Time period for spread betting.

[jayjay1985]

Hi I am very new to spread betting. Haven't started doing anything but have been doing some research.

I can find the answer to most things online but this question, I'm struggling on. Maybe I can't use google properly.

Over what time period can I spread bet?

Lets say I bet on Tesco today. How long can I stay involved in that bet. 6 months? A year? I know there will be ups and downs but what if after 6 months, my good days have covered my bad days and I'm up. What if I don't want to close out the bet? Can I stay in for a year? 5 years?

Is a time limit imposed by the broker at the start? if there is I haven't read about it yet.

Let's say I have £500 in my deposit that I haven't used yet. I bet £10 a point and I'm up 100 points by the end of 6 months. I mean there's only £1,500 involved so it's not like a lot of capital is tied up.

If I've made a really stupid error, please go easy. I'm very fresh on this.

 

[mike.]

Hi Jayjay, welcome to the forum, A quick answer to your question is, every night you hold the bet there is a roll over fee,This is worked out on the price of your stake, the price of the share and the libor rate, ( im not 100 % sure about overnight financing on a futures bet's)

Secondly, have you studied "margin" ? google it, it may be easier for you to read than me to explain. But once the price falls below a certain level youre bet may be closed out or a margin call to add more funds. Basically at £10 per point it only has to drop 50 points to wipe your account out.

Just to add, you can stay in the bet as long as you want.

 

[jayjay1985]

Hi Mike,

Just one quick follow up. Can the spread betting company just set the roll over fee arbitrarily? What determines if I pay it? So it could be up to £10 a night? If I was doing well, could they start charging me this to offset their losses?

Well I'm familiar with the concept of margin and unless I'm mistaken, you can add more if a situation were to arise where you still wanted to stay in and it was dropping. I bought one or two shares over the last few years that went up and down but never dropped below my initial deposit so that's the kind of situation I was thinking about.

The reason I'm asking is I'm more of a long term guy. I bought some shares in a company in 2011 and have been monitoring it but only sold a few days ago.

 

[mike.]

No, the overnight financing is based on the libor rate that the banks lend to each other, +2.5% for a long position and -2.5 % for a short or thereabouts, usually works out about the price of your stake i.e £1 per night on a £1 per point stake. Its deducted directly from your account daily.

 

[mike.]

So it could be up to £10 a night?

sorry, edited that post, worked it out wrong.

its based on price per share/stake/libor rate +2.5%.

 

[timsk]

Hi jayjay,
Welcome to T2W.

Just to add to Mike's points, spread betting (SB) is aimed at traders hoping to profit from the market over the relatively short term. This means anything from minutes in some cases to a few months. Whilst it may be possible to hold open SB positions indefinitely, the financing costs will really mount up over time. If you wish to hold for a duration of many months to a year or more, I suggest you look at purchasing actual shares. Beyond the initial dealing costs (which are relatively high), there are no overnight financing costs to consider and, of course, you'll receive dividend payments, which you won't get from a SB firm. For a half way house option, it might be worth considering CFDs? If you're not familiar with those and how they compare to SB, check out this FAQ: What are the Pros and Cons of Spread Betting Vs CFDs?

Hopefully, a member who uses a SB firm to trade short term and holds shares for longer term plays will see this and comment on the respective costs and recommend which is best based on time frame.
Tim.

 

[Pondlifedregsbutler]

Hi jayjay,
Welcome to T2W.

Just to add to Mike's points, spread betting (SB) is aimed at traders hoping to profit from the market over the relatively short term. This means anything from minutes in some cases to a few months. Whilst it may be possible to hold open SB positions indefinitely, the financing costs will really mount up over time. If you wish to hold for a duration of many months to a year or more, I suggest you look at purchasing actual shares. Beyond the initial dealing costs (which are relatively high), there are no overnight financing costs to consider and, of course,you'll receive dividend payments, which you won't get from a SB firm. For a half way house option, it might be worth considering CFDs? If you're not familiar with those and how they compare to SB, check out this FAQ: What are the Pros and Cons of Spread Betting Vs CFDs?

Hopefully, a member who uses a SB firm to trade short term and holds shares for longer term plays will see this and comment on the respective costs and recommend which is best based on time frame.
Tim.

As far as I'm aware divs are paid/deducted at 90%.

 

[timsk]

As far as I'm aware divs are paid/deducted at 90%.

Ooops, I stand corrected! My mistake - thanks for pointing this out Pondlifedregsbutler.

