Can someone briefly explain how to calculate spread betting margin please?

[mb11]

Hi,
I recently set up a tradefair spread betting account, and plan to open a trade next week,

but on tradefair it doesnt calculate the minimum/maximum margin (just gives the %), whereas IG Index gives you the amount you need in your account.


I just cant get my head round how to calculate how much i need to have in my account and how far (in points) this will let me lose

i am a private investor trading in the conventional way but find it awkward working this out,

am i right that if you bet £10 per point on a share costing 410p you have a leverage of £4100 , so if the minimum margin is 25% then i need £1025 ?
but then why does being £10 a point then equal a value equivalent of £4100

would this then mean the Share price can fall 102 points and i wouldn be in any debt (besides losing the £1020)
11
is there an easier way to explain/calculate?

thanks

 

[rc450]

£10 pp in this case would be the same as buying 1000 shares in bp.
1000 shares at £4.10 is £4100 and if an sb company required a 10% deposit that would be £410, then for every penny bp went up/down you would gain/lose £10.

say you had a feeling in your water that bp was going to £5.00 next week but didn't have £4100 to buy the shares an sb punt would allow you to put £410 down as margin and then let you set a stop say 15p away at £3.95 so your maximum loss should** be £150 but if you're right you get to pocket £900 whilst tying up only £560 of your funds.
**the **** could of course hit the fan overnight and on open bp could gap down and be trading at £2.00 missing your stop and leaving you £2100 out of pocket!!

for most shares £1pp is the same as buying 100 shares, £10pp is 1000 shares and so on...
i guess the best way would be to work out your stake size into the amout of shares that it would be equal to in the real market then multiply that by the current share price then multiply that by the margin percentage.
i don't trade shares but that's my take on it, no doubt somone will be along shortly and explain it better.

 

[mb11]

thanks for explaining,

when you say "£10 pp in this case would be the same as buying 1000 shares in bp."

when its £10 pp isnt it always the same as buying 1000 shares?


as i want to start by using guaranteed stop losses but i think these come at a cost of a wider spread,

wouldnt this mean i would need more money deposited (bigger % margin) as the spread would be wider?


also what determines the amount required for the margin/deposit?
as ive seen some shares with a minimum margin of 5% and some with 25% ?

 

[rc450]

as far as i'm aware £10pp is equal to buying 1000 UK shares.

guaranteed stops (g/s) will cost you extra in spread , ig and possibly others used to let you set a g/s of so many points and all you would need in your account was the funds to cover the loss with no margin reqs. so say 50 points an £10pp and all you would need is £500 in the acc. not sure if this is still the case perhaps someone else will confirm this.
sb cos. all operate in different ways but i can't imagine any would want more margin for gs stops, but i may well be wrong.

i'm guessing margin reqs will be based on the volatility of the share price and potential for big overnight gaps. if a mug punter has whacked their account on a stock with a tight stop and overnight its gaps big then the sb co will need to chase the punter for the extra money as the gap will have missed their stop leaving the sb co. out of pocket. by increasing the minimum margin they protect themselves a little more.

this is my take on it all, i may be wrong!!!

 

[mb11]

thanks for explaining rc,

which SP company do you use/prefer?

im with tradefair but tempted to move to ig index, he platform looks so much more user friendly.
or is there adifferent sb company othgers would recommend