Jump to content
  • 0

Daily funded spread bet and quarterly (forwards)


Greeners

Question

Hi

I tend to trade as a position trader and currently have open several cash funded spread bet positions on numerous shares (usually for several weeks or longer).

I have recently discovered that I can spread bet these positions as forward / quarterly funded positions and the IG academy suggests that this method is more cost effective than holding these longer term positions as Cash funded positions.

I understand that the wider spread reflects the increased cost and the material I have found on IG suggests this reflects the overnight funding charges for the quarter.

I can’t find anything that allows me to clearly see the difference in costs between holding a given long term position as a cash bet versus a quarterly bet and whether there is actually any benefit to be derived from doing so.

Can anyone help or advise. Does holding a quarterly position result in lower overall funding charges compared to cash and is there a cut off point where holding the position as a cash bet results in lower overnight funding charges.  I.e. If I open a quarterly position and then sell with a week would I of been better to open as cash funded position.

I don’t find the charge information particularly clear Andy helpful in allowing me to work out the differences (if indeed there are any)

Thanks
Justin

Link to post

5 answers to this question

Recommended Posts

  • 0

Hey @Greeners - Let me try and break it down a little. As stated above this needs to be something you manually work out based on duration of trade etc. When you are looking at the DFB or Cash market for shares for example which have daily charges, you're going to need to consider...

Overnight funding if your deal is in GBP
Size × closing price × LIBOR +/- 2.5% ÷ 365
Based on LIBOR one month overnight rate

Therefore in this case you are looking at
£xxxxx X xxxx X (0.5% + 2.5%) / 365 = £xxxx a night 

You then need to add to cost to get in/out of the spot trade (i.e. the spread or commission)

If you are planning on holding a position for a number of days / weeks as you said it is worth thinking about using the Forwards contract which may be cheaper for you. You will pay a larger spread to open, however there is no overnight charges applied each night.

The cost on the forward will just be the spread or commission to get in/out of the trade. Both trades should incur the same FX charge if required. 

FX / commodities etc are slightly different but let me know if I can help on those. 

  • Like 1
  • Thanks 1
Link to post
  • 0

Hi @Greeners, as size of bet is a factor in the overnight cost calculations and duration is a factor of total cost and these will be variable both by trade and by trader you would probably want to consider 'on average' am I better off with Spots or Forwards. Each trade and trading style will differ and make a publishable cut off calculation for all traders problematic and potentially misleading.

I haven't seen any such calculations on IG's web pages. One way to ascertain which would benefit you in particular would be to run a test on demo to find the on average best system though I do appreciate that will take time.

Anyone else with any ideas? 

  • Like 1
Link to post
  • 0

@caseynotes 

Thanks for the response.  I did think about using the demo account but as it's free it doesn't actually show any historical charges from which to figure out the cost differences.  I decided to place a couple of live positions last night and interestingly the cost for one of the shares was minimal making a quarterly position  and as you say the overall cost is largely dependent on a number of factors so its not really a black and white answer to my question.

  • Like 1
Link to post
  • 0

Thanks @jamesIG 

I assume trade size is the price per point. I’ve done some calculations and the result is within the range of what I’ve been paying so think I’ve sussed it out.  In addition if I go long on a position over the long term using the cash/spot price and it moves in my favour then the nightly interest I’m charged is also going to increase the more successful the trade becomes.

Link to post

Join the conversation

You are posting as a guest. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Answer this question...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

  • General Statistics

    • Total Topics
      15,389
    • Total Posts
      73,859
    • Total Members
      62,261
    • Most Online
      7,522
      10/06/21 10:53

    Newest Member
    darrylantonio0
    Joined 12/06/21 18:09
  • Posts

    • Oh, so underlying conditions are significant now we have the vaccines, ''98% of ALL COVID-19 deaths in English hospitals were people with underlying conditions. The evening standard is trying to defend the vaccine by saying that the people who died with two doses had underlying health issues. See the problem?'' datatosee.com  @dontbetyet     MEANWHILE, - What? ''WHOA!! 73% *HIGHER* death rate in this vaccinated UK cohort compared to the unvaccinated (19/9344 vs 23/19573, p=0.07). Pause. We need more transparency on this data, not more politics with people ... misrepresenting the data.''  Dr Ah Kahn Syed @arkmedic   Also meanwhile, ''Pandemrix was pulled for causing narcolepsy in 20 in a million doses. The crude reporting rate for myocarditis is 35 per million doses for 16-17 year olds [covid vaccines] ''  Dr Clare Craig @ClareCraigPath  (Chart taken from FDA video below).        .
    • UK following the US in rewriting the rules for testing and counting the Chinese virus. Before vaccines every thing possible was done to inflate the numbers, post vaccine rollout now new rules to deflate the numbers. ''NEW: Hospitals have been told to differentiate between those actually sick with coronavirus and those who test positive while seeking treatment for something else. The move will reduce the official numbers in hospital for coronavirus Via @Independent.''  @PoliticsForAlI   Meanwhile Ferguson's fake models finally getting the sort of attention they deserve. Matt Ridley  @mattwridley: ''I was misled by Prof Neil Ferguson at a select committee hearing.'' 'Researchers at Uppsala University adapted the ICL model and on 30 April estimated that, without mitigation, Sweden’s Covid deaths would hit 96,000 by the end of May. The actual number on 1 June was just 4,403. Questioned about the disparity by Matt Ridley in the House of Lords on 2 June, Ferguson insisted: ‘they did not use our model, they didn’t adapt our model’ and ‘We had no role in parameterising it’. ICL itself tweeted sniffily on 6 May, ‘Professor Ferguson and the Imperial Covid-19 response team never estimated 40,000 or 100,000 Swedish deaths’.  In fact ICL did and the Excel spreadsheet they produced showing just that is still up on the internet for all to see. So what about Sweden, huh? | The Spectator Australia   Also,   .
    • probably missing the point, but I don't get the growth stocks (QQQ) short to hedge against correction in cyclical commodities, sorry.  NDX went nowhere since mid Feb, while oil is up 20% or so.  That doesn't mean tech is cheap, nor that QQQ would rise (again...) when cyclicals crash.  but hasn't the narrative been reflation-rotation for a while...?  if that simply unwinds - QQQ obviously will outperform.  on the other hand, in case of a general risk-off, with multiple compression in the center, you'll do very well.  Personally, I see too much risk of NDX catching up first.  next week expiry date - not that I would have much data on these things, but wouldn't be the first time that range breakouts come just in time, almost like manipulationgic...      
×
×
  • Create New...