Rollovers ?

[cshieldsx]

Hi guys, I' currently learning to trade with IG Index (but Im sure this concept is the same for all SB firms).

On any equity you can open a poisiton for todays date, or a date in approx 3 months. The only difference I can see between the two are the prices are different (though they move by the same amount) and the spread is greater for the date in the future. I now a daily position will be closed automatically on market close, but a position for a few months time will not. But I do not understand the concept of rollovers, how much they cost, how this cost is charged, and what point does it become better to get a longer term position opposed to just keep rolling over a daily position ?

Please post all thoughts on the matter, I find it's explained very badly by SB firms themselves. Thanks

 

[ZEPPO]

My recommendation

I would recommend to you Malcolm Pryor's "The Financial Spread Betting Handbook", visit http://www.harriman-house.com/financialspreadbetting for more details.
There is good coverage of every aspect of spreadbetting, from an answer to your question to more exotic topics such as money management and posotion trading.

Eduardo

 

[the blades]

Hi guys, I' currently learning to trade with IG Index (but Im sure this concept is the same for all SB firms).

On any equity you can open a poisiton for todays date, or a date in approx 3 months. The only difference I can see between the two are the prices are different (though they move by the same amount) and the spread is greater for the date in the future. I now a daily position will be closed automatically on market close, but a position for a few months time will not. But I do not understand the concept of rollovers, how much they cost, how this cost is charged, and what point does it become better to get a longer term position opposed to just keep rolling over a daily position ?

Please post all thoughts on the matter, I find it's explained very badly by SB firms themselves. Thanks

Hello there,

Daily bets roll over each night at no charge to you - except a finance charge which works out at (approx ) LIBOR (6%?) +/- 3%. So you pay 9% PA if long, and receive 3%PA if short. This charge is applied if you hold overnight. You pay a narrower spread in the first place for these.

Quarterlies have the interest (LIBOR only) factored in - hence the difference in price. They are also then adjusted for any dividend due in the quarterly period - so you don't lose out. You pay a larger spread for these, but lower "interest rate".

The break even time is around a week (ie holding longer than 1 week, hold quarterlies). It will vary form company to company, and time to time. But you wont go far wrong based on 1 week, IMHO.

Quartelies can roll into the next quarter (pricing pts are the 3rd Tuesday in March, June, September and December I believe) - you usually pay half the spread bet companies spread at this point. CMC (only, I believe) roll at no cost to you.

If you look at the thread "cost of spreadbetting" you'll get an idea of the comparative prices of quarterlies between several companies - form my own experience.

UTB

 

[cshieldsx]

for daily rollovers, how are these % fees applied ? Do they literally take the percentage out of your current profit/loss ? Or do they take the percentage of the points you've made away from your account (according to the £/point level you betted with ?)

 

[the blades]

for daily rollovers, how are these % fees applied ? Do they literally take the percentage out of your current profit/loss ? Or do they take the percentage of the points you've made away from your account (according to the £/point level you betted with ?)

say you hold BT at £5 per pt - and it's priced at (guess) £5 per share.

Effectively you hold £2,500 of stock.

Let' s say LIBOR is 7%, so you're paying 10% if long - If you held for a year you'd be charged £250, so overnight they'd deduct £250 / 365 in cash from your account.

UTB

 

[cshieldsx]

thanks alot for your explanation, It makes sense to me now !