Experienced in trad. shares but new to spreadbetting

blackcab

blackcab

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I've bought & sold shares through a conventional broker for years and am new to spreadbetting, CFDs, futures, options, etc. Now I want to start spreadbetting.

Do all the major SB companies offer bets on the current price of individual stocks, or only on front quarters? Eg the real price of company ABC on the market if you bought the shares via a broker is currently 100-103 bid-offer. The price is trending up so the SB will bias their quote upwards. Is the quote reliably going to be something like 110-113 or could it be something completely different because it's based on the future not the current price?

This is what seems to happen with indices and I'm not really clear why or how - what the relationship between future and current is and how it affects the SB quote for the Daily, the Daily Future, the Front Quarter Future, etc.

It seems for indices you can't reliably use the actual index chart for TA for SB purposes because the SB quote is based on something quite different. Is the same true of individual stocks?

Confused,
Cab.
 
BlackCab

Welcome to T2W.

I dont think you will get any SB's that use actual prices for stocks. The closet you will get is the rolling cash bets which expire daily and re-open the next day, that is if you haven't yet closed the bet. I use Finspreads whom have a vast number of shares that operate on a rolling cash basis.

Other than this, you can only trade the quarter months, which I linked to the futures price.

Hope this helps
Regards

Lee
 
Lee, thanks for taking the time to reply. Things are starting to fall into place.

1) Because SB quotes are not based on the current actual stock price, does that mean that you can't really use TA on the actual charts for your SB decisions? From the sound of it, that's the case.

2) What chart would you use instead for TA when spreadbetting - a chart of SB company quote prices? If so, presumably you can only get that chart from the SB company itself, so you're restricted to one chart provider and can forget about charts on Yahoo, Stockcharts, ADVFN, BigCharts, etc. (Does traditional TA necessarily even work on quote charts rather than price charts?)

Just to be absolutely sure about this - with normal share trading if you want to trade short/medium term you buy the share and sell say 3 days later. In the SB world you would instead take out a rolling cash bet and close it say 3 days later, is that right? If so, why/when would you bet on the next quarter future?

Come to think of it, what does the quarter future actually mean? It always seems to be very close to the Daily quote, so it can't be their forecast of where the price will really be in 3 months?

Sorry for all the questions, these are the things I haven't seen discussed in the tons of sites I've looked at so far.
 
I think you will find that since the futures price is (on a day-by-day basis) at a fixed offset from the porice of the underlying instrument, your TA will work just the same and just as well (or badly). There may be a distortion where %age based indicators are concerned, or fib ratios, but I suspect these are not material.




blackcab said:
Lee, thanks for taking the time to reply. Things are starting to fall into place.

1) Because SB quotes are not based on the current actual stock price, does that mean that you can't really use TA on the actual charts for your SB decisions? From the sound of it, that's the case.

2) What chart would you use instead for TA when spreadbetting - a chart of SB company quote prices? If so, presumably you can only get that chart from the SB company itself, so you're restricted to one chart provider and can forget about charts on Yahoo, Stockcharts, ADVFN, BigCharts, etc. (Does traditional TA necessarily even work on quote charts rather than price charts?)

Just to be absolutely sure about this - with normal share trading if you want to trade short/medium term you buy the share and sell say 3 days later. In the SB world you would instead take out a rolling cash bet and close it say 3 days later, is that right? If so, why/when would you bet on the next quarter future?

Come to think of it, what does the quarter future actually mean? It always seems to be very close to the Daily quote, so it can't be their forecast of where the price will really be in 3 months?

Sorry for all the questions, these are the things I haven't seen discussed in the tons of sites I've looked at so far.
Click to expand...
 
the futures price is (on a day-by-day basis) at a fixed offset from the price of the underlying instrument

Oh, right - I haven't seen this before. As I understand it then the 1-month or whatever chart of the futures price will be identical to the same chart of the underlying instrument, just shifted up or down by a number of points - and that number of points might vary from day to day. That's a new bit of knowledge - thanks :)
 
Hi blackcab,

The futures price will not actually be "identical to cash but shifted up/down by a number of points" (assuming you mean a fixed number). It will be similar to cash but the relationship is not quite as simple as that. Futures may lead, lag or be the same as cash. They may be subject to more or less, usually more, volatility, i.e. the spikes will often be spikier. As the futures approach expiry the price is likely to fall further and further in line with cash.

If you want to trade the Dow cash index through an SB, then trade off the Dow cash index chart not the SB one. The SB bias may well signal a trade exit on their chart when the real cash chart does not. If you want to trade S&P futures, do not use the S&P cash chart on which to base your decisions, use a proper futures chart.

"Just to be absolutely sure about this - with normal share trading if you want to trade short/medium term you buy the share and sell say 3 days later. In the SB world you would instead take out a rolling cash bet and close it say 3 days later, is that right? If so, why/when would you bet on the next quarter future?"

