tar
Legendary member
- Messages
- 10,443
- Likes
- 1,314
IG Index versus CMC markets, immitation the sincerest form of flattery?
- Thread starter Black Swan
- Start date
- Watchers 7
capitalspreads
Experienced member
- Messages
- 1,452
- Likes
- 79
i might like to point out that Capital Spreads rolls all positions at BASE RATE plus or minus 2% . We dont use LIBOR as hardly anyone knows what it is on a day to day level and it is always higher than the base rate (or indeed which Libor is being used [o/n , i month, 3 month ? etc...]).
I would like to mention that this makes our rolling charges significantly less than the two companies being mentioned here. Not only this but we have been doing this for seven years and still everyone is dearer. Can you imagine the cumulative loss on an account holding long term positions over this period of time! Not only this but you still have the CS tight spread on entering the trade in the first place.
Before anyone asks we do not do 'rolling' Oil contracts. You pay the spread on the entry and that is it. I am not sure how you can charge a rolling fee on something that is purely based on a futures price. If you want to hold it into the next contract month you pay the spread in price exit and entry (or receive it of course) to do so.
Simon
I would like to mention that this makes our rolling charges significantly less than the two companies being mentioned here. Not only this but we have been doing this for seven years and still everyone is dearer. Can you imagine the cumulative loss on an account holding long term positions over this period of time! Not only this but you still have the CS tight spread on entering the trade in the first place.
Before anyone asks we do not do 'rolling' Oil contracts. You pay the spread on the entry and that is it. I am not sure how you can charge a rolling fee on something that is purely based on a futures price. If you want to hold it into the next contract month you pay the spread in price exit and entry (or receive it of course) to do so.
Simon
Baffling, isn't it!
tar
Legendary member
- Messages
- 10,443
- Likes
- 1,314
Fx rollovers with SB is a rip off , Onada is much better .
"Capital Spreads also offers the facility to rollover futures contracts. If you chose to roll any quarterly or monthly contracts, you will need to contact us shortly before our expiry date to leave a rollover instruction. For equities, Capital Spreads will close the existing trade spread free (at just the market price) and offer the subsequent quarter at half of the spread. For indices, commodities and Forex contracts, Capital Spreads will close the trade at our midpoint and offer the subsequent quarter at the corresponding level. Please note that on rollover of futures contracts, the existing trade is closed, realising any profits or losses incurred and a new position is subsequently opened."
How we receive the spread when we roll futures contracts ?
"Capital Spreads also offers the facility to rollover futures contracts. If you chose to roll any quarterly or monthly contracts, you will need to contact us shortly before our expiry date to leave a rollover instruction. For equities, Capital Spreads will close the existing trade spread free (at just the market price) and offer the subsequent quarter at half of the spread. For indices, commodities and Forex contracts, Capital Spreads will close the trade at our midpoint and offer the subsequent quarter at the corresponding level. Please note that on rollover of futures contracts, the existing trade is closed, realising any profits or losses incurred and a new position is subsequently opened."
What happens if the full notional of the underlying bet for a simple financial instrument with no cost of carry (for example equity shares) is deposited in the account? For example, say I buy the equivalent of 100 shares of BP and I have 500 quid deposited in the account, so not using margin at all. Is there still a "financing" charge?
tar
Legendary member
- Messages
- 10,443
- Likes
- 1,314
yes !
tar
Legendary member
- Messages
- 10,443
- Likes
- 1,314
no stamp duty , no tax :cheesy:
tar
Legendary member
- Messages
- 10,443
- Likes
- 1,314
capitalspreads
Experienced member
- Messages
- 1,452
- Likes
- 79
tar
if you were short an oil contract for March which was trading at 105.00 and wanted to roll it into april which was trading at 106.50. you would buy at 105.00 (closing the march trade) and sell at a higher price 106.50 therefore you would 'technically' be short at a better price (therefore, again technically, 'receiving the spread'). Over the last year the forward carry on being short oil has been around 12 dollars! i.e a person being long for the whole period would need the price to have risen by over 12 dollars to actually make a profit (which of course it has!).
airmark
problem is that client money must be segregated ... the SB company must use its own funds to cover your bet. The SB company will always cover with a cfd with another broker who will charge the SB company to do so. Unfortunately the fact that you have covered the whole amount does not actually make much of a difference.
