Spreadbet/IB- the final answer?

ChartMan

Legendary member
5,580 46
Here we go. A quick attept to show the pro's and cons of spreadbet v IB ( or any other direct to market.)
Assumptions:
1: No tax on SB- the actual points x bet you get to keep the lot.
2: spread AND bias is assumed at 3 points ( 2.5-3 nominal)
3: You need to deduct 25% minimum from the IB actual points x bet. IF you are a big winner, make that 40% afer the first £28K or so.No allowances for lower bands etc.
4: no allowance for dealing fees on IB- allow $5 per round trip. This is insignificant at the higer amounts.
5: Min. bet on IB is $50 per point, and goes up in steps of 50$ per point ( contract)
6: Min bet on Spreadbet is rounded to 1$ (50p)
7: No allowance for "allowable expenses" on IB

So what can we see ?
Firstly, the LOSSES are always double on SB, assuming you take the norm of 2 points as a maximum hit.
Here's the CRUNCH. The bigger the move that you can achieve, the better of you will be with SB.
If you take an average scalping type move on ES ( 1-5 points), you will win hands down with IB. You kiss goodbye to the first 3 points of a move with SB's.
The break even point is around a 6 point win at 40% tax and a 10 point move at 25%
Given that 10 point moves are few and far between, it suggests that IB is going to be the best bet. I suggest that most moves are going to fall in the 2-5 point range.
IF you take a longer term view, maybe hours to days, then you will be better off with SB's, IF you can capture the bigger moves. This naturally means you will have to have wider stops.
A lot of "ifs and buts" here, but I hope this helps people see how the numbers work out. If anyone fancies doing something more comprehensive, get it up here.
 

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ChartMan

Legendary member
5,580 46
and the picture
 

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Skimbleshanks

1
2,325 16
Just in case anyone isn't aware, when ChartMan refers to IB he is meaning Interactive Brokers - a cheap and cheerful direct to market US-based broker which now has a UK office.
 

Helenqu

Established member
841 3
Thanks Martin,

Useful to see it laid out with such clarity. For myself IB is the way as I only trade small moves. But I can forsee a time when I have longer term trades to make and my return to spreadbetting the indices.
 
 
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