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Overnight Funding + FX Conversion


Zazzi

Question

Hi,

 

I am looking to buy certain shares using spread betting (primary reason is tax efficiency, not leverage per se) - the amount per share will probably be around £1-2k per share.

Hold period could be anywhere for a month to a year or even longer, although I expect that it will probably be a few months on average.

My questions are:

1) Does it generally work out cheaper to use defined expiry spread bet forwards for these shares, even though they have wider spreads (since overnight funding is not charged on these?) or the cash/spot option, assuming the forwards may or may not need to be rolled forward. Does the answer hold true for all asset classes on IG (i.e. is defined expiry cheaper to hold, despite the wider spread once overnight funding is taken into account), or just shares only?

2) Secondly, I am assuming the 0.5% FX conversion fee will be applied to the entire transaction e.g. buy £1000 of Apple shares and NOT just the P&L generated from the transaction?

3) Does the overnight funding apply to just the amount on leverage (e.g. assuming margin is 1:5, I would need to hold £200 in equity, so £800 would be on leverage) or the entire amount of the trade of £1000 (even though a part of it is not borrowed?)

Thanks,


Dave

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