Spread Bets - The Cost of Trading......

[J-S]

Hi all

First post, so hello to everyone!

I've got a question about the spreads with the spread betting firms.

I'm looking to trade a mixture of currency, commodities, bonds, interest rates etc with fin spreads. I'm just trying to work out the costs of trading with the spread bettors & whether it's worth it.

I've run through the market info for the markets that I'm interested in, and I've calculated the cost of the spread as a % of the price of each market.

1. Euro Dollar (CME) (Spread = 0.04%)
2. Euro Currency (CME) (Spread = 0.08%)
3. Swiss Frank (CME) (Spread = 0.15 %)
4. Long Gilt 15 year (Liffe) (Spread =0.04%)
5. Short Sterling (Liffe) (Spread = 0.04%)
6. Euro Bund (Eurex) (Spread = 0.04%)
7. Euro BOBL (Eurex) (Spread = 0.05%)
8. Crude Oil (NYMEX) IPE (Spread = 0.31%)

I'm puzzled - the spreads seem very low, and yet every man and his dog seems to complain that trading these markets is too expensive with the spread betting firms? Have I calculated correctly or am I missing something?

Many thanks

J-S

 

[ChartMan]

No, but you have to watch any bias against the real world price, as this adds to the effective spread. Also, it depends on the size of your bet too. For lower bets, it's cost effective. For higher bets, the spread cost x stake is big... you'd be better off trading large amounts with someone like IB where the spread is at the real market price , but they charge so much per deal.

 

[Visaria]

Also it depends on your style of trading in terms of length of time you intend to keep a trade. Generally, the shorter the period of time, the more expensive these spreads are; however if you are intending to hold positions for days to weeks to longer, then it is okish. (although I personally think that the spread on both short and long interest rate futures (i.e. bonds) is a total rip-off when the underlying market offers a spread of a point and you can probably be filled on the right side of the spread many times)

You may also need to bear in mind the frequency of trades you transact in any given period

 

[J-S]

Thanks

Many thanks for the replies.

I'm trading a trend following system and holding on average for 1 week to up 6 months. I would imagine that the spreads become less of an issue with this way of trading though I will have a go at calculating the differences between the different options.

My system calls for trading a large number of markets to increase the odds of getting in a good trend, and this is the plus of having stops down to 50p per point with the likes of financial spreads.

Thanks again

J-S

 

[Vaco]

dont forget that the sb firms will also charge you interest on your long overnight positions this is applied to the whole trade not just the margin u us.

 

[chindl]

dont forget that the sb firms will also charge you interest on your long overnight positions this is applied to the whole trade not just the margin u us.

Elef
This only applies when trading the rolling daily contracts and not the contracts quoted at the start of the thread.
Regards
Chris