Spread bets vs CFD's

PoleStar

Spread betting and CFDs are both leveredged products with some differences but the principle is the same, speculating with more money than you have on movement of a share. While I know there are differences with CGT and commissions etc, the basic idea is the same.

And yet most "real" traders say spread betting isnt investing, its just a form of gambling, however CFD's are taken as a standard (albeit high risk) investment tool. Even the big guys invest millions in CFD's and yet wouldnt touch a spread bet?

Why is this so when they are very similar investment tools? Why is it that many would say that spread betting is a mugs game but CFD's are ok.

Is there something I just havent figured out yet?

Thanks!!!!!!!!

edzillion

AFAIK you don't pay CGT on spread bets, but do on CFDs

bosra

As a trader, I prefer CFDs .. true, spreadbetting is CGT free..but the real advantage of using CFDs is by using direct market access (DMA) ...So say BKIR is 490 bid and 495 offered.. With DMA i can position my order within this spread . So I have the chance of getting a better price than 490 if Im selling and better than 495 if im buying.. Using spreadbetting, ur quoted a spread/ strip that you must buy or sell at.. Anyway, i feel that what makes CFDs a more attractive option in the main..but im sure there are an army of investors on here that rather spreadbet..

portomar

edzillion wrote: »

AFAIK you don't pay CGT on spread bets, but do on CFDs

yep, true, and this is one of the main reasons that small players use spread betting versus CFDS. the benefit of cfds is direct market access. as stated above

PoleStar

Thanks guys!

Thats reassuring, I thought there was something I was missing. As I will be starting off small I will go with spread betting.

techguy

I'm interested in this also..as i'm feeling a bit bearish lately.

I'm not too keen in spreadbetting, well from paddypower anyway as the spreads are to wide..this is where the make their money, it's like a hidden commission.

I know spreadbetting can be used with very little cash.. What are the requirements for CFD's ?

I'm interested in a small bit of shorting.

PoleStar

Dont be put off spread betting by PaddyPowers!

I am trying to decide between Delta, IG and CMC, not sure which yet though.

CFDs have commission and CGT so it only feasible with larger investment funds in my opinion to make it profitable.

techguy

What kind of initial deposit do you guys put in and usualy do ye only ever risk a couple of percent on your overall capital for each trade?

PoleStar

Im the wrong one to ask as Im a noob to all this.

However as for risking capital, its different entirely with spread betting and CFD's as they are leveredged tools.

The capital needed to back a spread bet is called the initial margin and varies with the value of the share.

However in general the amount you can gain OR LOSE with these is a much higher percentage of your initial investment amount.

While I dont like PaddyPowers, if you go to paddypowertrader.com it actually has a lot of info and tutorials.

bosra

I would highlight the following. While there is no 'explicit' commission charged on spreadbetting, it is still factored in and it is a hidden charge. Here is an example. Paddy power quotes you the following on bank of ireland. 5 bid to 5.10 offered. The stock maybe trading at 5.04. So you buy at 5.10. Then the stock must move at least 7c until you are in profit. That is the commission you are in fact paying. With a CFD, you can position your order closer to 5 to buy. And so you are likely to hit profit alot quicker.
For me the costs embedded in spreadbetting mean that alot of newbies to trading fail at day trading and very quickly too. As for iniatial deposits, you would be looking at anywhere between 3 to 5k to get started. If you would like anymore info, please message me.
Thanks

PoleStar

Hi sorry I should have stated that the margin is the commission.

To put it simply, if the spread in BOI is 5.00 to 5.10, the market has to move as stated by at least 10 c actually before you are in the money.

And as for initial deposit, you just have to deposit enough to cover the inital margin and some companies will allow you to place bets as low as 1euro a point so even a couple of hundred can get you started.

PS dont go bty Paddy Power, their spreads are terrible.

Cyrus

lads ive been using ig index for a while and found them good,

also if you want to bet more than €30 a point call them and tell them the price in the cash you want to buy in at, you will get a better spread than whats being offered if you can get the shares at a lower price

PoleStar

One question about IG index before I sign up for them. As its based in UK, are my transactions in sterling and thus make me suffer on currency exchange? (I know I can deal in euro prices but just wondering if these are sterling prices converted to euro)?

As for IG index, they seem to receive the best reviews, or should I say, they seem to receive the least BAD reviews, unlike the others I have been researching, Paddy Power, CMC, World.

Not sure yet about DElta Index, cant find many opinions out there on them.

Bytheway

bosra wrote: »

I would highlight the following. While there is no 'explicit' commission charged on spreadbetting, it is still factored in and it is a hidden charge. Here is an example. Paddy power quotes you the following on bank of ireland. 5 bid to 5.10 offered. The stock maybe trading at 5.04. So you buy at 5.10. Then the stock must move at least 7c until you are in profit. That is the commission you are in fact paying. With a CFD, you can position your order closer to 5 to buy. And so you are likely to hit profit alot quicker.
For me the costs embedded in spreadbetting mean that alot of newbies to trading fail at day trading and very quickly too. As for iniatial deposits, you would be looking at anywhere between 3 to 5k to get started. If you would like anymore info, please message me.
Thanks

Hello,
Could you explain spread betting please ?

luckystrike23

Bytheway wrote: »

Hello,
Could you explain spread betting please ?

http://www.financial-spread-betting.com/Spread-betting-faqs.html