Best Thread Capital Spreads

[ceydababy]

Carbon Spread

Hi Simon,

Just a quick note. I was looking at the carbon contract last week and could have sworn CSpreads were offering a 5 point spread. I have looked today and the spread is 25 ???

Did you widen your spread on this market ??

 

[bracke]

Capital Spreads

When a short is taken against a share are you obliged to buy shares to cover the trade or is it sufficient for you to have an equal amount of longs to cover the short trade?

My question relates to statutory requirements not to your company's policies.

 

[PipStar]

I would like to ask the folowing question:-
How does Capital Spreads earn its income? Is it:
1. Through the spread
2. Traders losses
3. All of the above?

 

[capitalspreads]

brake

if you go short of stock (i.e sell them to someone) the person who has bought them from you will, obviously, want them delivered on the settlement day. If you are going short you must still deliver stock and this is where the borrowing comes in to play. You borrow the stock for a fee (generally somewhere around base rate for the period you borrw them for) from a holder of the stock and deliver those borrowed stock to your original buyer. By the end of the borrowing period you must have bought the shares back as you must now deliver them back to the person you borrowed them from. Of course you can just 'rollover' the lending period into a new lending period ad nauseam.

pipstar

oddly enough if you multiply all our opening bets by the underlying spreads you do get to a number not disimilar from our profits. I believe that the more trades we take the more likely it is that our profit is defined by the spread, although my dealers would, of course, say it was more due to the way they run the books!

ceyda baby

i think you must have been blinded by the market..my dealers tell me that the spread has always been 25

simon

 

[bracke]

if you go short of stock (i.e sell them to someone) the person who has bought them from you will, obviously, want them delivered on the settlement day. If you are going short you must still deliver stock and this is where the borrowing comes in to play. You borrow the stock for a fee (generally somewhere around base rate for the period you borrw them for) from a holder of the stock and deliver those borrowed stock to your original buyer. By the end of the borrowing period you must have bought the shares back as you must now deliver them back to the person you borrowed them from. Of course you can just 'rollover' the lending period into a new lending period ad nauseam.

Capital Spreads

When we short a share with your company we do not borrow the shares, does that mean that you borrow the share for us? Therefore your company has to borrow shares in all the companies that are shorted by your clients?

Regards

bracke

 

[capitalspreads]

brake

when a client goes short via a spread bet the SB compnay looks at it slightly differently. As far as the SB company is concerned you (the client) have lent us the stock. Therefore we pay you for the privalege of 'borrowing' from you.

In quarterly spread bets this is hidden in 'time decay'. Which means that if a stock was trading at 100 and you sold a six month forward spread bet in that stock AND interest rates were 6% AND the stock paid no dividends. THEN the price that the spread betting comapny would quote would be around 103 (half a years interest at 6% on 100). If the stock did not move for the entire six month period then the price would decay down to 100 and the holder of the bet would make a profit even though the share had not actually moved. Of course the holder of the bet would lose a certain amount of value from the margin that he/she had put up to cover the position in the first place.

In rolling bets the fee is more upfront and the SB company will pay either an amount each day or by a slight change in the bet price to a holder of a short position in a stock.

If a large number of clients short a stock then , yes, capital spreads will short the stock via its brokers (we are members of the LSE) and will pay borrowing costs to a stock lender, but we will earn interest on the funds received from selling the stock.


Simon

 

[Paul Wilson]

FAO Simon.

Firsty I'm not going to plough though the previous 300 odd pages in this thread. This is the first time I have been in this thread and I really don't have the time.

What I will say though is it is a nice touch bank rolling the guys and gals here with their charity account.

This small gesture of benevolence has prompted me to go check out your platform and services.

Nice one.

 

[bracke]

when a client goes short via a spread bet the SB compnay looks at it slightly differently. As far as the SB company is concerned you (the client) have lent us the stock. Therefore we pay you for the privalege of 'borrowing' from you.

