timsk
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Hi carme,
Welcome to T2W.
Whatever market you trade, you will always have the bid and offer prices and the difference is known as the spread. These prices and the size of the spread can vary according to the instrument you're using to trade. So, in your example using Lloyds, a trader could buy actual shares in the company which, historically, is the most common way of trading it. However, these days, there are any number of derivative instruments that allow people to trade Lloyds without actually owning the stock itself - which is referred to as the 'underlying'. CFD's are one type of derivative product; others include spread betting, warrants, options and single stock futures. They are all different with their relative pro's and con's and all will offer different prices to the other with different size spreads. This is because you're not trading actual shares, rather the derivative product whose price is usually (always?) based on the futures price rather than the cash price of the underlying. 'Always' is in brackets as I'm not certain of my ground here - someone else may be able to clarify if this is correct - or not.
Tim.
Welcome to T2W.
Whatever market you trade, you will always have the bid and offer prices and the difference is known as the spread. These prices and the size of the spread can vary according to the instrument you're using to trade. So, in your example using Lloyds, a trader could buy actual shares in the company which, historically, is the most common way of trading it. However, these days, there are any number of derivative instruments that allow people to trade Lloyds without actually owning the stock itself - which is referred to as the 'underlying'. CFD's are one type of derivative product; others include spread betting, warrants, options and single stock futures. They are all different with their relative pro's and con's and all will offer different prices to the other with different size spreads. This is because you're not trading actual shares, rather the derivative product whose price is usually (always?) based on the futures price rather than the cash price of the underlying. 'Always' is in brackets as I'm not certain of my ground here - someone else may be able to clarify if this is correct - or not.
Tim.
I didn,t think a CFD or a spread bet are derivatives. They are just another way of trading/ betting the stock. Options are derivatives because they derive from the underlying (not connected) and trade on a seperate market. Yes, I know, not convincing!
Manipulate?? Does the FSA know about this? I think it is MAKES the prices (as in Market Maker)
timsk
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Hi raysor,
I would have thought that both CFD's and spread bets are also derivatives as they too are instruments that are derived from securities or physical markets. In that respect, they are no different from options, warrants, convertible bonds and futures contracts - are they? This is more of a question than a statement - so please correct me if my thinking is kock-eyed!
Cheers,
Tim.
zigglewigler
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Spread bet NOT a derivative. NO, no, no! And Non!
Spread bets are attached to nothing more than pie in the sky.
That was a statement.
timsk
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Hi Zig,
Can you run that by me one more time please, as I'm not quite clear!
:cheesy:
Seriously though, while I take on board the sentiment behind your comment, surely SB and CFD companies will argue that their prices are indeed 'derived' from the underlying - to the extent that they will hedge their position(s) in the underlying where possible and / or via another derivative product when it's not (e.g. futures in the case of market indices for example)?
Assuming you and 'raysor' are correct - can either of you explain please why SB and CFD's aren't derivative instruments?
Cheers,
Tim.
Can you run that by me one more time please, as I'm not quite clear!
:cheesy:
Seriously though, while I take on board the sentiment behind your comment, surely SB and CFD companies will argue that their prices are indeed 'derived' from the underlying - to the extent that they will hedge their position(s) in the underlying where possible and / or via another derivative product when it's not (e.g. futures in the case of market indices for example)?
Assuming you and 'raysor' are correct - can either of you explain please why SB and CFD's aren't derivative instruments?
Cheers,
Tim.
foredog
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I'd take a guess that the last price available to trade at 1630 was 68.07/11 but then there was the closing auction at 1635 and that price was the official close of 67.5
If you're got anpther example you an post maybe tomorrow after the close i'll try and take a look
If you're got anpther example you an post maybe tomorrow after the close i'll try and take a look
arabianights
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Spread bets and cfds are derivatives. No one credible will tell you otherwise.
Well I suppose they are not tradeable instruments derived from the underlying. They are just an alternative way of financing the purchase (at least CFD). An option is a true derivative. It can also be sold onto someone else. I think it is a mute point anyway. Is a mortgage a derivative? A spread bet is just a bet.
arabianights
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no, a spread bet is the tax free wrapper for the OTC derivative...
Mr. Charts
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Of course they are derivatives as Timsk says.
Albeit very loose derivatives, esp. SBs
Richard
Albeit very loose derivatives, esp. SBs
Richard
zigglewigler
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SB's don't hedge their position in the underlying, they 'hedge' within their book. Same as the over-round as standard bookies.
That SB in Gibraltar, Futuresbetting, I think, have a diff model, they do hedge with the underlying, offer tighter spreads that track the market (it's like trading futures, tax free, but there are costs ontop) the exception proving the rule. SB's DO not hedge with the underlying.
And that's all I want to say about that...
arabianights
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That has nothing to do with their status as derivatives
timsk
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Zig - could you say just one more thing - to satisfy my curiosity please . . .SB's don't hedge their position in the underlying, they 'hedge' within their book. Same as the over-round as standard bookies.
And that's all I want to say about that...
Can you explain how the SB Co's hedge within their book? Let's say that a good many punters have been long the indices this last week and are raking in the profits - how are the SB Co's protecting themselves against that? Hopefully your answer will also shed some light on what you mean by the "over-round as standard bookies".
Thanks.
Tim.
