Spread Betting is cheaper than holding shares!

JamesU

cepheus wrote: »

I have inserted a saving per round trade sheet in the spreadsheet, with a default to the Motley Fool parameters for a check, so remember to adjust the Interest at the bottom before using.

This works fine, better inform MF you cracked it. At typical example, £10K over 365d single round trade is -£260K. Add 10% margin and 3% interest rate and it becomes +£41. So that is done and MF chart and calculator are pretty much redundant given yours has the requisite added functionality.

On the technical side of the second calculator for practical use, this seems fine when %Libor is fixed at 0.6 and % margin and % interest are varied (as above). Similarly when % Libor is varied to e.g. 0.5% and % margin and % interest are set to zero (cost from -£260 to -£250 in usual £10K/365d test). But from what I can see, technical limitation on calculator if % Libor is varied and then % margin and % interest are also varied. As MF is redundant, easiest solution might be to revert to % Libor = 0.5% for direct comparison between your two calculators?

Need to tidy up visual data for OPs so that there is no confusion and your point on costings is easy to see. If you like I can tidy up all the graphs and screengrab/repost as you want. First calculator is fine (have C1A and C1B for varying number of trades and equiv £s/point as tidy jpegs). On your second calculator, on the google doc that is viewed from your link, it shows too many decimal points at %Libor 0.6, % margin = % interest = zero and it is easier to change the lot on the google doc visual (strangely the workbook downloads fine with tidier decimalisation without need to change, but then it is more difficult to screengrab the Excel document itself rather than the Excel html on your link). If that can be tweaked your end, I can regrab and repost it for you. After that perhaps regrab and repost at 0.6% input 10% margin and 3% interest to demonstate your improved functionality over the old MF stuff? Although easy to input the changes on the download, it is harder to screengrab the workbook, far more fiddly.

Feel like a geek and a guinea pig (rarely play with techie stuff unless need to).

But think it is worth the effort above to demonstrate your calculators visually on thread for OP clarity and to show the potential cost savings.

JamesU

cepheus

James

Feel free to tidy it up as you please, this was generated in and imported from Excel, and I'm not as familiar with Google spreadsheets.

JamesU

cepheus wrote: »

James

Feel free to tidy it up as you please, this was generated in and imported from Excel, and I'm not as familiar with Google spreadsheets.

I do not use Google products either. But all you have to do is highlight B5-H14 in your Excel spreadsheet, click the decimalisation button x3 and upload that to overwrite the current savings per trade calculator. If I do it this end on the download, have to screengrab the excel spreadsheet rather than googledoc excel which is tricky. This is the view at present, will delete the chart later......test chart removed to avoid confusion (Sabre's comment, #35 below).

JamesU

sabretoothtigger

Most people would take one look at all that working out and glaze over. But then most people shouldnt mess around with leveraged trades. Maybe you could put a very simple share vs spreadbet trade cost at the top

Ark_Welder

sabretoothtigger wrote: »

Most people would take one look at all that working out and glaze over. But then most people shouldnt mess around with leveraged trades.

Probably a reason for not putting a simple costing at the top!

cepheus

sabretoothtigger wrote: »

Most people would take one look at all that working out and glaze over. But then most people shouldnt mess around with leveraged trades. Maybe you could put a very simple share vs spreadbet trade cost at the top

I'm not sure you quite get it sabretooth

The calculation assumes it isn't leveraged or else it doesn't work! 90% of the original share funds are placed in a risk free account in the spreadbetting case, this is essential. So the word 'leverage' is really redundant.

How is is possible to put a single figure at the top when the savings vary depending on the size of the trade and length of holding?

Ark_Welder

cepheus wrote: »

90% of the original share funds are placed in a risk free account in the spreadbetting case, this is essential. So the word 'leverage' is really redundant.

The spread bet is still a leveraged trade. However, your position is fully covered with the 90% of funds - and it is this that is important.

sabretoothtigger

The calculation assumes it isn't leveraged or else it doesn't work!

Its how I operate myself and I talked about it on the ftse thread a few months ago. You are paying for leverage and a spreadbet firm can alter the margin they require. Barclays required 100% margin in Feb 2009 with at least 1 firm

Which firm charges you 3% overnight because I get charged at least double that. It tends to be rounded in their favour. Once Lloyds gets over 50p a share I will be charged 1p a day for every 100 shares which works out to be 7.3% apr

Could you say which firm and post some example from your receipts maybe. I dont care about the nominal size just the costs per share ( This is how I would expect a simple summary on the spreadsheet to be)


Most people should deal shares first then when comfortable move to a spreadbet occasionally
FSA pretty much outlines similar

Easy margin is what cause the 1929 boom and we saw similar with houses similar effects and so on.
In theory its quite right spreadbetting is good to avoid that stamp duty tax and UK has the most favourable laws in the world in this regard.
USA bans spreadbetting and forces people to hold 50k trading capital and/or use future contracts directly

cepheus

What are the charges?

From IGIndex

The main charge is the dealing spread. For DFBs on shares that are part of a major market index (like the FTSE 100), this is 0.1% of the value of the transaction. There is also a daily adjustment that reflects the cost of financing the position that you hold having only put down a fraction of the value as a deposit. The financing is charged at the risk-free (or LIBOR) rate plus 2.5% per annum.
If you are short-selling there may be a daily charge for us borrowing the shares to sell short for the period the position is open.
Finally, we apply a charge for Guaranteed Stops. Non-guaranteed Stops and Trailing Stops are free of charge. There are no other charges.
For further details, see our Dealing spreads.

rockitup

Ark_Welder wrote: »

The spread bet is still a leveraged trade.

So is buying a house with a mortgage