In quarterly spread bets this is hidden in 'time decay'. Which means that if a stock was trading at 100 and you sold a six month forward spread bet in that stock AND interest rates were 6% AND the stock paid no dividends. THEN the price that the spread betting comapny would quote would be around 103 (half a years interest at 6% on 100). If the stock did not move for the entire six month period then the price would decay down to 100 and the holder of the bet would make a profit even though the share had not actually moved. Of course the holder of the bet would lose a certain amount of value from the margin that he/she had put up to cover the position in the first place.

In rolling bets the fee is more upfront and the SB company will pay either an amount each day or by a slight change in the bet price to a holder of a short position in a stock.

If a large number of clients short a stock then , yes, capital spreads will short the stock via its brokers (we are members of the LSE) and will pay borrowing costs to a stock lender, but we will earn interest on the funds received from selling the stock.


Simon

Simon

Many thanks for taking the time to provide a comprehensive answer to my question. I greatly appreciate your willingness to answer my and others questions relating to the operation of the markets. That the answers come from the'horses mouth' gives confidence that the answers can be relied upon.

Regards

bracke

 

[capitalspreads]

brake

thanks for the comments. As i did mention my understanding of repo on stocks may be a bit rusty but the description of how we consider stock lending is accurate. i hope that as you were asking so many questions on shorting stock that you were actually short over the recent 'trials and tribulations'.


paul

cheers..

simon

 

[itsmyadd]

Hi Simon (Capitalspreads),

I have read a few things about scalping, what do you guys regard as scalping, what is termed as scalping? I am not trying to trade against delayed time feeds, but I am looking at a couple of strategies.

One of them is looking to tade like for 6 pips + spread, so around 8-10 pips in total per trade, like 4/5 trades a day doing say £8 per pip.

Would you say I am a scalper?

Thanks!
itsmyadd (for sure)

 

[hannibal.barca]

simon from capitalspreads, when holding a position on currencies overnight your spreads are extremely uncompetitive. If you cannot provide the same level of service overnight then why don't you stop accepting new orders at these times rather than doubling the spreads? 4 pip speads on eur/usd, usd/jpy, eur/gbp and 5 pip on usd/chf, thats a rip off! if your competitors can offer fixed spreads 24 hours a day then so should you really.

 

[capitalspreads]

itsmyadd

as far as we are concerned we do not mind how many times a day or how much money a client makes so long as the trades are made on a fair and reasonable price. Scalping is when a client specifically hunts out a slow or latent price on a continuous basis.

The problem with the statement above is the bit about 'fair and reasonable' ... what is fair and reasonable to us may not (of course) seem fair and reasonable to you.


hannibal

i assume that you do not check the spreads on many of our competitors. Many of them quote the spreads you mention all the time not just in the small hours. Liquidity in FX markets tends to dry up considerably outside UK trading hours and price feeds tend to become more unreliable. We reflect this fact in a wider spread.

I can assure you that clients would be very, very annoyed at any reduction in trading hours. You may be aware that spreads on overnight markets has been coming down recently and we expect to reduce it even further in the future.

Simon

 

[hannibal.barca]

igindex, cmc, cantor index all offer better 24 hour spreads. i can understand spread widening a little overnight but that doesn't explain why aus/usd usd/yen have their spreads doubled does it? liquidity shouldnt be a problem there(asian session etc). 1 other thing, since you can handle 1 pip spreads on ftse 100 how about the same for eurostoxx 50? much more liquidity and similar volatility.

 

[PipStar]

as far as we are concerned we do not mind how many times a day or how much money a client makes so long as the trades are made on a fair and reasonable price. Scalping is when a client specifically hunts out a slow or latent price on a continuous basis.
The problem with the statement above is the bit about 'fair and reasonable' ... what is fair and reasonable to us may not (of course) seem fair and reasonable to you.
Simon

If ever there is any latency and I dont know if there is, then it is a problem with the platform and it would need to be fixed at your end. From a client's point of view if I see a price on your platform, I think that it's logical that it is the price at which you are prepared to take my bet. Right? I mean it's in everyone's interest to have a platform that keeps up with the market so one one can be seen to take unfair advantage. Would you say that the CS platform passes the test in this respect?

