Excuse the Newbie question: but are CFDs and Spread Betting the same thing?
Hi chard, it is nearly the same. With Financial Spread Betting (FSB) you have to enter a "Stake" per Point and with CFD you enter the Size.
In other words FSB works as follow:
If you want to win 1 € if the FTSE moves up (you want open a Long Position) 1 point, than you have to enter 1 Stake. If you want to win 5 € if the FTSE moves 1 point then you need to define 5 as Stake.
Depends on the provider you have the opportunity to trade the Cash or Future Markets.
FSB usually "rolling" contracts up to their expiry, CFDs have no expiry.
FSB: you can trade with a smaller amount of money than CFD
There are a few other advantages/ disadvantages but like you have already stated both derivatives have nearly the same specs
In other words FSB works as follow:
If you want to win 1 € if the FTSE moves up (you want open a Long Position) 1 point, than you have to enter 1 Stake. If you want to win 5 € if the FTSE moves 1 point then you need to define 5 as Stake.
Depends on the provider you have the opportunity to trade the Cash or Future Markets.
FSB usually "rolling" contracts up to their expiry, CFDs have no expiry.
FSB: you can trade with a smaller amount of money than CFD
There are a few other advantages/ disadvantages but like you have already stated both derivatives have nearly the same specs
mikeeg
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Trading CFD's offers direct access which means you compete against other traders, whilst SBing means that you are trading against the market to a certain extent but at the SB firm's underlying prices.
theroguetrader
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Spread Betting firms arent trading against your positions - your positions either long or short are offset in the future, so they are covered anyway.. !!
Their fee/comms " is the spread " ...
A Contract For Difference (CFD) is just an instrument - theres no physical delivery between the buyer or the seller.. (used for tax efficiency etc), but theres counterparty risk and stuff..
The firms themselves arent " Mr Evil " - in fact, there actually giving EVERYONE the opportunity of a lifetime by usage of their technology - the ability to trade in " BOTH " directions -
Not so long ago,most peoples exposure and experience to the markets was through regular share buying and " buy and hold " was the prevailing philosophy..
Even " some " people used to use an antiquated service called the POST and actually send share certificates across land and sea -
strange world -
Hi Rogue,
I was confused by the tax efficiency part of your post. I thought gains from CFDs were taxable even in the UK. Am I right?
Thanks
Paul
theroguetrader
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hey Paul,
as far as i believe, theres no stamp duty to pay on equity CFDs .. !! i spose the good thing is as well, theres no expiration dates, so you can hold long and short positions as long as ya want - which makes it less complicated for your "regular " kind of day to day investor etc..
Because of the interest though, (on long positions) - after a month, theyre usually getting expensive,so youd probably be better off buying the actual stock instead.
James
In the US trading with CFDs and SB is not legal. If that applies for Canada as well I don't know.
