Best share spread betting account?

jamesmorgan

EdGasket wrote: »

Yes, I was one of the 90% mugs with no 'edge' (AKA inside information); I made a loss, lesson learnt, move on.

I think you need to differentiate between a spread betting account (which is just a way of managing costs) and a trading strategy (which could be implemented across any type of account). Many people believe in efficient market hypothesis. For them the market is always correctly valued. As such it only makes sense to invest in a tracker. They believe that any stock picking approach will simply lead to increased costs and reduced returns. With this mindset the only people who can win from stock picking are those with insider information (or those that are lucky).

Spread betting attracts investors who are more likely to be into stock picking. As it favours short duration trades it also attracts investors who are more likely to be using TA. Many investors in both these areas fail to make long-term gains. However, these investors will fail whether they use spread betting, CFD's or direct share purchases. Trading strategies in these areas require a certain personality and discipline. If you haven't got this I agree it is best to move onto other styles of investment.

plunt

jamesmorgan wrote: »

Hi,
it sounds as if your approach is very similar to mine. It is interesting to see your comments on CMC markets. My decision to go with IG Index was largely based on their size (and hopefully financial security), although I note that CMC aren't exactly a minnow.
For info, all my previous stock trading was done within an ISA. I transitioned to using spread betting a year ago simply to save costs. However, as my funds were within an ISA account I couldn't invest them directly in a high interest savings account. After a fair bit of research I decided upon a short dated investment grade corporate bond ETF (IS15). At the time this had a yield to maturity of 5.2%. Capital growth of this ETF has done very well over the past 12 months and it has grown by an annualised 8%. However, as a result its yield to maturity has fallen to 2.8%. This is no longer quite enough to cover the spread bet interest charges so I am currently considering other options.

James

the other issue i have now come across is that i have gains i want to realise. in my case (as an example i have changed figures a bit..)

but i have £400 deposit and now my account value is at £900, so £500 profit. i therefore withdrew all my cash which i usually left in there for a buffer. my account close out level is £89 pounds. so i essentially now have £800 buffer. which i feel is a bit too high. but you cant realise the gains untill you close out the position and then reopen. but this would incur costs due to the spread.

So my strategy.... invest in share about to go ex dividend. sure the stock falls by roughly the same amount and the dividend payout. but the payout is then cash. This you can then withdraw. (cmc markets)

This wont be relevant to many people but feel you may come across this issue and thought you may want a easy solution! And its the one time you can go dividend date hunting which i always find amusing!

EdGasket

jamesmorgan wrote: »

If you want to trade current prices, use Daily Funded Bets (DFB). On IG Index currently if you want to buy Vodafone the price is 162.6-162.9. On my stockbroker account (real live prices) the price is 162.7-162.8. I've never noticed a significant difference in prices from my spreadbet account and current live prices.

Anyway what justification have SB firms for charging overnight financing costs?? They don't actually buy the shares you bet on do they; they just match off against sellers and if there is a big mismatch they lay off the bet. The Spread-Bet industry is completely sewn-up so that like all bookmakers, they always win.

jamesmorgan

EdGasket wrote: »

Anyway what justification have SB firms for charging overnight financing costs?? They don't actually buy the shares you bet on do they; they just match off against sellers and if there is a big mismatch they lay off the bet. The Spread-Bet industry is completely sewn-up so that like all bookmakers, they always win.

Yes, you are right that SB firms will balance long trades with short trades and only hedge the difference by direct investment. In theory this makes the interest rate they could charge variable depending on the relative balance of long/short trades. However, this could be quite difficult for them to implement and a fixed rate of interest is possibly an easier sell. A few points to note though:

a) if the SB firm has to hedge their position it will cost them more money than they are earning from the trade

b) typically more trades are long than short so there is a continuing need to hedge

c) an interest rate of 3% is very good for an unsecured loan

Ultimately the interest rate they charge is a business decision based on all their costs. If customers feel it is too high they will go elsewhere (as you have). SB firms, in common with all brokers, make money based on activity. It is in their interest that clients trade. It shouldn't matter to them whether their clients win or lose or the direction of the stock market. They simply make money by providing a service. The only way they should start losing money is if their clients stop using that service.