As all client monies are held in 'designated segregated' accounts the banks (boo, hiss) know that we cannot just move the money around to get a better return... so they pay 'bugger all' (a technical financial term) for the funds.
Simon
if you were short an oil contract for March which was trading at 105.00 and wanted to roll it into april which was trading at 106.50. you would buy at 105.00 (closing the march trade) and sell at a higher price 106.50 therefore you would 'technically' be short at a better price (therefore, again technically, 'receiving the spread'). Over the last year the forward carry on being short oil has been around 12 dollars! i.e a person being long for the whole period would need the price to have risen by over 12 dollars to actually make a profit (which of course it has!).
airmark
problem is that client money must be segregated ... the SB company must use its own funds to cover your bet. The SB company will always cover with a cfd with another broker who will charge the SB company to do so. Unfortunately the fact that you have covered the whole amount does not actually make much of a difference.
As all client monies are held in 'designated segregated' accounts the banks (boo, hiss) know that we cannot just move the money around to get a better return... so they pay 'bugger all' (a technical financial term) for the funds.
Simon
tar
Legendary member
- Messages
- 10,443
- Likes
- 1,314
what ?! as per your example i didnt receive even one cent to my pocket , even i am now short at a higher price this doesnt mean anything cuz my new trade will be marked to market which is 106.5+spread and oil could go higher or lower from here ...
I see. Not very good for long term buy and hold positions then.
How about for the following? I have been selling naked OTM puts for a while now against cash for the entire notional (so if they go in the money I get assigned which I'm happy to do). I have actually been assigned less than 10% of the time, which means that I have simply been earning a nice little return (around 20% annualized) on top of base rate for the cash that sits in my account (to cover the naked puts). Now, this return is subject to CGT and in order to avoid it I would like to move the operation within the SB world. However, if I pay financing for the forced margin (instead of receiving as currently the case), this probably kills the deal for me. Is there any way to make it more efficient financing carry-wise?
Last edited:
capitalspreads
Experienced member
- Messages
- 1,452
- Likes
- 79
tar
Of course you do not get paid to roll a position. As indeed you do not 'pay' (other than a nominal rolling charges) either.
i did say "technically" ... the point is that if you were long you would not be 'paying the spread' either as the price would, as you say, be in the next months futures contract price. The problem is that some people on this thread seem to be saying that they have been 'charged' the extra $1.50 to roll their bets!
airmark
Capital Spreads does not currently do options (but we hope to do so at some point). But you must remember the SB companies have costs that do not apply to normal brokers. We get taxed 3% of client losses (gaming duty) and so must operate a slightly different model.
I must say though that to compare the loss of perhaps 0.5% interest income on broker deposits versus 28% on CGT seems a little xtreme. If you trade in the quarterly futures markets rather than the rolling daily (this is much more sensible when trading in options) then the costs should be reasonably comparable.
I realise that some companies no longer do quarterly markets but the majority still do.
Simon
Of course you do not get paid to roll a position. As indeed you do not 'pay' (other than a nominal rolling charges) either.
i did say "technically" ... the point is that if you were long you would not be 'paying the spread' either as the price would, as you say, be in the next months futures contract price. The problem is that some people on this thread seem to be saying that they have been 'charged' the extra $1.50 to roll their bets!
airmark
Capital Spreads does not currently do options (but we hope to do so at some point). But you must remember the SB companies have costs that do not apply to normal brokers. We get taxed 3% of client losses (gaming duty) and so must operate a slightly different model.
I must say though that to compare the loss of perhaps 0.5% interest income on broker deposits versus 28% on CGT seems a little xtreme. If you trade in the quarterly futures markets rather than the rolling daily (this is much more sensible when trading in options) then the costs should be reasonably comparable.
I realise that some companies no longer do quarterly markets but the majority still do.
