D4F overnight charges

suggy

Active member
133 0
Hi all, hope somebody can help me out, I;ve been holding positions short on the FTSE and Dax for last couple of days, however I have no idea about D4F charges.

US30 Cash Cash Net GBP 0 (15.00) 0.00


GERMAN30 Cash Cash 24.11.03 1S 3737.2137000 3733.1600000 4.05



GERMAN30 Cash Cash Net GBP 1S 4.05 40.00


UK100 Cash Cash 25.11.03 1S 4398.0000000 4388.7000000 9.30



UK100 Cash Cash Net GBP 1S 9.30 50.00



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Totals (all instruments) (1.65) 90.00


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Opening Price Adjustment Summary for Next Business Day 26.11.03


Instrument
Expiry Stake
(L/S) Financing
Adjustment CRB
Adjustment Corp.Action
Adjustment Adjusted
Closing Price
GERMAN30 Cash Cash 1S 0.1506500 3733.3106500
UK100 Cash Cash 1S 0.1772500 7.5000000 4381.3772500


Price Adjustments for 25th November 2003 based on following overnight financing rates:

Long positions 5.473400
Short positions 1.473400



my statement from D4F

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oops dont think that came out well but can anybody tell me what they do exactly?
 

frugi

1
1,827 126
Deal4free apply an overnight interest charge to rolling cash postions as if you had borrowed the money to hold the notional position size. On a short position you are effectively lending them money so they pay you interest. However, guess what? The rates are tilted heavily in their favour.

For longs the rate they charge is SONIA (sterling overnight financing rate) +1.5%, for shorts the rate they credit is SONIA -2.5%. SONIA varies slightly every day.

The rates are shown every night at the bottom, i.e. 5.4734% and 1.4734% on yr statement. These are annual rates so you have to divide by 365 to obtain the overnight rate.

A £10 per point position on the FTSE at 4000 has a notional size of £10 x 4000 or £40000.

If you were long you would pay d4f (5.4734% / 365) * 40000 per night or about £6 for the privilege of effectively borrowing £40000 from them.

If you were short they would pay you (1.4734% /365) *40000 per night or £1.61.

They do not actually take or give you this money though - they merely adjust the quote to reflect it. So if you were long £10 FTSE and it closed at 4000, they would add on 0.6pt overnight giving you a final price of 4000.6, the eqivalent of a £6 charge.

Though the odd 0.x points charge looks innocuous enough per night it can add up to a significant amount over time. For positions held for more than a few days I am pretty sure that futures are more cost effective, despite the wider spread, as Deal4free do not charge overnight finance on them (although be aware there is a cost of carry built into the futures price that reflects this to some degree).

Page 13 of the dealing guide explains this better than I can!

HTH
 

suggy

Active member
133 0
thx mate didnt get that far into the manual ;)

but after 3 nights holding at only £1 a point my FTSE bet had moved almost 20 points i swear. unless they sell and restart my position each day. If 'my positions' worked perfectly none of this would be an issue, but I never know where I am.

cheers for clearing that up
 
 
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