Spread betting question for a beginner.

[roy_a]

Hi there, just got a quick question about spread betting. I am new to this, so i am just asking what you think about the following strategy.

The strategy is effectively a buy-and-hold one - which seems effective in the current market conditions. For example, suppose i have Company X trading at £4.00. I think that in the long run, as in the next two-three years, the share price will increase significantly. Therefore, suppose i hold a long position and bet £50.00 per point rise. Obviously the share price might fall in that period (temporarily), so i will make sure that i have sufficient capital in my account to cover any short term falls in the price. However, if the share price does go up to £7-8, then i will have made a tidy sum.

Would you advise on such a long-term strategy, or is spread betting better for short-term thinking? The reason i ask this question is that i have a full-time job, and i don't want to have to analyse my position on a daily basis.

Kind regards,

Roy

 

[Lee Shepherd]

Your long term strategy is not good for spread betting as the contracts will expire making you take the loss.

Your best bet is to actually buy the shares outright and directly, you'll get amongst other things, dividend payments.

I would also suggest not putting all your eggs in one basket and diversifying over a few good stocks and make sure you do your homework and are not lured into penny shares or dead stock(reg s) ect.

When buying a part of the company, imagine it just like your local butcher's asking you for money. What questions would you ask.

How steady has the business been, what is it's current liability for debt against assets. If big debt to assest ratio then who's it's lender/s. Whats the company's long term business approach. Who's in charge/whats their track record. ect ect.

This list is by no means exhausted but gives you some idea of some questions that you'd need the answers to.

Hi there, just got a quick question about spread betting. I am new to this, so i am just asking what you think about the following strategy.

The strategy is effectively a buy-and-hold one - which seems effective in the current market conditions. For example, suppose i have Company X trading at £4.00. I think that in the long run, as in the next two-three years, the share price will increase significantly. Therefore, suppose i hold a long position and bet £50.00 per point rise. Obviously the share price might fall in that period (temporarily), so i will make sure that i have sufficient capital in my account to cover any short term falls in the price. However, if the share price does go up to £7-8, then i will have made a tidy sum.

Would you advise on such a long-term strategy, or is spread betting better for short-term thinking? The reason i ask this question is that i have a full-time job, and i don't want to have to analyse my position on a daily basis.

Kind regards,

Roy

 

[Splitlink]

Hi there, just got a quick question about spread betting. I am new to this, so i am just asking what you think about the following strategy.

The strategy is effectively a buy-and-hold one - which seems effective in the current market conditions. For example, suppose i have Company X trading at £4.00. I think that in the long run, as in the next two-three years, the share price will increase significantly. Therefore, suppose i hold a long position and bet £50.00 per point rise. Obviously the share price might fall in that period (temporarily), so i will make sure that i have sufficient capital in my account to cover any short term falls in the price. However, if the share price does go up to £7-8, then i will have made a tidy sum.

Would you advise on such a long-term strategy, or is spread betting better for short-term thinking? The reason i ask this question is that i have a full-time job, and i don't want to have to analyse my position on a daily basis.

Kind regards,

Roy

You won't get any dividends, of course. It's a big "if" and a dangerous one because you are probably thinking of leverage, which would leave you with huge losses and margin calls if things go wrong. Personally, I would rather have the shares for that length of time. Remember that spreadbetting firms are bookies. You are gambling, no matter how good you may be, on the price moving up and they are betting against you. If the shares get volatile, they could (and almost certainly, will) ask you to increase your margin to unacceptable levels. If that happens you are between a rock and a hard place.

Think of how much margin you may required to lodge with them and if they go bust---hard luck, no FSA support.

Not a good idea. Futures are not designed for investment purposes.

 

[Tenapenny]

I would agree with Lee's advice. 2 or 3 years is a long time, you could go long on a six monthly futures-style spread bet. If you want to hold for this length of time buy the stock. If you've not used up your capital gains allowance it should be more effective taking into account cost of any rollovers and the spread on the initial purchase.