Simon
It's not 0.5% vs 28% tax. It's 2.5% on the notional (paying 2% financing vs receiving 0.5%) PLUS the difference in transaction costs (not major as only do very few transactions but still much better to trade directly in the market vs crossing the spread every time) PLUS there's a tax free allowance before CGT kicks in. On top of that there's a very limited selection of underlyings currently from what I've seen (no single name stock options, only major indices).
Having said that, for these markets that are offered in the SB world, it's probably still worth going there, so I'll probably open an account somewhere.
Also, one more point: the CGT is paid only if there are capital gains. Whereas the other additional costs in spreadbetting compared to a traditional direct market access broker are paid regardless. A proper cost-benefit analysis has to take that into account by weighing the two scenarios with some (obviously arbitrary) probabilities for winning vs losing. Which means I still keep searching.
capitalspreads
Experienced member
- Messages
- 1,452
- Likes
- 79
Airmark
this is why i said do the futures market as there is no 2% rolling fee just a slightly wider spread
i believe that some of the SB companies will give you single stock options if there is an underlying real market from which to quote but you will have to call up and arrange with telephone trades (CS does not do this and I am sorry to say probably never will).
There are limits to what can be acheived using Spread Bets and the SB companies must be wary of becoming too much a mirror of the more exotic financial instruments as this would definately call into question it 'tax free' status. If we allowed this then just off the top of my head I can think of a few ways that banks could help staff avoid tax on options awarded in place of bonuses.
to do the types of trades you are looking at it would be more sensible to utilise cfds. to be absolutely honest you are just not going to find your 'holy grail' unless you are operating out of a tax free location as otherwise you would be asking regulated companies to aid you in tax evasion/avoidance (i can never remember which is the allowable one) on professional trading activity.
cheers
simon
this is why i said do the futures market as there is no 2% rolling fee just a slightly wider spread
i believe that some of the SB companies will give you single stock options if there is an underlying real market from which to quote but you will have to call up and arrange with telephone trades (CS does not do this and I am sorry to say probably never will).
There are limits to what can be acheived using Spread Bets and the SB companies must be wary of becoming too much a mirror of the more exotic financial instruments as this would definately call into question it 'tax free' status. If we allowed this then just off the top of my head I can think of a few ways that banks could help staff avoid tax on options awarded in place of bonuses.
to do the types of trades you are looking at it would be more sensible to utilise cfds. to be absolutely honest you are just not going to find your 'holy grail' unless you are operating out of a tax free location as otherwise you would be asking regulated companies to aid you in tax evasion/avoidance (i can never remember which is the allowable one) on professional trading activity.
cheers
simon
Im new to this forum, this post makes interesting reading, but I am just a little disspointed that someone has not offererd some really simple examples of the costs.
As gold is such apopular trade at present can anyone then for example tell me "the financing" element of the cost of a rolling cash bet on spot gold on CMCs Platform for one night assuming an interest rate BOE base rater fo 2%? and a 1GBP stake?
My guess is that answer will be no, and just a load more rambling about "what libor is used?" "what widget is on" so on and so forth, which basically says it all...its far to complicated for most traders to figure out, and that suits SB firms just fine...room for hokers pokers! The first SB firm to simplify their financing charges will likely be on a winner. I've absolutely no idea how much more of a successful trader I would have been in gold and silver in the last year if it where not for rolling finances charges...not a clue. Thank god a for a strong bull...dont mind sharing then!
As gold is such apopular trade at present can anyone then for example tell me "the financing" element of the cost of a rolling cash bet on spot gold on CMCs Platform for one night assuming an interest rate BOE base rater fo 2%? and a 1GBP stake?
My guess is that answer will be no, and just a load more rambling about "what libor is used?" "what widget is on" so on and so forth, which basically says it all...its far to complicated for most traders to figure out, and that suits SB firms just fine...room for hokers pokers! The first SB firm to simplify their financing charges will likely be on a winner. I've absolutely no idea how much more of a successful trader I would have been in gold and silver in the last year if it where not for rolling finances charges...not a clue. Thank god a for a strong bull...dont mind sharing then!
Similar threads
