Fins Rolling Contract or CFDs? Advice pls!

[fastnet]

I have recently been developing a new system for EOD trading of FTSE 100 shares based on retracements from range extremes etc.

The system seems to be profitable in principle but I can not find a method of placing the trades without a large chunk of the profit being eaten by spread.

My choices seem to be:

i) Finspreads rolling contracts. These have fairly tight spreads but are closed out each evening. Not only do you pay overnight interest as you would a CFD but the trade is closed and re-opened automatically ever day. Each time you pay the spread. I bought HSBC last Wednesday and closed out this afternoon. On paper this would have been a marginally profitable trade however after paying a spread each morning it ran into a loss.

ii) Finspreads 'future' FTSE share contracts. The spreads on these vary. For example the spread on a March contract this pm was 8 points! The spread on the equivalent Hays contract was 1 point. I just don't understand - if it were a fixed ratio of the price it would make more sense.

iii) Open a CFD account. Are the spreads really much smaller? Are they a fixed multiple of the market spread of the underlying contract? Maybe this is the way forward but I like the tax free status of SB cos. Also I can not open the trading software provided by most firms on my office PC due to the firewall.

I'm not sure what to do. Unless I can find a cost effective way of trading equities on margin I might as well go back to indices, FX and commodities etc.

Could any share/CFD traders offer any advice?

Thanks

 

[ardhill]

Finspreads rolling contracts. These have fairly tight spreads but are closed out each evening. Not only do you pay overnight interest as you would a CFD but the trade is closed and re-opened automatically ever day. Each time you pay the spread.

Actually, not quite..

If you roll a position overnight on Finspreads, they will 'technically' close the position, then re-open it. But the actual workings of it are...

You are in a trade and wish it to continue the next day, the spread is 1064 - 1069, what will happen is that the trade will be 'closed' at the mid price of 1067. The next day it will be re-opened at that same price - 1067. So it don't actually close in the sense of the spread, but as a technical close.

You don't pay any extra spread on a rolling position as it is opened at the same price that it is closed, it just pauses overnight.

Of course, if it is a short position, you are paid a premium into your account for overnight rolling positions - just like CFDs

OR

You could of course adapt your system for US shares then you could use one of the discount direct access brokers

 

[fastnet]

Really. . . that's a pretty big misunderstanding on my part!

I just wonder if that's the case who would choose a Mch/May bet with huge spread? Surely better to have a rolling contract.

So essentially the only difference between Fins rolling instrument and CFDs are the tax treatment and of course the potential volatility in the spread outside the volatility of the underlying asset.

I'm shocked - and pleased - thanks Ardhill

 

[ardhill]

So essentially the only difference between Fins rolling instrument and CFDs are the tax treatment and of course the potential volatility in the spread outside the volatility of the underlying asset.

In my experience, others will no doubt have different experiences, unless you use a direct access CFD company, then you are better off using a Spread Bet company. When I tried CFDs, I got a worse spread than on Finspreads due to the slippage and time problems with middlemen.

My CFD account wasn't open for very long, I closed it fast when I realised that I couldn't get into or out of a trade in any hurry.

With direct access CFDs, you have control and you can make the spread as you do with equities.

I just wonder if that's the case who would choose a Mch/May bet with huge spread? Surely better to have a rolling contract.

The spread is larger, but you don't have the interest to pay. So, if you are going to stay in the trade for more than a few days, it can be better to take the bigger spread and not pay interest.

Though, on short trades, I always choose rolling bets. Better to get the smaller spread AND have them put interest INTO your account every day :cheesy:

These are simply my own personal experiences.

I use Finspreads for multi day trades and direct access for intra day trades.