why SpreadBet??? its not professional

[Pringle]

Look, all I am saying CharleChan is that SBing works for me!
In my case I am very happy to pay say an extra 50 pips per year or so when I can save paying 40% tax on my winnings - it's not even close!

In addition SB companies do not "only make money from customer losses". As I said earlier they attempt to match up clients of opposing views and make their money from the spread from both.
If for example I am long euro vs dollar at £10.00 a pip and they have say two other punters short euro vs dollar at £5.00 then the SB companies position is neutral - If I win on the trade, the other two guys lose. The SB company wins from us both in any case from the spread charged in opening and closing positions, but the bulk of the win goes to one or other of the parties involved. So in effect when I trade somebody else is taking the other side not the SB company.
In reality it must be very difficult for the SB company to have a total neutral position all the time, and when they are lopsided, like when most clients are short euro/dollar they simply hedge in the 'real' market according to thier own risk parameters. So I'm afraid your assumtion that SB companies ONLY MAKE MONEY FROM CUSTOMER LOSSES is just not true.

 

[charliechan]

i think you need to think this one over a little more.

if the sb is always perfectly hedged, or delta neutral , where is it getting its money from?

please tell me!

if it isnt getting its money from customer losses, what other income stream are they making money from?

could it be the hedge itself, as it gives its net delta a skew?

it cant be a position in the market can it - because if that were the case they wouldnt bother having customers and all the grief that they bring - they would just trade the market using other funds for positions as a proxy for the net 'customer' position.

hmmm....

im always surprised that despite the common statistic of only 10% consistently succeed at speculation, why people would ever put themselves further behind and handicap themselves more than necessary.

oh yes of course - its tax free. silly me.

i read the other day that all the market wizards are heading over to the uk so that they can all make their livings tax free. after all, the sb companies wont mind them as customers because they dont make their money from customers losses - and i really cant see how they make money from customer wins either!!

get real.

 

[Stockjunkie]

that doesn't mean that ALL SB customers lose . if so then how come I'm here ? how come I made 6x my capital on SBs ?

also the X factor of super leverage is what makes the difference for me .

yes , SBs can be real prats , but they cannot flout the law at will , they still have to follow a semblence of fairness .

the problem with complaining about spikes is that really if your stop is hit by a spike , you don't have much to complain about . a spike is a spike is a spike and anything near it is liable to be taken out whether in SB's or even with a posh Bank's Fx dept . do you think they treat you better just coz they have a fancy name ?

no way .

so arguing with SBs over spike outs is academic . yes , maybe his offer should have been 2 higher maybe it shouldn't , as long as it's within touch then it's tough for you to argue.

Though I would say that it's worth you contesting with them when it happens . I have been successful like this ona few occasions , although I think they were not spike outs.

 

[SOCRATES]

i think you need to think this one over a little more.

if the sb is always perfectly hedged, or delta neutral , where is it getting its money from?

please tell me!

if it isnt getting its money from customer losses, what other income stream are they making money from?

could it be the hedge itself, as it gives its net delta a skew?

it cant be a position in the market can it - because if that were the case they wouldnt bother having customers and all the grief that they bring - they would just trade the market using other funds for positions as a proxy for the net 'customer' position.

hmmm....

im always surprised that despite the common statistic of only 10% consistently succeed at speculation, why people would ever put themselves further behind and handicap themselves more than necessary.

oh yes of course - its tax free. silly me.

i read the other day that all the market wizards are heading over to the uk so that they can all make their livings tax free. after all, the sb companies wont mind them as customers because they dont make their money from customers losses - and i really cant see how they make money from customer wins either!!

get real.

Yes, exactly so.

 

[SOCRATES]

that doesn't mean that ALL SB customers lose . if so then how come I'm here ? how come I made 6x my capital on SBs ?

also the X factor of super leverage is what makes the difference for me .

yes , SBs can be real prats , but they cannot flout the law at will , they still have to follow a semblence of fairness .

the problem with complaining about spikes is that really if your stop is hit by a spike , you don't have much to complain about . a spike is a spike is a spike and anything near it is liable to be taken out whether in SB's or even with a posh Bank's Fx dept . do you think they treat you better just coz they have a fancy name ?

no way .

so arguing with SBs over spike outs is academic . yes , maybe his offer should have been 2 higher maybe it shouldn't , as long as it's within touch then it's tough for you to argue.

Though I would say that it's worth you contesting with them when it happens . I have been successful like this ona few occasions , although I think they were not spike outs.

