Spreadbet cash or futures? Why choose one over other?

Hi,

I'm new to trading and spreadbetting, currently playing with very small trades at City Index.

I've found out that that if I want a trade to remain open for more than a few days I should be trading the futures instrument instead of the rolling, due to accumulating charges of closing and re-opening rolling trades each day.

I've compared spreads and margin requirements of gold and silver, they're almost identical for the rolling and futures.

Question: why bother trading the rolling at all? Why not the just trade the futures? The costs are comparable and you can close it any time you like so what's the disadvantage?

Thank you.

Spreadbet cash or futures? Why choose one over other?

or neither

Mornington Crescent said:

Spreadbet cash or futures? Why choose one over other?

or neither

Click to expand...

Hmm, didn't see that one coming MC. Guess that's why you're a Legendary Member

FixOrRepairDaily said:

Hi,

I'm new to trading and spreadbetting, currently playing with very small trades at City Index.

I've found out that that if I want a trade to remain open for more than a few days I should be trading the futures instrument instead of the rolling, due to accumulating charges of closing and re-opening rolling trades each day.

I've compared spreads and margin requirements of gold and silver, they're almost identical for the rolling and futures.

Question: why bother trading the rolling at all? Why not the just trade the futures? The costs are comparable and you can close it any time you like so what's the disadvantage?

Thank you.

Click to expand...

If you spread bet you will be ripped off. It doesn't matter what you are trading you are trying to beat the bookie and that rarely works out.

pboyles said:

If you spread bet you will be ripped off. It doesn't matter what you are trading you are trying to beat the bookie and that rarely works out.

Click to expand...

Thanks for your reply PB. I've been reading, attending free seminars from City and IG, demo trading and now small-bet trading. My day job programming is demanding so I don't get much time to practice, but it does seem like a really interesting way to lose my money LOL

I'm taking my time and trying to really understand the fundamentals, especially position sizing, stop placement and margin maintenance.

I've attended a seminar where the well-known analyst has said to us newbies "you'll read stories on the forums how we deliberately stop people out - well that's absolute rubbish, all we do is follow the market price and apply our bid and offer spread"...

...which sounded convincing to me until I did some more digging and begin to figure out (rightly or wrongly) that the only way the spread betting company would be neutral in my trades is if they always mirror my trades in the real market. i.e. if I go long gold they go long gold. That way they would pass on any winnings to me from the market less their spread, or recover any losses from me, again less their spread.

When I asked them how they handled my trades they were evasive and said "we have an internal market" or it's all computerised now, our dealers hedge our positions.

I'm damn sure their admin software will tell them exactly where the stops are, and if most punters follow similar trading techniques it wouldn't be that hard to increase the spread to just trigger stops.

Am I being paranoid?

Thanks again for your reply.

FixOrRepairDaily said:

I've attended a seminar where the well-known analyst has said to us newbies "you'll read stories on the forums how we deliberately stop people out - well that's absolute rubbish, all we do is follow the market price and apply our bid and offer spread"...

...which sounded convincing to me until I did some more digging and begin to figure out (rightly or wrongly) that the only way the spread betting company would be neutral in my trades is if they always mirror my trades in the real market. i.e. if I go long gold they go long gold. That way they would pass on any winnings to me from the market less their spread, or recover any losses from me, again less their spread.

When I asked them how they handled my trades they were evasive and said "we have an internal market" or it's all computerised now, our dealers hedge our positions.

I'm damn sure their admin software will tell them exactly where the stops are, and if most punters follow similar trading techniques it wouldn't be that hard to increase the spread to just trigger stops.

Am I being paranoid?

Thanks again for your reply.

Click to expand...

You won't get anything as crude as that from IG or the like these days. They are rather more subtle.

Pboyles is right, you'll be getting a bad deal, but I would be surprised to see outright dishonesty from IG for example. More a skew here, a shave there. Not to mention they don't need to do any more than you can see quite openly.

IG's mini S&P future - spread 0.5. Equivalent cost to you per contract, $25.

Actual mini S&P, spread 0.25, commission $5 (at the absolute most). Cost to you per contract $17.50.

Difference, $7.50 per contract.

Assume you get big enough to trade 10 contracts a clip. $75 per trade worse off. Assume you trade on average once a day, 5 days a week, 250 days a year.IG is costing you $18,750 extra vs trading with a futures broker.

I've left off platform and data costs from the broker because if you're paying 5 bucks that will be included.

IG is not a bad company. Good platform, you can trade any size, more or less, nice, simple chart package etc. Not bad to learn your way about with a small account.

They provide a perfectly reasonable service, but they make you pay handsomely for it, even if there aren't any shenanigans.

The Leopard said:

You won't get anything as crude as that from IG or the like these days. They are rather more subtle.

Pboyles is right, you'll be getting a bad deal, but I would be surprised to see outright dishonesty from IG for example. More a skew here, a shave there. Not to mention they don't need to do any more than you can see quite openly.

IG's mini S&P future - spread 0.5. Equivalent cost to you per contract, $25.

Actual mini S&P, spread 0.25, commission $5 (at the absolute most). Cost to you per contract $17.50.

Difference, $7.50 per contract.

Assume you get big enough to trade 10 contracts a clip. $75 per trade worse off. Assume you trade on average once a day, 5 days a week, 250 days a year.IG is costing you $18,750 extra vs trading with a futures broker.

I've left off platform and data costs from the broker because if you're paying 5 bucks that will be included.

IG is not a bad company. Good platform, you can trade any size, more or less, nice, simple chart package etc. Not bad to learn your way about with a small account.

They provide a perfectly reasonable service, but they make you pay handsomely for it, even if there aren't any shenanigans.

Click to expand...

Thanks, very interesting reply. I don't have yet the knowledge to fully understand everything you wrote but part of it seems to be that the CGT-free aspect of SB isn't necessarily the deciding factor, in comparison with a broker.

More research required

FixOrRepairDaily said:

Thanks, very interesting reply. I don't have yet the knowledge to fully understand everything you wrote but part of it seems to be that the CGT-free aspect of SB isn't necessarily the deciding factor, in comparison with a broker.

More research required

Click to expand...

Put all notions of saving tax out of your head, it should be the last thing you worry about. Chances are you will lose your money and that is always tax free.

So much nonsense on this thread it's hard to know where to start. So I won't bother.

counter_violent said:

So much nonsense on this thread it's hard to know where to start. So I won't bother.

Click to expand...

No, please do. If I'm prattling nonsense at least tell me why.

At this point in my spread betting career (LOL) I don't have a position (psychological or financial) to defend, I'm trying to learn.

To the OP: it's quite simple really. Spreadbet rolling cash if you want to close within a short time-frame. Spreadbet monthly/quarterly futures if you want to keep your position open for more than a few days.

Don't write off spreadbetting just yet, either as it definitely does have its advantages over other methods of speculation. Big players will find that tax advantages become irrelevant compared to the slimmest spreads, but that's not to say that the same can be said of everyone else. Besides, there are always those who carry a strong distaste for spreadbetting, most usually owing to the pain of sustained losses...