Calculating the cost of carry

[Guest Lewis1234]

If a stock has a spread of say 5, and I'm paying 10 pound per point, how much does it cost (ignoring dividend readjustments etc) to roll the trade every day? Would it be effectively like closing and reopening the same trade every day?

[GeorgePizarro]

Hi ,

 

If you're trading a share on a CFD account or a DFB contract on a Spreadbetting account you will pay an overnight funding fee (only if the position is held on the account at 10PM UK time). Please note that quarterly contract shares for Spreadbetting have a wider spread to incorporate interest for the duration of the contract. 

 

In order to calculate the overnight funding fee you would use the below calculation:

 

(Size X Price) X (IG admin +/- Interbank rate) / 365 or 360.

 

IG admin fee is 2.5% annually.

Interbank rate is the 1 month rate. For UK this is LIBOR, which is currently approx. 0.25163%

Please note that if long you will pay LIBOR and if short receive.

You will divide by 365 days if UK, South African or Singapore. And 360 days for every other country.

 

As an example, if I was long £10 per point of a UK stock and the closing price was 500p. I would pay the below:

 

(£10pp x 500) X (2.5% + 0.25163%) / 365 = £5000 X 2.75163% / 365 = £0.38 overnight charge (rounded up).

 

Please see the below links for more information. You will need to scroll down the page and select the 'Funding' tab.

 

https://www.ig.com/uk/shares-spread-bet-product-details

 

https://www.ig.com/uk/shares-cfd-product-details

 

Please also note that the position will not be closed on your account realising the profit/loss, the market will simply shut and re-open the following day.

 

If you or anyone else has any more questions let us know!

 

Thanks,

MichaelC