 

[Hoggums]

If ever there is any latency and I dont know if there is, then it is a problem with the platform and it would need to be fixed at your end.

As an IT guy who works on trading systems this is not true. You have no control over the speed at which a message over the internet goes from A->B. If it takes 0.25 seconds then you have a half second round trip, which means your trades will always be 1/2 second behind the prices CS is quoting - plenty of time for the underlying to change. I'm sure CS has an allowance built in for this - all quotes probably have an expiry of a second or more. I'm sure Simon can fill you in on the details. But it's not fair to Blame CS if someone in your street is flogging the network with their copy of Kazaa so you get delayed/reduced bandwidth.

 

[capitalspreads]

pipstar

that always sounds great until you actually try it in practice.

In the 'real' world, for you to get filled there must be somebody else on the other side. For every buyer there must be a seller.

If you are trading direct access and you see 10 contracts on the bid in the FTSE and hit it... if somebody else was just quicker on the button than you then they will get filled first and you end up on the offer with nothing done. The exchange had the price but without another buyer that is tough. You can hardly complain to LIFFE
The same thing occurs in SB if you try to sell but the price moves against you whilst the deal is processed there is a chance that you will not get the price. The new platform from one of our competitors (and the existing one from another) have this feature built in automatically. If you try to sell cable at a bid of 2.0350 but the price moves as you are trying to trade to 2.0349 then you will not get the trade it is auto refused. With our platform there is a good chance that you will still get the trade but not definately.

We offer our prices in good faith but with fast moving markets clients must be aware that fills are by no means guaranteed.

Simon

 

[fxwinner22]

the fills are always guaranteed if price has moved against you - never ever had a better fill than i pressed with CS but if it moves in your favor you can guarantee that you will be re-quoted.

as for every buyer needing a seller - in spread betting we arent trading against anyone else, we are placing a bet with you. if i walk into a bookies on the street and say i want to bet on the ftse rising today they give you a price and that's what you get - they dont sit there and when youve given your mony say errm hang on, its moved in your favor so it this price now different etc.

you can't quote trading talk and then quote spread betting talk - they are totally different entities.

 

[capitalspreads]

fxwinner

please walk into a bookie and ask for odds on the ftse rising today.

if you get a price at all it will be on the basis that you know as little as the person on the other side of the desk. You will not be able to look at four or five binary prices at exactly that moment in time..so the bookie will be quite happy to take you on.

We work in the 'real time' world where our prices are up against everyone else's.

when we want to hedge client risk in the FX markets we have access to the most liquid platform available to institutional traders and we still miss prices or get filled on trades going against us. We swear and just trade on the next price. Profitable trading is about getting it right, not picking off the odd mis-priced pip here and there.

simon

 

[ceydababy]

Stopped Out price never reached....

Hi Simon,

Never had a complaint yet. However, this afternoon I bought Brent Crude at $75.36 with a stop at $75.16. I went out for 20 minutes looked at the chart and assumed I was still in the market as it was roaring up through $75.70. When I looked at my dealing screen I was actually out with my stop triggered. The chart is showing the lowest point at $75.18 and the prices on the chart are taken from the bid. How did my stop get triggered ??

Thanks

 

[laptop1]

please walk into a bookie and ask for odds on the ftse rising today.

if you get a price at all it will be on the basis that you know as little as the person on the other side of the desk. You will not be able to look at four or five binary prices at exactly that moment in time..so the bookie will be quite happy to take you on.

We work in the 'real time' world where our prices are up against everyone else's.

when we want to hedge client risk in the FX markets we have access to the most liquid platform available to institutional traders and we still miss prices or get filled on trades going against us. We swear and just trade on the next price. Profitable trading is about getting it right, not picking off the odd mis-priced pip here and there.

simon

Bla bla bla...Bla bla bla...Guys you are trading in a Bucket shop remember Capital spreads must be making a killing in this market environment......I had the same with Fins and WS... Basically they shut me down because I was taking to much money off them......Its like trading in good old 1920s where jesse once traded in what was called backet shops... look at the trouble he had getting bets on.. he had to move on.