Share Dealing Discussion Area
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sabretoothtigger wrote: »Spreadbetting is high risk trading not investing . It works best when you guess exactly when a stock will move in just one direction which isnt usually the case even with good companies
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Why is it any higher risk than buying shares? You buy shares, you are betting they go up. You bet up on spread betting, it is the same thing.
Yes you can leverage yourself far more, but that is optional. Say you have £5k to invest in shares of company X. Why not calculate your bet per point that equates to buying £5k of shares? Profit / loss will be the same, just no CGT.0 -
As you mention below, leverage and downside risk.Procrastinator333 wrote: »Why is it any higher risk than buying shares?
Ummm, no, absolutely not.Procrastinator333 wrote: »You buy shares, you are betting they go up. You bet up on spread betting, it is the same thing.
Again, no, downside risk can be significantly more than 'just' investing. Invest £5k, the most you can lose is £5k, with spreadbetting your losses can be far more.Procrastinator333 wrote: »Yes you can leverage yourself far more, but that is optional. Say you have £5k to invest in shares of company X. Why not calculate your bet per point that equates to buying £5k of shares? Profit / loss will be the same, just no CGT.
And, yes most people are aware there are stop/loss and guaranteed stop/loss but I'm affraid you cannot just compare it with standard trading. It is a vehicle to make, and lose money from the markets and one people consider but there are additional risks.Personal Responsibility - Sad but True
Sometimes.... I am like a dog with a bone0 -
If a share has a price of £50. You buy the share for £50. Max loss £50. Every £1 growth in share price, £1 profit. Every £1 fall, £1 loss.
If you place £50 in to a spread betting account and bet £1 for each £1 rise or fall in the share price you get exactly the same result. The max you can lose is £50 (it can't go negative), every £1 up, £1 profit, every £1 down, £1 loss.
I'm not trying to be obtuse, I just don't see how that is any different from buying a share. Yes spread betting can be used in different ways that are very different and result in significatnly higher risk / reward, but why can it also not be used as shown above?0 -
Hey
Just received a message from HSBC InvestDirect about some variations of terms & conditions. I understand that many people may not use them but for the few that do (like me) thought I should post it as it could easily be missed.
We're writing to let you know that we are making some changes to the InvestDirect Sharedealing and Investment Terms and Conditions (the 'Terms') and the following Rates and fees, which will take effect from 1 May 2010, unless otherwise stated:
Deals placed online
- UK Equities - increasing from £11.95 to £12.95.
- Shares denominated in Euro - changing from €20-€70 to a flat fee of €29.95.
- Gilts - increasing from £11.95 to £39.95.
Deals placed by telephone
- UK Equities - changing from £15-£60 to a flat fee of £29.95.
- Shares denominated in Euro - changing from €20-€70 to a flat fee of €49.95.
- Gilts - changing from £15-£60 to a flat fee of £49.95.
Trading inside an ISA (effective 1 February 2010)
- We've removed the additional charge for trades made within an ISA.
Other Charges
- For the transfer of securities to another broker/share certificate in the customer's name we are introducing a charge of £15.00 per line of stock.
Our rates and fees have remained unchanged for a number of years - these changes will ensure the continued delivery of our high level of service to you while remaining competitive.
View a complete set of the new "Terms" and a Notice of Variation which contains a summary of all the rates and fees that are changing and covers the main changes to the Terms. It's really important that you're familiar with these changes so please read them carefully.
We're also taking this opportunity to inform you that we're increasing the standard Trading Limit on our InvestDirect service from £10,000 to £10,200 from 1 April 2010. Any Trading Limits previously agreed with us will remain unchanged.
Yours sincerely
Nicholas Cashmore
Senior Investment Services Manager0 -
Kamzy, thanks for the information. I was going to open an hsbc investdirect account, generally the increases in prices seem fair except for trading in gilts - this is a big stumbling block for me.0
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Just a couple of examples: the spread is wider and the bid price (depending on the period) is higher, so the effective dealing charges can be quite a lot higher; and there is an expiry date, so if your share strategy is not going as expected, it could cost you a lot more to roll over and keep the share till it comes good.Procrastinator333 wrote: »I'm not trying to be obtuse, I just don't see how that is any different from buying a share.
Bear in mind that spread firms' prices are not necessarily directly related to the share price (esp at the time you want to buy or sell!) and trading may not always be as liquid as the actual share, depending on the whim of the spread firm.0 -
Procatinator333, I understand what you are saying but you are simplifying things very much.Procrastinator333 wrote: »If a share has a price of £50. You buy the share for £50. Max loss £50. Every £1 growth in share price, £1 profit. Every £1 fall, £1 loss.
