The real costs of spreadbetting

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Old Sep 4, 2009, 12:04am   #1
 
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The real costs of spreadbetting

Hi guys,

I've got a long term trading system that typically holds a trade for over 50 days, and am trying to understand what the true cost of spreadbetting a trade would be.

For instance, if the trade lasts 50 days, and the spread is 2 pts, and I'm long, would my profit be:

closing position - opening position - (50 * 4pts)

I'm assuming 4 pts per day as the cost of rolling the position over.

What do you think? Is this accurate or have I got this wrong, because looking at it this way, spreadbetting seems very expensive for longer term trading.

David
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Old Sep 4, 2009, 1:12am   #2
 
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Originally Posted by davidnmfarrell View Post
Hi guys,

I've got a long term trading system that typically holds a trade for over 50 days, and am trying to understand what the true cost of spreadbetting a trade would be.

For instance, if the trade lasts 50 days, and the spread is 2 pts, and I'm long, would my profit be:

closing position - opening position - (50 * 4pts)

I'm assuming 4 pts per day as the cost of rolling the position over.

What do you think? Is this accurate or have I got this wrong, because looking at it this way, spreadbetting seems very expensive for longer term trading.

David

David,

If you trade the daily cash this will roll over dialy if the SB firm allows you to and will probably incur a rollover spread charge or fee. Better off trading the SB futures which should roll over with the actual futures contract which can be quarterly or monthly depending on what you trade. The initial spread will be more like 4 or 6 points.

I hope you get what im saying and im sure somebody else can put it in better terms as its 12:15 and ready for some sleep now.

Ged
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Old Sep 4, 2009, 10:53am   #3
 
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Malcolm Pryor's "Spread Betting Handbook" goes into some detail about the relative pros and cons of daily rollover versus futures, in a spread-betting context.
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Old Sep 4, 2009, 12:09pm   #4
 
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david

no, rollover is closed and re-opened at the same price.

as ged says, there is an overnight (including week-ends) financing charge which for longs is around LIBOR + 2% based on the value of your position. For shorts it's around LIBOR - 2% (which means you receive money if LIBOR is greater than 2%)

As an example if you have a share priced at around £5 and you've had a £1 per point long bet then the overnight financing charge would be around 4p at the moment.

cheers

jon
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Old Sep 4, 2009, 12:41pm   #5
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Quote:
Originally Posted by davidnmfarrell View Post
Hi guys,

I've got a long term trading system that typically holds a trade for over 50 days, and am trying to understand what the true cost of spreadbetting a trade would be.

For instance, if the trade lasts 50 days, and the spread is 2 pts, and I'm long, would my profit be:

closing position - opening position - (50 * 4pts)

I'm assuming 4 pts per day as the cost of rolling the position over.

What do you think? Is this accurate or have I got this wrong, because looking at it this way, spreadbetting seems very expensive for longer term trading.

David
It depends on which market u trade , but as other guys said dont use daily bets if u want to hold for 50 days , u could use quarterly bets instead for example FTSE DEC expiry has 6 points spread with IG
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Old Sep 4, 2009, 12:43pm   #6
 
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IG were charging under 1 pip per day on spot EUR/USD roll overs...
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Old Sep 4, 2009, 12:51pm   #7
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IG were charging under 1 pip per day on spot EUR/USD roll overs...
The charge is 0.0055% of the value of the position for forex bets but if he holds for 50 days this will equal to ( 40 pips * stake ) on the euro , but he colud bet on Euro DEC expiry with a spread of 12 pips
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Old Sep 4, 2009, 1:00pm   #8
 
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Just don't spreadbet. Trade real exchanges and if you can't because you don't have the money - Don't trade. Its just fake. Fake Fake Fake.

If you've got a serious methodology, try it out on the real exchanges to give your self the best chance possible. If you just want to gamble, Spreadbet.
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Old Sep 4, 2009, 1:45pm   #9
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The charge is 0.0055% of the value of the position for forex bets but if he holds for 50 days this will equal to ( 40 pips * stake ) on the euro , but he colud bet on Euro DEC expiry with a spread of 12 pips
ofcourse this is the rollover charge but i forget to mention that there is also interest adjustment but it could be to your favour depends on which pair and your bet ( buy , sell )
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Old Sep 4, 2009, 1:56pm   #10
 
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If you are holding for 50 days then trade futures on SB NOT the daily rolling. You'll find it far cheaper in the long run.
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Old Sep 4, 2009, 3:25pm   #11
 
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If you are holding for 50 days then trade futures on SB NOT the daily rolling. You'll find it far cheaper in the long run.

The catch is of course that unless you are really sure of what you are doing, you don't really know whether it's going to be worth holding for 50 days or so, so it is hard to make a realistic calculation.
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Old Sep 4, 2009, 7:59pm   #12
 
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davidnmfarrell started this thread Thanks for the replies guys, very useful!

I had completely forgotten about the quarterly contracts.

Does anyone know a spreadbetting firm that offers spreads on currency futures, like Yen, Euro and Swiss Franc?

NB. I'm not talking about spot FX like EURUSD

IG and CMC seem to do most of the mainstream futures except currencies that I can see.

Thanks in advance,

David
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Old Sep 4, 2009, 8:26pm   #13
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Originally Posted by davidnmfarrell View Post
Thanks for the replies guys, very useful!

I had completely forgotten about the quarterly contracts.

Does anyone know a spreadbetting firm that offers spreads on currency futures, like Yen, Euro and Swiss Franc?

NB. I'm not talking about spot FX like EURUSD

IG and CMC seem to do most of the mainstream futures except currencies that I can see.

Thanks in advance,

David
IG offers them
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