital is not managed strictly.
12. Stock Swing Trading with Legal Insider Information (Insider-Informed Trading)
Legal insider-informed stock swing trading is a short-term investment strategy based on leveraging publicly disclosed, transparent information that is highly sensitive to stock prices, such as quarterly earnings results, dividend plans, merger and acquisition news, or changes in senior management. This strategy is different from illegal insider trading, which relies on the use of confidential, non-public information.
Investors who “ride the wave” of news typically place buy/sell orders just before or immediately after news is announced to capitalize on strong short-term price volatility.
Advantages:
- Quick profits: Strong price swings over a few days or even hours can yield significant returns.
- Capitalize on market volatility: Suitable when the market reacts strongly to financial news, M&A, or macroeconomic events.
- Diverse opportunities: Corporate news, government policies, or industry trends can all create trading waves.
Disadvantages:
- High risk: If the news doesn’t have the expected impact, investors can get their capital stuck.
- Information lag: The market may have already reacted before an investor can place an order, reducing opportunities.
- Susceptible to manipulation: Some companies may “hype up” information to inflate prices.
- Requires quick reflexes: Not suitable for inexperienced investors or those who don’t follow the news constantly.
Advice:
- Only invest a small amount of capital; do not use your entire portfolio for this strategy.
- Combine with technical analysis (chart patterns, volume, RSI, MACD) to confirm signals before entering a trade.
- Always set a stop-loss to protect capital when the price moves against expectations.
- Prioritize trading on high-liquidity stock exchanges to avoid getting stuck in a position.
When to use:
- When a company announces quarterly financial reports with results exceeding expectations.
- When there is official information about M&A, dividend distribution, or bonus share issuance.
- When there are macroeconomic policies that have a clear positive/negative impact on the industry.
- During periods of high market liquidity and strong speculative cash flow.
A typical example in Vietnam is the case of Hoa Phat’s HPG stock in 2021. When Hoa Phat announced its Q1/2021 profit after tax reached VND 7,000 billion, a 200% increase compared to the same period in 2020, this news immediately created a major wave in the market.
Within 2 weeks of the announcement (from April 23 to May 7, 2021), the price of HPG stock increased from VND 47,000/share to VND 58,000/share, a nearly 23% increase. Investors who promptly captured this information and “rode the wave” of this financial news could have made significant profits in a short time.
However, by the end of 2022, when the steel industry cycle declined and the news was no longer positive, HPG stock dropped sharply to below VND 20,000/share. This shows that this strategy is only suitable for “short-wave trading” and cannot be applied long-term without thorough analysis.
13. Fractional Ownership or Stock Tokenization
Fractional ownership or stock tokenization is a modern form of stock investment where traditional stocks are divided into smaller digital units (tokens) on a blockchain platform. Thanks to this mechanism, a high-value stock can be broken down into many parts, allowing multiple small investors to participate without needing to buy a whole share. This is considered the future trend of the capital market, combining traditional finance with blockchain technology.
Stock tokenization not only increases liquidity but also expands access for global investors, as tokens can be traded across borders 24/7 on decentralized exchanges.
Advantages:
- Expanded access: Retail investors can buy a fraction of a share instead of a whole lot.
- High liquidity: Tokens can be traded continuously, even outside traditional stock market hours.
- Transparency and security: Data recorded on the blockchain helps prevent fraud.
- Flexibility: Tokens can be used in various decentralized finance (DeFi) applications.
Disadvantages:
- Unclear legal framework: Many countries do not yet have specific regulations for stock tokenization.
- Technological risks: Dependent on the blockchain platform, which can be subject to attacks or technical glitches.
- Price volatility: In addition to volatility from the underlying stock, tokens are also influenced by the cryptocurrency market.
- Difficult for the general public to access: Requires investors to have knowledge of digital wallets, blockchain, and how to trade tokens.
Advice:
- Suitable for investors with knowledge of blockchain technology and digital finance.
- Only allocate a small portion of your portfolio to this form of investment due to legal and technological risks.
- Choose a reputable token issuance platform that is supervised by a trustworthy financial institution.
- Monitor new legal policies from financial regulatory bodies before getting deeply involved.
When to use:
- When the traditional stock market has high capital barriers (e.g., high-priced stocks).
- When there are opportunities to participate in pioneering stock tokenization projects backed by reputable companies.
- During periods of strong growth in the blockchain and cryptocurrency markets, when liquidity is abundant.
A prominent example is FTX’s Tokenized Stocks project (launched in 2020). The FTX exchange once allowed investors to trade tokens representing stocks like Tesla (TSLA), Apple (AAPL), and Amazon (AMZN) without going through a US stock exchange.
For example: In Q4/2020, when Tesla (TSLA) surged from $420 to $880 per share (an increase of over 110% in 3 months), international investors could access it through the TSLA token on FTX without needing a US brokerage account. Many small investors only needed to spend a few dozen USD to own a small fraction of a Tesla share.
However, in 2022, after the collapse of FTX, the entire tokenized stocks service was shut down, highlighting the significant legal and exchange-related risks that still exist.
14. Conclusion
Advanced stock investment methods open up many attractive profit opportunities, from margin trading, options, and arbitrage to stock tokenization. However, these come with higher levels of risk and require deeper financial and technological knowledge. Investors need to consider carefully, choose strategies that suit their capabilities and goals, and avoid chasing short-term trends while neglecting long-term fundamentals.
If you are interested in safer investment strategies or want to gain more in-depth knowledge, continue exploring other articles on the 1Office blog for a more multi-faceted perspective on financial management and investment.
Additionally, if your business is looking for a modern management solution to optimize operational efficiency, enhance decision-making capabilities, and mitigate risks in financial management, contact 1Office now for a detailed consultation. Our solution not only helps businesses operate smarter but also supports building a solid foundation for long-term development.