EdGasket

...and the Spread Bet companies charge you financing on 100% of the underlying investment even though at least 20% has already been financed by yourself by way of margin! You seem very defensive of SB companies jamesmorgan, do you work for one?

jamesmorgan

EdGasket wrote: »

...and the Spread Bet companies charge you financing on 100% of the underlying investment even though at least 20% has already been financed by yourself by way of margin! You seem very defensive of SB companies jamesmorgan, do you work for one?

I don't feel I'm being defensive - I'm just a satisfied customer. At the end of the day you look at their total costs and decide whether they provide value for money compared with other options. For me personally they only provide value with today's low LIBOR rates. If LIBOR rates rise significantly I wouldn't use spreadbetting (or CFD's).

Nomad2006

EdGasket wrote: »

Anyway what justification have SB firms for charging overnight financing costs?? They don't actually buy the shares you bet on do they; they just match off against sellers and if there is a big mismatch they lay off the bet. The Spread-Bet industry is completely sewn-up so that like all bookmakers, they always win.

What justification do Tesco have to charge me more for an orange than they paid the fruit grower?

Businesses as a general rule make money by charging end customers a spread over their input costs, whether they are retailers or spread bet firms.

I might decide Tesco's price for oranges is an outrageous con, but then I might also find that buying my own orange tree actually works out more expensive if I only want a few oranges or I only want oranges today. So I might conclude that Tesco is the most cost effective place to get my oranges, despite the fact they are making a profit in the process. If it's not, I'll probably get my oranges somehow else.

plunt

EdGasket wrote: »

...and the Spread Bet companies charge you financing on 100% of the underlying investment even though at least 20% has already been financed by yourself by way of margin! You seem very defensive of SB companies jamesmorgan, do you work for one?

please see my earlier post..... CMC markets charges only on the unfunded portion, and rates are 2%+reuters zero risk rate (roughly 0.3%-0.6%)

Thus lower than what i get in my savings accounts

Just because someone else is making money doesnt mean its bad for you... SB firms clearly make money, but so do stock brokers, supermarket, and most businesses (well they try atleast but the recession says otherwise!)

sabretoothtigger

There are brokers who will do margin account or secured lending thats for normal shares as well as spreadbet.
One broker has given me 1k credit which is useful for not needing to leave any money in there just in case.

A spreadbet company often does actually buy the underlying share or at least have large interests in ftse and so on. There is a cost to them and in any case they are required to keep large amounts of cash so somebody has to pay for that.
One firm went broke about a year complaining people just won too often, they had not hedged or bothered to balance books just hoped they'd win the bet just like the punters were hoping but they lost!

They were practically illegal in how they operated, thats not the norm most are charging fees as this is how to stay afloat

I was a customer with the bust firm, they were covered by FSCS just like savings account. Got my money back about 6 months later


If you want to see dynamics, LCG is about to be taken over apparently. They may discuss the operations better if a newspaper covers this

plunt

sabretoothtigger wrote: »

There are brokers who will do margin account or secured lending thats for normal shares as well as spreadbet.
One broker has given me 1k credit which is useful for not needing to leave any money in there just in case.

A spreadbet company often does actually buy the underlying share or at least have large interests in ftse and so on. There is a cost to them and in any case they are required to keep large amounts of cash so somebody has to pay for that.
One firm went broke about a year complaining people just won too often, they had not hedged or bothered to balance books just hoped they'd win the bet just like the punters were hoping but they lost!

They were practically illegal in how they operated, thats not the norm most are charging fees as this is how to stay afloat

I was a customer with the bust firm, they were covered by FSCS just like savings account. Got my money back about 6 months later


If you want to see dynamics, LCG is about to be taken over apparently. They may discuss the operations better if a newspaper covers this

just out of curiosity, what brokers have allowed you to trade on leverage? and what interest if any do they charge when you utilize this?