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Fees on VIX trading


TheDudeLondon

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Hi, i am trading on IG for a while now, mostly with indices or commodities. I have been recently experimenting with trading the Volitality Index and I am quite surprised about the commodity interest which seems horrendous. I understand that leverage is substantially lower for the Vola Index, which adds to my surprise. Eg for a position of GBP 2,500 per point I have been charged c. GBP100 per day.

That is not at all comparable with fees for indices or gold / silver (which have a much higher leverage).

Can someone explain how those daily fees are calculated? 

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20 hours ago, TheDudeLondon said:

Hi, i am trading on IG for a while now, mostly with indices or commodities. I have been recently experimenting with trading the Volitality Index and I am quite surprised about the commodity interest which seems horrendous. I understand that leverage is substantially lower for the Vola Index, which adds to my surprise. Eg for a position of GBP 2,500 per point I have been charged c. GBP100 per day.

That is not at all comparable with fees for indices or gold / silver (which have a much higher leverage).

Can someone explain how those daily fees are calculated? 

Hey @TheDudeLondon,

Thanks for your message. The VIX overnight funding is caluctated the same was as undated commodities. It's explained best on our website under The better way to trade commodities then go to 'Spread betting example'. 

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Let me know if you need additional clarification or if you'd prefer to speak with someone give us a call. However the figure you provided does seem right. The adjustment for the VIX that would have been taken this morning was 0.041071.. (0.041071 x £ per point) .

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Guest TheDudeLondon

Thank you, that's very useful. 

2 follow-up questions: 

1) i can see that there are two kind of instruments for the VIX, one is the DFB, the other one the Dec-19 instrument. Does one of them offer lower fees?

2) does that mean that in a scenario in which I short the VIX, I would receive a positive income for holding it overnight?

Thanks

 

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11 hours ago, Guest TheDudeLondon said:

Thank you, that's very useful. 

2 follow-up questions: 

1) i can see that there are two kind of instruments for the VIX, one is the DFB, the other one the Dec-19 instrument. Does one of them offer lower fees?

2) does that mean that in a scenario in which I short the VIX, I would receive a positive income for holding it overnight?

Thanks

 

The DFB is the price we have created using the formula above. This has a smaller spread but you may be subject to overnight funding. The funding for last night was 0.2056699/ -0.212176. So last night if you were holding a £1 per point short position you would have been credited £0.21. It's not always that case that a short position will be a credit. 

The Dec19 price is the futures contract. It has a larger spread but no overnight fees. It does however have an expiry date meaning that contract will finish. If you want to keep the exposure in the next contract you must make sure your rollover instructions are enabled. If they're enabled we will close the old contract and reopen you in the new future contract. 

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