£10,000 which way is most cost effective?

[stevet]

you cannot compare spreads etc of spreadbetting prices with real market prices

if you ever trade real markets - you will see why - you get a fill at a real market price within a second of placing the order and can close out in another second if you choose to

so thats two seconds in total to open and close the trade if you want- and if the market has moved just one tick in your favour - you will get out at a scratch and just pay the commision ( do enough volume and that commisions can be in cents) -from what i read on this forum - thats a whole different ball game to getting fills on spreadbetting

if price is just moving sideways - fast fills may not seem important - but if the price starts to take off - you will find out how fast fills are your best friend in trading

 

[henry766]

very good point stevet, in some ways when u trade real mkts there is no spread , just a question of how patient u are with your bid or offer , you may often benefit ,as your trading against your own equivalent , whereas a spreadbet or cfd , the spread is a genuine cost , and in practice it works out that way too,this has been my experience trading globex as opposed to spread bets on fx

 

[TRADERguy]

you cannot compare spreads etc of spreadbetting prices with real market prices

This is true. My comments were regarding the costs for Lord Lister. For his timeframe and volume he should be able to roughly calculate his costs by multiplying the spread times the number of shares. He can then compare this cost to the commissions he would have to pay at a direct access broker. Before tax effects I assume that spread bet will be more expensive but for Lord Lister the extra cost may only amount to a few pounds per month and might not be worth the hassle of switching his account else ware. As his account grows and he trades larger size he will find that switching makes more sense, at least pre tax. I'm not sure of the outcome post tax; he will have to calculate that based on his income, etcetera.

 

[stevet]

again - how can you compare the cost if your entry and exit price doing real trading is 100% transperent - and 100% opaque in spreadbetting

a lot go on about worse or better spreads with different spreadbetting companies - and some use companies they hate - simply because they feel the spread is better - but they dont get it - that the apparent spread is umimportant, if you cant get a fill at the exact second that you see the spread - prices move all the time and in fractions of a second - so with spreadbetting you will never know if the price you got was right relative to the real market - or if you got ripped off

but the point is not wether spreadbetting companies are good or not - just that it is impossible to compare the fill price in real trading with the fill price in spreadbetting

but forget the spread in spreadbetting - you might get an advantage - you might lose out - but you are never going to know either way on your fill

 

[TRADERguy]

Stevet,

Well we will never know for sure until someone publishes or posts a direct comparison (executing the same trades simultaneously in a spread bet and a direct account) for FTSE trades. I'm just taking an educated guess that if you assume the entire spread in spread bet is your cost and that your cost in direct trading is only the commission, the results of your calculation will approximate the true cost differential that you would find if you ran a true side by side test.


Cheers,

TRADERguy

 

[ChartMan]

Trader guy... a bit impractical.... even with two traders side by side, trading the same instrument, one on SB the other on DA. If they both hit the trade button, we know what will happen. One gets an instant fill, the other gets....... a delay.... a possible re-quote..... are you sure?...another delay..... and eventually you get your ticket back.....maybe 10 points away from the DA trade. Maybe not if it's a slow moving instrument. OK . Now and again, you might get a quick fill and only be a few away. You might get real lucky and get it right on the nail and get the same price as DA. But you don't want to rely on luck and "now and again" is next to useless. SB works in a strong market.But then so does everything in the way of indicators.

 

[TRADERguy]

ChartMan,

So you are saying that you think that true costs with CMC spreadbet would be larger? If so, how much larger? Remember that the assumptions that I'm making in my calculation method considers the entire spread with spreadbet is the cost and it doesn't include any spread cost in the direct market. In other words it already assumes that the true cost differential is larger than the spread in spreadbet (because the commissions in direct are so low).


Cheers,
TRADERguy

 

[stevet]

the costs with spreadbetting are undoubtably greater- and definelty enough to turn a winner going direct into someone who would lose if they used spreadbetting

 

[TRADERguy]

stevet,

What is the cheapest reliable direct broker for the FTSE stocks? IB has a minimum GBP 5.00 per trade charge which seems expensive for Lord Lister's 3,600 GBP account.

http://www.interactivebrokers.com/php/generalAccount/commission.php#stock

Stock Commissions (all exchange and regulatory fees included)​

CommissionsMinimumNotes

United Kingdom 0.1% of stock valueGBP 5.00.5% UK Stamp tax, 1% Irish Stamp tax on purchases.

Cheers,
TRADERguy

 

[stevet]

maybe Lord Lister should raise his trade size and/or start doingUS stocks as well

 

[Lord Lister]

Thanks chaps, this is very informative, still not sure what is the best option though.

Let me get this straight, bearing in mind the size of my account, if I bought £1000 worth of a stock at £1 per share direct access, it would cost me £1010, thats £5 commission and £5 Stamp duty. That would give me the equivalent of a £10 per point bet on SB? The cost would be equivalent to a spread of 1 point? if so that would seem quite high for a 100p stock? Would I then actually own that stock? Is there anyway of getting leverage? (So many questions)

Of course I understand I have to take into consideration the antics of SB companies, (Perhaps that should be SoB's). I have definitely (and regularly) been stung for the odd point here and there with re-quotes, delays and the like. Also in my early experiences I discovered how difficult it can be to execute a trade with an SB when the market is rapidly moving against you.

 

[henry766]

i agree with stevet anyways , trading underlying is generally best , but some spreads can be tight ( say cmc on some u.s stocks are pretty tight) AS long as your trading a long enough time frame and or large moves ( ideally your way ), spread is important though as is a big reason for losses in the longer term( over many trades) for most people!!

 

[TRADERguy]

Lord Lister,

Your decision would be much easier if you traded US stocks as the commissions and minimum charge per trade are much smaller:


http://www.interactivebrokers.com/php/generalAccount/commission.php?ib_entity=IB-UK#futures

Stock Commissions (all exchange and regulatory fees included)​

CommissionsMinimumNotes

United States USD 0.01/ShareUSD 1.00For up to 500 shares. Cap at .2% of trade proceeds.USD 0.005/Share Incremental shares > 500. Cap at .2% of trade proceeds.

Yes, if you purchase stock when trading direct you own that stock. Margin accounts are available but I don't have one so I better let someone else answer that one.

Cheers,

TRADERguy