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Calculating Overnight charges vs Futures


Spook1304

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Hi, 

I'm new to the forums and I'm looking for some assistance in calculating the charges applied to a trade depending on if it was placed on CASH market vs Futures.
The market I'm looking at is the VIX Volatility Index. My understanding is that Futures markets do not incur an overnight charge as this is build into the spread. 
Can some one assist in calculating a charge for both Overnight vs Futures on the VIX?

Overnight

Say the VIX is trading at £20.
We are putting our stake at £50 per point.

Based on what I've read from the link below, the formula should be:
https://www.ig.com/uk/help-and-support/spread-betting-and-cfds/fees-and-charges/why-is-overnight-funding-charged-and-how-is-it-calculated-

image.png.449498c61cb76487682da2246edb28f2.png

In this instance (Assuming a LIBOR rate of 0.48% to keep it in line with the article above) :
=50*20*(2.5+0.48)/365

Am I correct in saying this should be 0.08 so £0.08 overnight charge for the price/£ per Point above?
This seemed reasonable until I read this post here where he was being charged ~£100 per night where as my calculations show it should have been ~£4:

Futures

For the futures side of things, I based it on information from this page:
https://www.ig.com/uk/help-and-support/spread-betting-and-cfds/fees-and-charges/what-are-igs-indices-spread-bet-product-details

The spread shows as 0.1 which using the same Price of £20 and £ per point of £50 works out at £5

The charges for the overnight seem somewhat excessive compared to the futures which make my think my calculations are incorrect.
My goal is to determine at which point, the futures market is more suitable depending on how long I hold my trade.
Any help is appreciated. If anyone is aware of any kind of calculator that already does this, let me know - I couldn't find any surprisingly.

Thanks.

 

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9 hours ago, Spook1304 said:

Hi, 

I'm new to the forums and I'm looking for some assistance in calculating the charges applied to a trade depending on if it was placed on CASH market vs Futures.
The market I'm looking at is the VIX Volatility Index. My understanding is that Futures markets do not incur an overnight charge as this is build into the spread. 
Can some one assist in calculating a charge for both Overnight vs Futures on the VIX?

Overnight

Say the VIX is trading at £20.
We are putting our stake at £50 per point.

Based on what I've read from the link below, the formula should be:
https://www.ig.com/uk/help-and-support/spread-betting-and-cfds/fees-and-charges/why-is-overnight-funding-charged-and-how-is-it-calculated-

image.png.449498c61cb76487682da2246edb28f2.png

In this instance (Assuming a LIBOR rate of 0.48% to keep it in line with the article above) :
=50*20*(2.5+0.48)/365

Am I correct in saying this should be 0.08 so £0.08 overnight charge for the price/£ per Point above?
This seemed reasonable until I read this post here where he was being charged ~£100 per night where as my calculations show it should have been ~£4:

Futures

For the futures side of things, I based it on information from this page:
https://www.ig.com/uk/help-and-support/spread-betting-and-cfds/fees-and-charges/what-are-igs-indices-spread-bet-product-details

The spread shows as 0.1 which using the same Price of £20 and £ per point of £50 works out at £5

The charges for the overnight seem somewhat excessive compared to the futures which make my think my calculations are incorrect.
My goal is to determine at which point, the futures market is more suitable depending on how long I hold my trade.
Any help is appreciated. If anyone is aware of any kind of calculator that already does this, let me know - I couldn't find any surprisingly.

Thanks.

 

Hi @Spook1304,

To calculate the overnight funding for VIX you will need to use the formula : Bet size x Price x Swap Bid/Offer  ( Bid for short and offer for long)

image.png

 

For further assistance please reach out to helpdesk.uk@ig.com

All the best - Arvin

Link to comment
4 hours ago, ArvinIG said:

Hi @Spook1304,

To calculate the overnight funding for VIX you will need to use the formula : Bet size x Price x Swap Bid/Offer  ( Bid for short and offer for long)

image.png

 

For further assistance please reach out to helpdesk.uk@ig.com

All the best - Arvin

Thanks Arvin.

So to stick to the example above:

VIX is trading at £20.
Bet set to £50 per point.
open a LONG position

this would result in:
Bet size x Price x Swap Offer 

50 x 20 x -0.0763
76.36

Surely thats £0.76 and not a £76 overnight fee to hold a £50 per point position overnight? 
Can you post a link to where you got that formula?

Futures
For the futures version of the same trade, with the current spread of 0.2, you pay £10 if you buy and instantly sell (using the same parameters as above) which seems reasonable. If the Contract gets to expiration (currently Sep 2021), I assume the only cost for the rollover is the spread to close the existing contract and re-open the new one?

So 
Sep 21 -  18.73 / 18.93
Oct 21 - 20.98 / 21.18

My current Sep 21 contract would be closed at price 18.73 and a new Oct 21 contract opened at 21.18 resulting in a loss/fee of £122.50. 
 

Thanks again for your assistance. 

Link to comment
17 hours ago, Spook1304 said:

Thanks Arvin.

So to stick to the example above:

VIX is trading at £20.
Bet set to £50 per point.
open a LONG position

this would result in:
Bet size x Price x Swap Offer 

50 x 20 x -0.0763
76.36

Surely thats £0.76 and not a £76 overnight fee to hold a £50 per point position overnight? 
Can you post a link to where you got that formula?

Futures
For the futures version of the same trade, with the current spread of 0.2, you pay £10 if you buy and instantly sell (using the same parameters as above) which seems reasonable. If the Contract gets to expiration (currently Sep 2021), I assume the only cost for the rollover is the spread to close the existing contract and re-open the new one?

So 
Sep 21 -  18.73 / 18.93
Oct 21 - 20.98 / 21.18

My current Sep 21 contract would be closed at price 18.73 and a new Oct 21 contract opened at 21.18 resulting in a loss/fee of £122.50. 
 

Thanks again for your assistance. 

Hi @Spook1304,

You can find calculation of VIX overnight funding at the bottom of this page.

If you need further assistance it would be best to contact the helpdesk.uk@ig.com

I hope that it helps.

All the best - Arvin

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