Spreads on Futures?

[evostik]

Hi All

Could anyone please help me understand what are the typical bid/ask spreads with futures trading compared with Spread Betting? For example, I currently use CMC who offer a 4 point spread on the Dow. If I traded the mini Dow futures and payed a reasonable round trip commission, what would the 'spread' be on the futures price?

This would help me to work out at what stage moving from SB to Futures would cost-in for me.

Many Many Thanks

Evo

 

[dcarrigan]

can have the best of both worlds with f betting, sb for tax reasons, and live futs with ladder to put your bid offer in. .8 spread footsie 2-4 dow futs depending on number of trades per month. no further com. all imo.

 

[frugi]

In hours mini Dow futs spread is usually one point, occasionaly jumps to 2 or 3 in a fast market.

 

[Directional]

yep, bid/ask in Dow and most futures is normally 1 tick tight during normal market hours.

as dcarrigan suggested, you can trade the futures with direct access in a Spreadbet "wrapper" with firms such as TwoWayFutures and FuturesBetting.

If you have the capital requirements (£5k) and typically trade the dow in $5/pt size already, you'd be saving yourself the 4pt spread on every trade immediately by switching.

 

[evostik]

Thanks so far everyone. Just the kind of information I was hoping for.

The issue of saving the spread is whatI was hoping to establish. I guess there must be a cross-over point that can be calculated based on 'how much a point' one is betting. At the low end, SB probably makes sense but the higher you go the futs commission becomes proportionally less. If scalping for a few points this is clearly going to make the diference between winning and losing.

I think I need to understand more about wrapping the fut in an SB wrapper.

Cheers

Evo

 

[peto]

Futures - as well as the spread on the mini Dow bear in mind the commissions which might approximate to another point (i.e. roughly $5 per contract round trip). On the other hand you can save paying any spread at all if you enter and exit your trades with limit orders set early so that you are '1st in the queue'.
Slightly off topic, but you mention 'scalping for a few points'. Another important difference you might notice here is speed of execution, where direct access is almost instant ( half a second or so from pressing the button to receiving the confirm signal), and spread betting can sometimes be significantly longer, making scalping difficult or impossible.

 

[Directional]

typical direct access futures with a retial brokers you'd pay around $2.50-$1.90 a side or less in commission.

An "SB wrapper" is basically the same thing - you trade the futures directly, but the commission is added onto the trade entry price as a "spread" and the broker is licensed as an SB firm - so the government counts it as a bet.

All the advantages of direct access, (speed, market depth, real market access, no requotes or skew etc) with the tax free status of betting.

 

[evostik]

Thanks Peto. To be fair to CMC, not had too many times where a delay has caused me a problem - 1.5 to 2 seconds seems typical. It is more the spread thats the problem for me. On Nas stocks, for example, the spread is 5 so, with a 10 point scalp target (net profit), the instrument needs a 15 point move - its amazing how often my entry would give me a ten point move before moving back so I can't/don't close. Also, of course, if using a tight stop (like I do when scalping) then the spread of 5 means getting killed way too often! It screws the risk/reward to win/loss ratio. Basic stuff, I realise, but I am in learning mode!!

 

[Vaco]

scalping and spread betting do not go hand in hand, if this is your preffered method of trading then you really need to go direct access.

 

[cherriman]

TwoWayFutures/FuturesBetting

Arbitrageur,

I'm just starting to look into betting on futures. You mentioned the two firms above. Do you have experience of them ? Is there any way I can check on them apart from setting up an account ? I used to have a spread betting account but closed it because of the skew.

Eric
p.s. from an NLP point of view, Perception is Projection, therefore your experiences are the result of who you are !

 

[jkhek21]

As mentioned in a few post before during normal market hours Mini Dow futures spread is normally 1 point, if those of you are considering moving from spread bettings to futures. I am a broker from Global Futures Exchange and Trading Company I can provide you free live simulators for Mini Dow Futures Feed and you can see for yourselves what the spreads are during market hours, If you are interested please email me at [email protected] and I will be more then happy to provide you one.