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
      20,046
    • Total Posts
      88,075
    • Total Members
      69,036
    • Most Online
      7,522
      10/06/21 10:53

    Newest Member
    leothayyil
    Joined 29/09/22 16:55
  • Posts

    • Stock Market SP 500, NASDAQ 100 NDX, Russell 2000 RUT. Dow Jones Industrial (DJI) Elliott Wave Technical Analysis and Trading Strategies. US Markets News Today:S&P 500 closes at new 2022 low, as Apple sells off Elliott Wave Market Summary: The current trend down into Wave (1) is not completed, any move up is a corrective bear market rally Elliott Wave count: (ii) of v) of 3 of (1) Day / Trend Trading Strategies: Day traders look to short Wave c of (ii) Video Chapters 00:00 S&P500  14:08 NASDAQ 100 (NDX) 15:35 Russell 2000 (RUT)  20:17 End. Thanks for supporting! Analyst Peter Mathers TradingLounge™ Australian Financial Services Licence - AFSL 317817 Source: tradinglounge com    
    • Retailers are being hit into all corners. Today it’s the turn of high street stalwart Next plc. It’s lowered its guidance and shares opened down almost 10%, taking shares of rivals M&S with it.      
    • What market data to trade on Friday: EUR/USD, GBP/USD, EUR/GBP, HSI Economic data from Japan, Australia, China US, UK and the eurozone, IGTV’s Jeremy Naylor takes a trip around some of the big FX pairs. Also, with PMI data from China, could we see the downtrend in the Hang Seng (HSI) continue?    
×
×
  • Create New...