IG Long dated shorts rejected

[thomcooper]

So, there's a nice little prop co that's way overvalued & going to feel some price pain when interest rate hikes clobber the nav & debt costs (IMO).

My view is that I would see a profit from a short over the coming 2 years & so attempted to short the sept-14 price (in the view that I'd pay a few percent on 1 or possibly 2 rollovers).

Upon placing the trade, I was presented with the following:

due to the potential stock borrowing charge this contract cannot be sold to open

They then pointed me to the DBF quote which will obviously rollover every day & likely take most of my profit in rollover fees.

I've never shorted with my proper broker, but assumed that it is similar to buying a share whereby you only pay the spread & dealers commission. Therefore, what is going on? Can't IG cover their position in the market in the same way?

 

[peakoil]

It's annoying indeed, I quite agree with you, just how many equity futures have short selling restrictions with IG - yet if you are prepared to pay a daily charge, suddenly those same 'restrictions' will disappear. Hmmm. Yet alas, until there is wider competition in this area i.e., more demand for stock futures among the client base, (And I won't hold my breath) then they can quote as they please. The facts clearly are that most folk still like to trade the 'dailies' - mesmerised, no doubt, by the slimmest available spreads. Not I, though; like you, I prefer longer term plays; in other words, this client far prefers, *if* I wish to keep any equity bet open for more than a few days, their slightly wider spread in return for the comfort of knowing I won't be pinched for extra each and every night until closure - which could be weeks or months away. Meanwhile most are indeed (sigh...) content to overlook that it all adds up, over time, when they open positions. Nonetheless, it doesn't take long at all, before those daily charges overcome the slimmer daily funded spread apparent advantage.

Anyway, until other spread-bet firms quote equity futures, there is still a potential solution to the problem of mounting daily charges on longer term, short equity bets: you could look to Spreadco.com who claim 0% financing on short equity and index positions. Granted they don't have the same wide range of stocks which IG quote, but it's still, at the very least, worth having a look at them. HTH

Edit: just recalling when I started, interest rates were higher and I remember (as I'm sure a few of us here do) being credited, with certain s/b firms, for holding short bets open each night, yes, credited!

 

[tar]

You can check Spreadex they have a wide range of shares ...

 

[thomcooper]

I have a Spreadex account that I've not used. They do have the equity & the short is actually at a higher price than IG - although the spread is a lot bigger.

I prefer where possible to keep everything in 1 place as its easier to monitor & administer. I'll give it a whirl in the morning.

 

[challenger78]

Hi Thom,

I am not sure if this is still relevant to you, but I believe you would actually be earning nightly interest on your short position with IG (I dont have an account with them, I just read their T&Cs - I hope I understand this correctly)

http://www.ig.com/uk/shares-bet-details

Conversely, if you are taking a short DFB position on a UK-listed share priced in sterling, the total interest adjustment is calculated by subtracting our funding adjustment, usually 2.5% per annum, from LIBOR. Unlike long positions, the total interest adjustment on short positions can result in either a higher or lower opening level. If LIBOR is greater than our funding adjustment, the opening level will be higher than the closing level. If LIBOR is less than our funding adjustment, the opening level will be lower than the closing level.

For example, if LIBOR is 4% (greater than our funding adjustment), the interest adjustment to a rolled DFB short position would be 0.004% (4% - 2.5% ÷ 365). If LIBOR is 1.5% (less than our funding adjustment fee), the daily interest adjustment to a rolled DFB short position would be -0.0027% (1.5% - 2.5% ÷ 365).

Current libor is below 2.5% (0.55%) https://origin.bankrate.com/rates/interest-rates/libor.aspx