I hope and expect you do not mind me correcting you.

What you really mean is a semblance is it not ?

 

[Stockjunkie]

MW's do not do SB's because their size cannot be accomadated , nothing to do with tax .

 

[timsk]

It could go to a Tie Break . . .

I can't resist reading threads on the 'SB vs pro' broker debate', because there's always the hope, the possibility, that someone will have something new to say that will settle the issue once and for all. I wish I was hat person but, alas, I'm not. However, I am clear where I stand on the issue as are most people, I suspect. I would love to have the 'professional' account, but I don't have sufficient wonga to fund one. So, in the mean time, I make the best of what I have - my good ol' SB account. Assuming Charliechan, SOCRATES and Co. are correct, I reason that if I can survive by SBing, that's a very healthy sign for the day I turn pro'.

The one thing that no one has addressed to date - as far as I'm aware - is that if SB Co's only profit from their customers losses, then they must need a substantial and continual flow of new customers to replace the 95% who blow out or lose heart - or both. With ever increasing competition as well, the SB Co's must be growing more desperate by the day in their bid to attract new punters from an ever decreasing reservoir of prospective ones. As a business model, ultimately this is as flawed as a pyramid selling scheme, surely? And we all know what happens to those, sooner or later . . .
Tim.

 

[Pringle]

CharlieChan,
You ask again where is the SBing firm getting it's money from? I have answered this in my previous post - quite clearly I thought. Perhaps if you re-read it slowly the penny might drop. ( I doubt it as you seemed to have made your mind up on this issue and will not listen to reasoned argument)
If you still do not get it I will explain later in kindergarten fashion.

Pringle

 

[charliechan]

......

The one thing that no one has addressed to date - as far as I'm aware - is that if SB Co's only profit from their customers losses, then they must need a substantial and continual flow of new customers to replace the 95% who blow out or lose heart - or both. With ever increasing competition as well, the SB Co's must be growing more desperate by the day in their bid to attract new punters from an ever decreasing reservoir of prospective ones. As a business model, ultimately this is as flawed as a pyramid selling scheme, surely? And we all know what happens to those, sooner or later . . .
Tim.

tim - exactly the same problem exists with regular brokers - replacing the losers. but dont you worry. human greed - especially in the western world, provides a bottomless pit of suckers, err, i mean clients to feed the machine. in the us 2nd hand motor trade they have a neat saying - 'an ass for every seat!' cute - and appropriate.

some time ago, one clever broker came up with a great idea called spread betting. this would be jazzed up to look like better returns than the normal market. they made it look like youve got a great deal - no commissions and tax free too! sounds too good to be true doesnt it. and guess what......

as for the earlier comment about the sb's not being able to handle market wizard business, why ever not?? there is no question of liquidity to absorb as there is no real market - just a price. you can transact what ever business you want at that price, assuming the sb has the balls.

so, why wouldnt a sb take a market wizards business? once again, they are very honest folk, and would never mis quote or give an overly large spread! there are no differences to trading in the real market, and like our friend blades says, their tax savings would more than cover their costs!! geez - maybe the market wizards arent so sharp after all and blades has one over on them!!!

what do you think??

wait......


breaking news is hitting the wire.........

STOP PRESS........

GOLDMAN SACHS HAS JUST ANNOUNCED IT IS TO STOP TRADING ANY EXCHANGE TRADED PRODUCT WITH IMMEDIATE AFFECT. INSTEAD ALL BUSINESS WILL BE TRANSACTED ON IGINDEX, CMC AND CANTORS BECAUSE THEY ARE JOLLY NICE CHAPS, HAVE GREAT MARKETING AND ITS......



TAX FREEEEE

 

[Stockjunkie]

Mr . Soc ,

no I don't , but it's just a typo . guess I got to get that spelling bee out . bzzzzzzzz. bzzzzzzzz.


SB's don't just make their money from client losses , they also hedge up to 40% of their book - I've seen it ! I am an ex consultant for Finspread..

this is why they have spreads on qoutes , which may only be a few pips wider than the market but accumalated that's a lot of pips and a lot of money .

 

[charliechan]

CharlieChan,
You ask again where is the SBing firm getting it's money from? I have answered this in my previous post - quite clearly I thought. Perhaps if you re-read it slowly the penny might drop. ( I doubt it as you seemed to have made your mind up on this issue and will not listen to reasoned argument)
If you still do not get it I will explain later in kindergarten fashion.