Yes, in principle. For a 3 day bet I would do exactly that. As a crude rule of thumb, rolling cash is usually the best option for trades of less than a week. However trading the future can be cheaper for longer term bets. It depends how much your SB company charges for finance: usually rolling cash bets come with an interest payment charge, whereas futures do not, although they have a cost of carry built into the spread. It is quite complicated and you will have to check the terms & condtions / manual carefully to see which is the best vehicle for a given situation.

Also if you go short on a rollling cash bet, they usually pay you interest, but it's not much!
 
My pleasure, though 2 small caveats: firstly I am far from being an expert so someone more experienced may well contradict and be entitled to do so. Secondly, I think the difference between the futures quote varies and may do so from day to day based on the analysts view of the future price. Notwithstanding, I have run the futures graph and the underlying instrument graph side by side on a number of occasions and not seen any difference in the shape or features of the graph, so for TA purposes, what one does the other should do.

MT


blackcab said:
the futures price is (on a day-by-day basis) at a fixed offset from the price of the underlying instrument

Oh, right - I haven't seen this before. As I understand it then the 1-month or whatever chart of the futures price will be identical to the same chart of the underlying instrument, just shifted up or down by a number of points - and that number of points might vary from day to day. That's a new bit of knowledge - thanks :)
Click to expand...
 
be very very careful of any newsletter pumping up OTC stocks

this applied to a link to a newsletter that seems to have been deleted now?
 
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Guys, thanks for your help, it really is useful. This is a summary of the points made, for my own benefit and any other newbies reading this - even though it's short I think it still helps to round things up.

There are three prices running at the same time on any instrument. You could chart them separately and they'd look very similar, but not identical:

  1. Cash price - 'real' market price of the underlying instrument, i.e. what you would pay through a broker in the conventional way.
  2. Futures price - the cash price plus/minus an offset that reflects the bull/bear opinion of whoever sets the futures price (not sure who that is but it's not important for now - LIFFE?). Usually more volatile than the cash price. Can lead or lag the cash price.
  3. Spreadbet price - the futures price plus/minus the SB company's bias that reflects the bull/bear opinion of the SB company, and their desire to maximise their clients' misery

For chart analysis when spreadbetting you'd be best of using the futures chart as this is what the SB price is based on, then next best the cash chart, then next best the SB price chart.

Got it - funny how simple things can take a while to sink in sometimes.

Um, more questions if anyone could oblige :LOL:

1. Who provides futures price charts? All the sites I know - Yahoo etc. - are cash price charts.

2. gmca686 started a great thread in July last year where he said he does TA on the SB price chart, not the cash or futures chart, the reason being that the SB price is what you actually pay, and it obviously has the bias built in so you're charting what you're buying.

However, frugi here recommended the cash chart for the Dow over the SB chart, and the futures chart for the S&P over anything else.

So why use the cash or the futures chart over the SB chart, when the SB chart shows the price you'll actually end up paying?

Maybe these points are actually trivial and I'm making a mountain out of a molehill. If so, that would be good to know too!

Thx,
Cab :LOL:
 
"So why use the cash or the futures chart over the SB chart, when the SB chart shows the price you'll actually end up paying?"
Click to expand...

I know what you mean and I am sure there are people making money trading straight off the SB chart, especially for longer term trades where a tick here or there isn't going to make any difference. However for day trading I would be reluctant to trade off the SB chart because it does not truly reflect real trades in the real market, it reflects their 'interpretation' of it.
e.g Imagine, say, the cash Dow hits a support level at 10000 and dips 2 points below to 9998 before embarking on a 40 point rally. You want your stop at 9996. Howvever in this scenario the SB price may well dip to 9994 as they anticipate selling below the important 10k level. Thus your stop is falsely triggered even though the real market did not touch that level. Trading off their charts will, IMHO, lead to more whipsaws and losses than trading off the real ones.

Incidentally I did not suggest the futures chart was best of all, I meant it is the one you have to look at if trading futures. The cash chart is possibly more suitable for rolling cash bets, but having read the thread you posted I now think that all SB prices are based on futures. As you say in your post below, this subject is a hardy perennial!

Futures charts are available from many sources. Generally you need charting software and a data feed. Free real time index futures charts are hard to come by. Have a look in the reviews section on this site under data feeds and software. eSignal is excellent but quite expensive. Sierra Chart with a MyTrack feed is a popular low cost option for US, but I believe their UK data is unreliable.

http://www.trade2win.com/boards/showthread.php?s=&threadid=8886
http://www.trade2win.com/boards/showthread.php?s=&threadid=8330
http://www.trade2win.com/boards/showthread.php?t=8332

Three guides (software, data feed and First Steps) produced by our stalwart t2w regulars which may be of use to you.

HTH
 
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once you "get it" - that represents 1% or 1% of ..... the skill based needed to make money trading - knowing how it all works is just the tech stuff -applying that to making money is a whole different thing
 
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