 

[mp6140]

Mp -- Im Still Lost With You Brits And Here In The Us !

i just cant make hide nor hare out of thi8s

what i understand so far is that youse peeps got these "bookies" who allow you to bet against the spread, which is EXACTLY the same thing as our "brokers" here in the states. the brokers take the opposite side of your trade and thats that !

we also have "direct access trading" which is done thru ECN's (electronic communications networks) where there is (supposedly) a genuine humanoid on the other end of your trade.

NOW, whats the difference between HOLDING over a long period of time with a bookie, broker or you aunt sally ? While im not an "investor" which is the stratagy the OP refers to, I have held for 3 or 4 months with a broker (same as your bookie) and ended up well into profit, so its really a matter of understanding WHAT is the significant differences between you guys on that wet island and us over here in the states ??

if one "invests" and follows the usual rules of "investing", I dont see where a problem exists unless theres something I dont understand !

you guys got me real confused --- must be because someone came along and put the steering wheels on your cars on the wrong side !

mp

 

[Glenn]

i just cant make hide nor hare out of thi8s

what i understand so far is that youse peeps got these "bookies" who allow you to bet against the spread, which is EXACTLY the same thing as our "brokers" here in the states. the brokers take the opposite side of your trade and thats that !

we also have "direct access trading" which is done thru ECN's (electronic communications networks) where there is (supposedly) a genuine humanoid on the other end of your trade.

NOW, whats the difference between HOLDING over a long period of time with a bookie, broker or you aunt sally ? While im not an "investor" which is the stratagy the OP refers to, I have held for 3 or 4 months with a broker (same as your bookie) and ended up well into profit, so its really a matter of understanding WHAT is the significant differences between you guys on that wet island and us over here in the states ??

if one "invests" and follows the usual rules of "investing", I dont see where a problem exists unless theres something I dont understand !

you guys got me real confused --- must be because someone came along and put the steering wheels on your cars on the wrong side !

mp

Ever heard of a Bucket Shop ? (Reminiscences of a Stock Operator).
Think along the same lines.
The other aspect which should give you a hint is that spreadbetting is tax-free because it's classed as Gambling (as in a Casino).

Who drives on the wrong side ?
In the 1700's your teamsters sat on the left hand horse and used their right hand for the whip, so they wanted others to pass them on the left.

Our teamsters had seats on their wagons - far more civilised - and sat on the right of the seat so that when using the whip right-handed it wouldn''t get caught up in the load.
So they wanted others to pass them on the right.
And incidentally the Romans who lived here 2000 years ago also drove their wagons on the left.

Perhaps the reason for your confusion goes back to before 1910 in the USA when the driver sat on the right-hand side of the car and drove on the right - lol

Glenn

 

[nine]

A spread better is a classic bucket shop MP.

They charge no commissions but instead have a wider spread between bid and ask. They follow the price of the underlying (index, future, forex or share say) but they may be slow or they may distort. Much of the discussion on their ethics and problems relates to the distortions - same old stuff you see from forex bucket shops.

Two things make them attractive in most cases:
- small size per point (usd1.00 or gbp0.50 with smaller startup in some cases).
- trading through a spread better is tax free in GB.

 

[Hoggums]

Don't forget that if you spreadbet you pay interest on the money you've effectively borrowed at at rate of 5% pa. So your stock has to go up by 5% just for you to break even after a year.

 

[mp6140]

Ever heard of a Bucket Shop ? (Reminiscences of a Stock Operator).
Think along the same lines.
The other aspect which should give you a hint is that spreadbetting is tax-free because it's classed as Gambling (as in a Casino).
Glenn

=================================================================
glenn and nine -- im aware of the spread paying the tariff, that they resemble bucket shops in that they are making and trading the prices (which is my BIG problem with INTERBANKFX, cause they really distort in their favor !)and that youse peeps dont pay taxes on wins (we do, but write off the losses against the wins)

but is "direct access" so very much more expensive ---- here in the states, you can open a direct access account for as little as $250 USD, and are allowed to trade down to a 10,000 share mini lot, which would equate to perhaps 10 cents bet, which must be similar to your bookies, with different bet sizes.

