Where spread betting profits come from?

[babycakes]

Hi There

Apologies for such a basic question but where do spread betting profits come from? Is it from other traders holding a losing position, the spread-betting company or from a market maker?

Like other forms of gambling, does the house always win in the long-run or is it possible to supplement your income from it?

Many Thanks
Baby

 

[richi rich]

SB firms ideally want profits to come from Sreads.

and believe it or not, they usually ideally want you to keep winning. Because that would generate more spreads for them....

but its nature...and i dont want to get dragged into a long convo about the winning/losing side of the business.

 

[babycakes]

When I trade long at £10 a tick and the market moves in my favour, yielding £1000 profit for that trade. Where did that £1000 come from?

 

[richi rich]

santa dropped it down the chimney..

no, theres somebody on the other end of your trade whose pockets have become smaller.

The SB firms also take positions to hedge against your trades most of the times.

 

[UKtradergirl]

One of the guys that works for a SB firm answered this question somewhere. I think the answer was that they hedge the balance of the trades in the underlying market, but not each individual trade. (e.g. if 100 people are long £1 a point, and 50 people are short £1 a point, they will hedge for the remaining £50 a point in the market itself)

 

[Alpha Dawg]

basicly da traders at da SB compny hav to hussle to cover ur wins u get bruv

SB ppl b sellin dope to cover dere losses n line dem selves up as hookers

and if u lose, den u will one day find urself sellin dope..n maybe reppin the hooker status
iz a cold world bruv

 

[porph]

I think your cred died 'homeboy'. Perhaps its time to **** off and die?

 

[FXSCALPER2]

In a market place where you buy to and sell from other traders, you win when they lose and they lose when you win. The market maker charges you for bringing you to the place where there are other traders. SB companies are not a market place where you interact with other traders. So, the money you win comes from the SB's pocket who make their money from losing clients, which is almost all of them.

With the very low cost they provide on some instruments, they are clearly counting on their clients losing or they would go bust.

 

[Skill Leverage]

Basically spread betting is bull****, and should be avoided like the plague. IMHO, of course.

 

[Alpha Dawg]

WTF u wastemans!!!

jus 2 let u all know i had a decent reply to phorp but it got deleted wivin lyk 2mins but da police up in here

n ye FXscalepr u ayt, sums up wot i sed, u win dey lose, u lose dey win

 

[ffsear]

With the very low cost they provide on some instruments, they are clearly counting on their clients losing or they would go bust.

Sorry thats total rubbish!!

The main idea is that they make money from the spreads. I.e when they hedge your position they can make an instant profit because of the differance in the price thay give you and the price they take (whether thet be in the direct market of with another SB firm)..

Their profit also depends on the decisions their own traders make when they decide which positions to take and which ones to hedge out.

In theory, every client of a spreadbetting firm could be a net winner and the SB would still make money, as long as their traders took the correct decisions in the market. They don't have some magic way of coning people. They play the markets just like the rest of us.

 

[KillPhil08]

Sorry thats total rubbish!!

The main idea is that they make money from the spreads. I.e when they hedge your position they can make an instant profit because of the differance in the price thay give you and the price they take (whether thet be in the direct market of with another SB firm)..

Their profit also depends on the decisions their own traders make when they decide which positions to take and which ones to hedge out.

In theory, every client of a spreadbetting firm could be a net winner and the SB would still make money, as long as their traders took the correct decisions in the market. They don't have some magic way of coning people. They play the markets just like the rest of us.

lulz

 

[FXSCALPER2]

Sorry thats total rubbish!!

The main idea is that they make money from the spreads. I.e when they hedge your position they can make an instant profit because of the differance in the price thay give you and the price they take (whether thet be in the direct market of with another SB firm)..

Their profit also depends on the decisions their own traders make when they decide which positions to take and which ones to hedge out.

In theory, every client of a spreadbetting firm could be a net winner and the SB would still make money, as long as their traders took the correct decisions in the market. They don't have some magic way of coning people. They play the markets just like the rest of us.

I agree but only if their spread is wide enough. On some securities some SB have very tight spreads. That is all I said, no?

 

[porph]

Sorry thats total rubbish!!

The main idea is that they make money from the spreads. I.e when they hedge your position they can make an instant profit because of the differance in the price thay give you and the price they take (whether thet be in the direct market of with another SB firm)..

Their profit also depends on the decisions their own traders make when they decide which positions to take and which ones to hedge out.

In theory, every client of a spreadbetting firm could be a net winner and the SB would still make money, as long as their traders took the correct decisions in the market. They don't have some magic way of coning people. They play the markets just like the rest of us.

I guess they must have some magic way of completely ignoring overheads and any other operational costs?

 

[N Rothschild]

yes sb firms can make money from the spreads, but if thats all they had to do why would they make there own markets, manipulate prices, re qoute, stop hunt etc.

 

[N Rothschild]

also notice how SB firm charts never let you see volume? wonder why...

 

[TomTom]

SB Firms rarley hedge any postions, as it would be too expensive for them to do so.
Look up on some fo my postings for the pros and cons of SB.

Good for small traders who are trading small amounts.

For Larger day traders SB Firms are expensive and to be avioded any thing over £20 and you will be monitored closely.
Trade hundreds or thousdands per point and disconection, re-quote even decline your orders/instructions.

 

[FXSCALPER2]

yes sb firms can make money from the spreads, but if thats all they had to do why would they make there own markets, manipulate prices, re qoute, stop hunt etc.

Exactly. If Capital Spreads could make money from a 2 pips USDJPY spread 24 hours a day, they would give you zero grief.

 

[ffsear]

I guess they must have some magic way of completely ignoring overheads and any other operational costs?

No, and I dont see your point their!

 

[ffsear]

SB Firms rarley hedge any postions, as it would be too expensive for them to do so.
Look up on some fo my postings for the pros and cons of SB.

Good for small traders who are trading small amounts.

For Larger day traders SB Firms are expensive and to be avioded any thing over £20 and you will be monitored closely.
Trade hundreds or thousdands per point and disconection, re-quote even decline your orders/instructions.

I agree with the latter, that these games may be played, although I never saw it when I worked in the industry. But your wrong about the hedging. If they did not hedge they would have no control over their positions, and they would purely be gambling on their clients being wrong! Its not expensive for them to do so! And a large % of their hedging is done via other SB firms.

I used to work at Cantor Index. On the same trading floor they had the spread betters, options, futures and CFD dealers all trading off each other.

The only people who really should not be spreadbetting, are the very short term traders/scaplers!