Newbie Question

pedro01

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Hi All

I am taking tentative steps into the world of financial spread betting.

What i am getting confused on is the prices...

I know I should be concerned about 'the spread' and not get involved if the spread is too wide. The thing is - the spread between which 2 numbers...

Let's take Rolls Royce - current Price 402

Finspreads shows me
June - Sell - 408, Buy 411
Mar - Sell 401, Buy 404

Now - it's trading on June that confuses me. Both prices are ABOVE the current price. In other stocks, Both prices are BELOW the current price.

So - if I see Rolls Royce Short, I will get the price of 408 which is 6 points away from the current price.

Now - if the underlying price stayed the same & I cancelled the trade by buying Rolls Royce at 411, I would be down by 3 points.

So - when you look at whether the 'spread cost' is too much for a trade, do you compare the current price with the sell price for that month or just the difference between the Sell & Buy Price ?

It seems to me that the latter makes sense but I am confused.
 
Just the difference between the buy and sell price.

What you are looking at here is futures. A futures price is calculated by taking the spot price and adding and dividends you'd get from holding the stock plus the interest you'd get on the money if it was invested in a zero risk bank account - which is why the futures prices are higher than the spot.

Over time the future price will drift down so that at the moment of expiry it's exactly the same as the spot. If you plan to hold your positions for more than a few days then trade these futures as it's much cheaper than trading dailies and rolling them over every night.
 
Thanks Hoggums

That's great - thanks for helping - it does give me a little confusion though.

If I look at De La Rue price at the moment - it stands at 864, 871.6 (current price - 853).

I had a market order to sell at 839 today.

So - it seems to me that the Sell Price I should have been given should have been about 10 points above the current price. This is not the case.

When I look on my Finspreads screen it shows the following

Open Price : 839.0 Current Price 871.6.

So - before the trade & after the trade, there was a 10 point spread between the market price & the Finspreads Sell price - that spread narrowed to 0 when my trade was placed.

Is this normal ?
 
I just called Finspreads.

Apparently - Market orders need to be manually adjusted when they are placed & the manual adjustment never happened on my trades - this happened to 7 trades today.

Perhaps I need a different provider...
 
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