I gather that does not exist in england ?

thnx for the car explanation --- unfortunately you still drive on the wrong side !

oh, in indoor track racing events, such as bicycles, skaters, etc -- which way do they race -- clockwise or counter clockwise ??

mp

 

[mp6140]

Don't forget that if you spreadbet you pay interest on the money you've effectively borrowed at at rate of 5% pa. So your stock has to go up by 5% just for you to break even after a year.

=========================================================

oh, so you pay interest on margin youve borrowed against -- we dont !

at 5pm edt, we have the "rollover" when the contract you own is "rolledover" into another new contract for the next day --- depending on whether youre long or short, you either are PAID interest or have the interest DEBITED from your account, which is based on the exchange rate of the two currencies in the pair !

other than that, there is NO interest on the margin you borrow !

mp

 

[Glenn]

=================================================================


but is "direct access" so very much more expensive ---- here in the states, you can open a direct access account for as little as $250 USD, and are allowed to trade down to a 10,000 share mini lot, which would equate to perhaps 10 cents bet, which must be similar to your bookies, with different bet sizes.

I gather that does not exist in england ?

We have Direct Access through London Stock Exchange and LIFFE. You can buy/sell 1 Share, 1 Futs Contract, 1 Option. However it is more expensive.
With a typical execution-only stockbroker you will pay $50 round trip to trade a block of shares of any size.
There are no mini-lots in futs here. A Ftse100 futs contract makes $20 a point. You need min of $1000 to open a typical account and a round trip will cost you $60 plus $7.20 per contract.
So Broker charges are not as cheap as, say, Interactivebrokers and going short of stocks is limited (afaik) to advisory brokers with higher charges and only for a relatively small number of stocks, which is why I trade US stocks through IB.

=================================================================
oh, in indoor track racing events, such as bicycles, skaters, etc -- which way do they race -- clockwise or counter clockwise ??

I'll let you answer that

Glenn

 

[mp6140]

We have Direct Access through London Stock Exchange and LIFFE. You can buy/sell 1 Share, 1 Futs Contract, 1 Option. However it is more expensive.
With a typical execution-only stockbroker you will pay $50 round trip to trade a block of shares of any size.
There are no mini-lots in futs here. A Ftse100 futs contract makes $20 a point. You need min of $1000 to open a typical account and a round trip will cost you $60 plus $7.20 per contract.
So Broker charges are not as cheap as, say, Interactivebrokers and going short of stocks is limited (afaik) to advisory brokers with higher charges and only for a relatively small number of stocks, which is why I trade US stocks through IB.

==================================================================

WOW -- no wonder some people question what i earn and my methods, especially when i tell them to go short the reversals !

i use EFX (MB) as one of my "brokers" and we can bet anything from 10,000 share mini lot to one full lot (100K shares) with only a differing commission cost -- with my real brokers (not Direct Access) i can do the same BUT there is NO difference in cost, just reduced profits from the reduced number of shares ! But here, most bet the smaller amounts while theyre learning and then move up to full lots (forex)

we cant hide from revenue because were gambling -- our IRS wants the money, no matter how you earned it ---- i believe theres even a code that deals with "ladies of the night" and that they have to pay taxes for services delivered !

Ill stay rite here and trade -- at least i know the rules.

Glenn

enjoy and trade well

mp

 

[nine]

Be aware mp that its not the brokerage that's expensive. IB is available and well used in the UK as well.

What's expensive is the exchange fees (and maybe some taxes). Even the data is expensive. Probably trying to keep the riff raff out.

As a result you'd be better off trading DAX, ESTX50, Bund or something else in europe rather than UK stocks and futures.

 

[leeboy123]

lee

--------------------------------------------------------------------------------

hi all

being new to spreadbetting i was looking for a couple of decent websites i could sign up to that offer an unbiased view on research and tech analysis on a daily basis to my email account.
most of these you have to pay for which i dont mind but to start any info on main markets ftse, cable, dow, ftse100 stocks would be a great help while i find my feet!