Quick Question

[pietro]

Hi All, just a quick question, Is level II relivant to Sbing? As im looking at using SBing to hedge my share portfolio and want to make sure im not just barking up the wrong tree, as from what ive heard you really shouldnt even be trading without Level II!

just to point out, i really am new to the whole SB thing.

Thanks for your time.

Pietro

 

[roguetrader]

Hi All, just a quick question, Is level II relivant to Sbing? As im looking at using SBing to hedge my share portfolio and want to make sure im not just barking up the wrong tree, as from what ive heard you really shouldnt even be trading without Level II!

just to point out, i really am new to the whole SB thing.

Thanks for your time.

Pietro

If all you're looking to do is hedge existing positions, I don't see what relevence Level II would have. Whether or not you need Level II to trade is probably at best a subjective issue relative to what you are trading and over what time frame.

 

[TheBramble]

Pietro - you mention a 'share portfolio' which I am assuming (correct me if I'm wrong) is more of an investment than a speculative position.

If you're not trading intraday I believe LII would be an expensive luxury (in time/effort rather than just money).

SBing would provide certain benefits for a longer term holding or swing position, but as a hedge...? Not so sure.

You'd probably be better off hedging with options against your outright stock position.

Try asking in the SB and in the the Options forums. We have experts in both these derivative instruments on these boards.

 

[pietro]

refined the question

Hi, thanks roguetrader & TheBramble for the quick reply, perhaps i didnt explain my self properly. what i really ment to ask was, if we take for example HBOS their shares are trading somewhere over 800p at the moment, if they take a down turn, i start to lose money as i actually own the share. So to counter that, i plan on shorting HBOS with an SB firm, thus offsetting the loss. But what i thought Level II was used for was looking at volume to determine which way the market was going on an intraday basis for swing \momentum trading as even if im not losing money in my portfolio i want to be SBing to beef up my profit. Does that make sence?

thanks for the help, still a little wet behind the ears :cheesy:

Pietro

 

[roguetrader]

Ok, I don't really use Level II so I might be talking out of my A** here. Level II in my humble opinion is used intraday as a guage for supply and demand pressure, ie the relative strength of bid/ask for a stock, so many people use it to trade intraday as such if you can read it appropriately it is a useeful tool to guage short term direction, but I would say not essential for what you are trying to do.
As for the spreadbetting aspect, I know nothing about spreadbetting, but at the risk of abuse would suggest that is not the most efficient way to hedge a position intraday. In fact as I reread your post I'm not sure there is any way to do what you want to do, a hedge is designed to protect from large moves against you as there will be a cost associated with it. If you are trying to protect against small intraday moves the cost will outweigh the gain.

 

[pietro]

roguetrader im not quite getting how it would cost me more than the gain?! example i know this is unlikely but from my previous example HBOS is at say 800p then, something smelly hits the fan and 100p is wiped off the value of their share price, so if i owned 1000 shares @ 800p and lost 100p for every one that would be £1000 loss, now if as this happens i open a short postion with a SB firm shorting at £10 per tick then 100 ticks * £10 is £1000, i know there would be a spread but lets forget that 'minor' detail for now, so how would the cost out weigh the gain? is there something im over looking? or just blind to?

thank you again for your time.

Pietro :cheesy:

 

[roguetrader]

In a situation such as you quoted that would be a significantly large move and subsequently return a profit, however a simple stop loss at an appropriate position would take you out of the position without too much damage. A £1 drop in an £8 stock is probably not a trade to be in anymore. I assume this HBOS is a long term position and you are not a shrt term trader or why wouldn't you just stop out and reverse your posittion in the stock, in fact I am getting a little confused here, Level II is only any use if you are sat watchin it so why spreadbet the falling position, why not just short it?

 

[pietro]

Yeah HBOS is a long term position, that’s why I wouldn’t short it and would rather offset the loss through, SBing, however I thought Level II would be a useful, to SBing, as I also would want to do a little day trading (3-4 trades per day) and thought Level II would help me achieve greater returns.
Confused?
:cheesy:

thanks for the help.


Pietro

 

[TheBramble]

Pietro, sounds like you want to hold an investment portfolio AND run speculative trading positions - which is great!

I still believe using options to hedge your long-term holding would be more suitable.

If you want to get into the LII intraday stuff and watch the screens etc., then you'd probably be better off with a DA broker rather than SB.

If you're looking run a day job AND play the markets more actively (in addition to holding your investment side) perhaps from an EOD perspective then SBing might be an option (no pun) for you to consider. But LII isn't going to be that pertinent. Sure, with time and training you'll be able to time your entry/exit more precisely, but if you're SBing the bid/ask you see on LII is unlikely to be the price the SB co is offering.

 

[roguetrader]

Yeah HBOS is a long term position, that’s why I wouldn’t short it and would rather offset the loss through, SBing, however I thought Level II would be a useful, to SBing, as I also would want to do a little day trading (3-4 trades per day) and thought Level II would help me achieve greater returns.
Confused?
:cheesy:

thanks for the help.


Pietro

Looks to me like the real question you are asking here is. Is it feasible to daytrade via a spreadbetting firm and would Level II be of any great advantage in this endeavour? Unfortunately i don't know enough about spreadbetting to contribute on this. A Level II screen will give you the individual bid/ask as they line up for execution and as such are useful for very short term directional prediction and spotting short term change in sentiment. I personally see them as more of a scalpers tool, and how useful that would be combined with spreadbetting, I don't know. I have seen posts on this board that suggest spreadbetting is not suitable for daytrading. If I were you I might look at CFD's to hedge, but again they are not an instrument I am familiar with. I only trade US markets and mainly intraday.

 

[pietro]

Hi All, thanks for all the info, yeah TheBramble you hit it on the nose, thats exactly what im looking to do, hold my investment portfolio AND run speculative trading positions. Options are something that im going to consider now though.

thanks for the help again.

Pietro