Jump to content
  • 0

Overnight charges for spreadbetting positions


BigDeal

Question

I am unsure whether IG are charging correctly for positions held overnight.  

I will use IG's own help files to illustrate:

 

Why is overnight funding charged?

When placing a spread bet or CFD, you’re using leverage. This means you are effectively being lent the money required to open your position, OUTSIDE THE INITIAL DEPOSIT YOU'VE PAID. To keep your position open after 10pm (UK time), an interest adjustment will be made to your account to reflect the cost of funding your position overnight.

Indices :      

For each day that a DFB or cash CFD position is open on a stock index, adjustments are calculated to reflect the effect of interest and dividends (if applicable).

Example:

You’re long £6 per point on the FTSE 100

The 10pm (UK time) price is 7720

The SONIA rate* is 0.48%

Cost = £6 x 7720 x (2.5% + 0.48%) ÷ 365

=£46,320 x 2.98% ÷ 365

 

= £3.78 overnight charge

 

* We use the SONIA and the 365-day divisor since you’re trading the UK Index in GBP

 

OK, so my query is this;  as a retail trader, I need to pay a 5% margin (deposit) to open an index position on a spreadbet DFB.  Your overnight charges should therefore reflect the amount I am borrowing (95% of the trade) as per your 'why is overnight funding charged?'.  However, it seems the calculations charge as if 100% of the funds have been borrowed.  Why is there no adjustment for the initial margin?

 

 

 

Link to comment

1 answer to this question

Recommended Posts

  • 0

Hi @BigDeal

Agreed, the words on the website can be misleading. In reality your margin is set aside to secure your exposure. We give you exposure to the full notional value of the trade without using the funds set aside i.e. we do not use your margin to hedge our exposure. In effect margin works like an insurance rather than contributing towards the amount invested. Therefore we calculate overnight funding on the full notional value. 

All the best, 

Anda

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
      21,249
    • Total Posts
      90,855
    • Total Members
      41,352
    • Most Online
      7,522
      10/06/21 10:53

    Newest Member
    Aliashiq
    Joined 03/02/23 17:38
  • Posts

    • Hi @Mark12 If you are trading shares, you will have the option to place a limit order to sell your existing position. When the market opens, please check if your order level is close to where the market is trading. All the best, OfentseIG
    • We have to wait until Friday to find out if the UK economy skirted a recession.   Richard Snow, foreign exchange analyst at Daily FX, tells IGTV’s Jeremy Naylor that after the third quarter contraction of 0.3%, there is a risk around the incoming data for the fourth quarter. Here he discusses GBP/USD as a trade to go short. But what if GDP comes in slightly higher? Richard says that is likely to be largely academic and that he believes the short trade will prevail. Jeremy Naylor | Writer, London | Publication date: Friday 03 February 2023
    • Breaking News - US NFPs Surge to 517k vs 185k Expectations, Unemployment Rate Falls to 3.4% Feb 3, 2023 | DailyFX Nick Cawley, Senior Strategist Source: Bloomberg   US DOLLAR (DXY) PRICE AND CHART ANALYSIS US NFPs smash expectations in January. US dollar picks up a bid. Total nonfarm payroll employment increased by 517k in January, and the unemployment rate fell to 3.4% according to the US Bureau of Labor Statistics. Hourly earnings also beat expectations. Last month’s NFP figure was also revised higher from 223k to 260k. ‘ Job growth was widespread in January, led by gains in leisure and hospitality, professional and business services, and health care. Employment also increased in government, partially reflecting the return of workers from a strike.’     The Federal Reserve hiked interest rates by 25 basis points at this Wednesday's FOMC meeting, a move fully expected, and priced in by the market. Fed chair Powell, while continuing to stress that further rises are data dependent, added a new word to his FOMC vocabulary, disinflation, sending the US dollar lower and risk markets sharply higher. Powell said that it is a ‘good thing that disinflation so far has not come at expense of labor market’, adding that ‘this disinflationary period is in early stages’. While chair Powell will still keep tightening monetary policy to break the back of inflation, financial markets are now pricing in just one more 25bp rate hike at the March meeting before a pause in Q2 and Q3, while rate cuts are now seen in Q4. FOMC Hikes Rates 25 bps as Expected, Leaves Open Further Hike Expectations The US dollar (DXY) picked up a bid post-release rising around 60 cents to 101.90 US DOLLAR (DXY) DAILY PRICE CHART – FEBRUARY 3, 2023     What is your view on the US Dollar – bullish or bearish?
×
×
  • Create New...