If you place £50 in to a spread betting account and bet £1 for each £1 rise or fall in the share price you get exactly the same result. The max you can lose is £50 (it can't go negative), every £1 up, £1 profit, every £1 down, £1 loss.
Your example has a nice and neat one-to-one relation ship, i.e. bet £1 for a £1 rise/fall. Where you fall down is.....- If the share price is £100 and it falls to nothing you will be exposed to £100 loss from your £50
- Usually spreadbetting use 'points' and for shares (generally) the relationship is 1 point = 1p (not £1)
As I said if you understnad the increased risks associated with SB then yes, it can be worthwhile but as Biggles mentions its not really conducive to long term investment strategy, etc.Personal Responsibility - Sad but True
Sometimes.... I am like a dog with a bone0 -
I see this discussed a lot, spreadbetting is not something I have much experience with, however, leverage is. Leverage is a tool, nothing more, not a bogeyman. Leverage only becomes a problem when people don't understand it.
Procrastinator333 is correct, when you buy a stock you are placing a bet on price improvement, if you want to control 10,000 shares of BARC.L, to benefit from the price improvement of 10,000 shares then you pay £31,300 and that is your risk, that or some portion of it determined by a stop loss. Thus leveage allows the same risk to be taken without tying up large sums of cash. If you understand leverage then there is no need to risk more money that you would by buying the stock, you simply require less capital.
In order to risk exactly the same amount using a spreadbet then you would bet £100 a point, your risk is if the stock goes to zero you would be liable for £31,300, or some portion of that determined by a stop loss. A spreadbet is simply akin to a derrivative product. One of the advantages of a spreadbet is the fact that it would seem you can, for a price, place a guaranteed stop which is something that cannot be achieved when taking a real stock position.
There do seem to be some downside risks that are peculiar to the spreadbet, as far as I can see, most stock bets appear to be rolling bets, that is they are closed out and reopened each night which would result in the loss of the spread daily. The real problem as far as I can see is that a lack of understanding of leverage leads people to believe they should place bets to control vastly more stock that they could otherwise do, whilst this is acceptable for people who understand both leverage and risk control, it is dangerous to those who don't.
A futures contract for example utilizes leverage, somewhere near between 10 - 20:1 as the margin payment for an S&P 500 emini contract is about 5-10% to control a contract worth approximately $55,200Hope for the best.....Plan for the worst!
"Never in the history of the world has there been a situation so bad that the government can't make it worse." Unknown0 -
Just a couple of examples: the spread is wider and the bid price (depending on the period) is higher, so the effective dealing charges can be quite a lot higher; and there is an expiry date, so if your share strategy is not going as expected, it could cost you a lot more to roll over and keep the share till it comes good.
Bear in mind that spread firms' prices are not necessarily directly related to the share price (esp at the time you want to buy or sell!) and trading may not always be as liquid as the actual share, depending on the whim of the spread firm.
The first point I'd agree with very much when considering if spreadbetting is suitable for what you are trying to achieve. Often people fail to take into account the impact of spread on their results. The spread represents a cost and therefore must be factored in when planning. I would say however spreadbetting was never designed to be a substitute for investment, at best it is an alternative to short term trading. One of the issues specific to spreadbetting seems to be the fact that most bets related to stocks and fx are rolling and as such they are reset every night, therefore the spread represents a recurrent charge on a daily basis.
The second one, I am not sure about, I have only tracked the futures, and not as yet extensively, (few months worth) but I find they are an accurate reflection of the underlying market, which is to be expected otherwise an arbitrage opportunity would exist, it is in the SB firms interest to be as accurate as they can. As for liquidity, given it is a synthetic market, liquidity should not be an issue, the spread itself will take care of liquidity issues, with less liquid and / or more volatile markets having a higher spread.Hope for the best.....Plan for the worst!
"Never in the history of the world has there been a situation so bad that the government can't make it worse." Unknown0 -
In this note -
"STOP PRESS. 30 JUNE 2009. The top pick provider, Hoodless Brennan, has withdrawn from the execution-only sharedealing market. All of its customers can retain the same prices for twelve months by registering with TD Waterhouse by 20 July 2009: read the full MSENews story
We are currently re-researching the top products and will be publishing the rewritten guide shortly"
... MSE says that a rewritten guide will be available shortly but... as far as I can see, nothing has been added/changed since June 2009.
Please will somebody let me kjnow what is happening (or has happened).
I'm thinking about making some modest (i.e. relatively small) share purchases and would like to obtain the best dealing 'deal' to (hopefully) maximise profit.
Many thanks... :EasterBun0
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