The exact amounts may vary from one SB firm to the next, but most firms credit customers accounts 80-90% of the dividend amount on long positions, but debit 100% of the dividend amount on short positions. This is because spread betting is currently tax free, so it prevents SB customers from receiving tax free dividend payments.

Apologies again for my error and any confusion it may have caused.
Tim.

 

[toknees]

I spreadbet for longer term - most brokers offer a futures quote, say Mar '14 or Jun '14 for each stock with a wider spread. This will mean your roll-over fee isn't every night, but when you roll from one quarter into the next. I usually go for the contract that is at least 3 months away. This is much cheaper than paying the rollover each night.

The costs are higher than just buying stocks, but with limited available capital, it does offer you more exposure than you would be able to get on other vehicles. You definitely need to calculate every trade, and quite often the spreads will make the trade intolerable.

Just FYI, since my current system started at the beginning of October, it is up 10R but 4R of that has gone to the brokers.

 

[peakoil]

Just want to add to what toknees has correctly stated.

Although most people see spread betting as a short term vehicle, there are a number of people (including yours truly) who are pleased to spread bet both on a short term and longer term basis.

The OP mentioned Tesco and (as he's probably aware by now) & there is indeed a s/b company which offers spread bets on it until e.g. March and June of next year (yet may be closed by the client at any time before then should client wish or stop loss is hit). Also, such bets may be rolled over to the next or further quarters should one choose.

With all respect, to suggest that spread betting is only suitable for short term market movements is debatable, even if the current reality is that the majority use it that way.

Meanwhile the rollover charges are, indeed, priced in not by repeated overnight financing, but rather by their offering such instruments with a wider spread. As someone who uses both short and long term positioning, I'm perfectly fine with that, as the spreads are just about acceptable - especially given the time-frames involved, besides it sure beats the rollover costs incurred given the alternative of rolling over the equivalent positions, each day on a daily basis.

It's arguably a shame that more people don't consider spread betting for both short and longer term positions. But until then, this punter's March and June positions will have to continue with that company.

HTH

 

[toknees]

The other thing to consider in your pros and cons is the obvious tax free element in the UK.

If you run a relatively profitable system, the trading costs should end up less than the tax you'd be paying on your profits.
The drawback is that you have to pay them whether you are up or down, where just buying shares would only see you pay tax if you were up.

The danger with spread-betting is that the broker will do whatever they can to make you trade more frequently. Nice platforms, mobile trading, options, binaries, IPOs, you name it. It's all designed to tempt you into another quick trade. It's Vegas on your iPhone, and very easy to lose a lot of money very quickly.

 

[lucas_king]

Hi I am very new to spread betting. Haven't started doing anything but have been doing some research.

I can find the answer to most things online but this question, I'm struggling on. Maybe I can't use google properly.

Over what time period can I spread bet?

Lets say I bet on Tesco today. How long can I stay involved in that bet. 6 months? A year? I know there will be ups and downs but what if after 6 months, my good days have covered my bad days and I'm up. What if I don't want to close out the bet? Can I stay in for a year? 5 years?

Is a time limit imposed by the broker at the start? if there is I haven't read about it yet.

Let's say I have £500 in my deposit that I haven't used yet. I bet £10 a point and I'm up 100 points by the end of 6 months. I mean there's only £1,500 involved so it's not like a lot of capital is tied up.

If I've made a really stupid error, please go easy. I'm very fresh on this.

HI,

You have two options when spread betting. Either you trade the “Daily Rolling bets” which as the name suggests, are daily bets which rollover each night. There is no expiry on this but the position is open/closed each night to adjust for overnight financing. Again, you can hold onto the position for as long as you wish.

The other option is to trade futures contract which might be 3-6 or 9 months. With these, they do not roll over each night and have an expiry which is either 3-6 or 9 months. With these, the spread is normally wider to take into account the overnight financing.

Hope this helps

Thanks

 

[malaguti]

HI,

You have two options when spread betting. Either you trade the “Daily Rolling bets” which as the name suggests, are daily bets which rollover each night. There is no expiry on this but the position is open/closed each night to adjust for overnight financing. Again, you can hold onto the position for as long as you wish.

The other option is to trade futures contract which might be 3-6 or 9 months. With these, they do not roll over each night and have an expiry which is either 3-6 or 9 months. With these, the spread is normally wider to take into account the overnight financing.

Hope this helps

Thanks

There are other options which all depend on the broker, for example there are just daily bets which expire and DO NOT rollover each night and your position is closed.

There are also daily rolling which are not adjusted for finance charges each night depending on the leverage you have selected

To say that there are two only options is simply down to what your broker is limiting you to, not others