Spread bet spreads

[etherington]

So far I've only watched the FTSE index and assumed that the bid/ask spread was constant but today I looked at AZN and saw that at one time it was 2 points and a few minutes later 5points. Is this normal, if so does it tip the balance in favour of the spread bet co - I might open a long at 2 points and never catch up!

Ron Etherington

 

[rossored]

No, if you open a position with a 2 point spread then that it was you will get on that position. However SB companies are well known to change their spreads according to 'market conditions'.

For example, with some SB companies you might find that at a particular time of day - say, oh, 2.30pm - that the spread becomes a little wider, and that your positions aren't filled quite as quickly, or you get a bit of slippage... things like that that you need to be aware of.

 

[the blades]

So far I've only watched the FTSE index and assumed that the bid/ask spread was constant but today I looked at AZN and saw that at one time it was 2 points and a few minutes later 5points. Is this normal, if so does it tip the balance in favour of the spread bet co - I might open a long at 2 points and never catch up!

Ron Etherington

Hello etherington,

You need to look at how the market spreads have changed at the time (look at iii trades data) - it's not unrealistic for the market spread to change by that much during the day, especially for a company priced like AZN (Astrazenica yes?).

If you trade quarterlies with the likes of IG, Fins or Capital you can then add a FIXED spread of around 0.5 - 0.8% (depends on the company), and a bit less for rolling dailies. If you use CMC. be aware that the additional spread they apply wll depend on their orderbook. However, it will be MUCH tighter than the others, 95% of the time.

Take a look at the thread "cost of spreadbetting" and download my spreadsheets to see how the costs build up.

In short (although many will probably suggest otherwise), I'll put my mortgage of the fact that the difference you saw was market spread changing.

hope this helps,
UTB

 

[etherington]

Thanks for the replies. I should have realised it's the market spread. I've looked at Blades post and spreadsheet. I am using CMC so that seems ok on the whole.

Ron Etherington