Pringle

yes please do explain as simply as you like.

why not give several examples -
1/ where the sb company has even bets on both sides
2/ where the sb company has a majority of long customers and the market is going up strongly
3/ where the sb company has a majority of customers on the wrong side of the market

while at it, you may also like to refer to my earlier post that socrates also sees as truth and not fairy tale stuff straight from the marketing blurb of the sb company.

thank you.

 

[ValB]

not sure where the 'professional' issue comes into this debate. professionals run sb comapnies - they don't use them.

bods who dont have the clout for full brokerage accounts use sb companies. is this thread a windup? lurking for ages and this one finally got me to post. if you have an inkling of what i'm on about you'll understand.

 

[Stockjunkie]

so what ?

are you saying that those w/0 large sums of money shouldn't SB ? and why not , it is still possible to make decent money from them , not easy but still possible .

though for larger sums of $ I would prefer the direct market .

 

[the blades]

putting the "debate" about the mechanics of spreadbetting aside;

I have exceeded this years CGT allowance, and I'm a higher rate tax payer.

I trade UK stocks - my average profit per trade (after costs) is circa 5%

My costs, comparing with my "best estimate" of current costs (ie spread bet price Versus market price), and allowing for interest on margin, are about 1.5% per trade

If I find the holy grail of trading with no spread, no comission, no exchange fees, my average profit per trade would be (5% + 1.5%) MINUS 40% tax.....3.6% per trade

Could someone explain, in simple terms, why spreadbetting IS NOT the best method for me?

Cheers,
UTB

 

[LongandWrong]

how does an sb company make money???

another way is financing. Assume client A is long rolling daily bet with CMC, and client B is short in the same size in the same market. No market risk for CMC, but client A pays roughly 7% overnight financing charge whereas client B only receives about 1%.

 

[JonnyT]

Come on guys this is obvious.

Worst case is that the SB co hedges 100%. They would make money still jsut from the spread.
The SB co know who's on a roll and who's not. They might therefore hedge certain players.
The SB company know what size the bets are. They may therefore hedge only certain size bets, hence the dreaded requote..
The SB co pay a certain amount of interest but then charge a damned sight more when they can.
The SB co may choose to put positions with winning traders.

Given the above it doesn't take a genuis to work out that a Spreadbet Co is rather like a casino. The dice is loaded in their favour, but a few people can still win big.

JonnyT

 

[mickandpete]

One aspect of SB that has not been refered to here is FACES
A traditional bookie (as some here would refer to SB) although not operating in as sophisicated a market has FACES
A FACE is someone who knows,A winner.
How does our bookie react when accepting bets from a FACE
Does he antagonise the FACE so he goes away or does he accept his business with a smile,lay off the bet and have some for himself.
The clever bookie,takes the latter course.
Just so with SB,as has been repeatedly stated here only 10% of clients will be winners, not hard to identify the FACES then.
Perhaps if your treatment by a SB firm has not been cordial,you are not a FACE.

 

[the blades]

Come on guys this is obvious.

Worst case is that the SB co hedges 100%. They would make money still jsut from the spread.
The SB co know who's on a roll and who's not. They might therefore hedge certain players.
The SB company know what size the bets are. They may therefore hedge only certain size bets, hence the dreaded requote..
The SB co pay a certain amount of interest but then charge a damned sight more when they can.
The SB co may choose to put positions with winning traders.

Given the above it doesn't take a genuis to work out that a Spreadbet Co is rather like a casino. The dice is loaded in their favour, but a few people can still win big.

JonnyT

JonnyT - any chance you can throw in a few "Delta's", refer to your pals, the "market wizards", then right at the end increase the font size to around 50, and make it red.

It will surely have much more effect than your incredibly simple yet rational points above - and have everyone on the wrack, wont it?

UTB

 

[the blades]

One aspect of SB that has not been refered to here is FACES
A traditional bookie (as some here would refer to SB) although not operating in as sophisicated a market has FACES
A FACE is someone who knows,A winner.
How does our bookie react when accepting bets from a FACE
Does he antagonise the FACE so he goes away or does he accept his business with a smile,lay off the bet and have some for himself.
The clever bookie,takes the latter course.
Just so with SB,as has been repeatedly stated here only 10% of clients will be winners, not hard to identify the FACES then.
Perhaps if your treatment by a SB firm has not been cordial,you are not a FACE.

Exactly.

 

[Stockjunkie]

Not totally true sometimes faces, if they win too much will get a negative reaction from the SB .

I speak from experience but I still used them , they are not infallable if you know what to do .

the trick is that knowledge.