Spread Betting

Running Bing

Im looking to start investing and was just wondering the best way to go about it.

Ill be investing very small amounts, an initial lump sum of around 3-5k and then a few hundred a month after this. Ill be investing mostly in indices but would like the flexibility to invest in individual shares or even commoditites.

I have heard spread betting is one of the best ways to invest seeing as its so tax efficient. My question is would spread betting be suitable for what Im looking to do? Im assuming a broker would be too costly for the amounts Im looking to invest? I know places like Quinn and Rabbo bank do index funds but Id like a little more flexibility.

Also what are the rollover charges like with spread betting (Ill be holding investments for a long time, not trading) and finally can anybody recommend a reliable place to do it regulated by the financial regulator?

Thanks.

money_man

I am very happy with Delta Index (http://www.deltaindex.com). They are regulated by the Irish regulator and the relative low spreads on Indices.

Most Spread betting companies offer free tutorials and free simulators/demo account, I would avail off these if you are interested in Spread Betting, just be aware that it is a quite risky product

Running Bing

Cheers moneyman.

What sort of rollover charges do you get with Delta index?

Im not really interested in spreadbetting per se, Im just looking to make a long term investment and was wondering about the best vehicle to do this.

Idu

It'll be harder to make a long term investment with a spread betting company as you are being charger per point and you're investment will thus be heavily leveraged. You'll need a decent amount of capital to cover your margin requirements should the market move against you. In a regular investment through a broker you won't have that hanging over you. If you feel you can get the most out of your pick and not have to worry about meeting margin requirements then tax-free spreadbetting is a good option

MacStacked

money_man wrote: »

I am very happy with Delta Index (http://www.deltaindex.com). They are regulated by the Irish regulator and the relative low spreads on Indices.

Most Spread betting companies offer free tutorials and free simulators/demo account, I would avail off these if you are interested in Spread Betting, just be aware that it is a quite risky product

:cool: Do you have any connection with Delta money man?

There are a lot more spread betting companies than Delta with tighter spreads and a far wider range of products available to trade. I would check those out op. Try IG index or CMC.

pokerface11

what about paddy power trader. I set up a demo account with them. you can practise your spreadbetting strategies for a while with 10,000. Anyone any opinions on paddy power or are the margins too wide??

DOC09UNAM

I was talking to a man from CMC Markets named Stewart Something that got me into the idea of spread betting, and am now also interested in it, and looking at getting started up... Must get glued to this section pretty soon!

mickman

the irish spread betting companies are rubbish, i find IG index the best by a wide margin. someone else said "your position will be highly leveraged", thats rubbish, it will only be as levereaged as you want it to be, it will depend on your capital, stop loss etc.

i use ig and find them excellent and am making good money for the past few months. barbados for me for the xmas :-)

Running Bing

The whole spread betting thing is very interesting but it seems people use it more for short term trading rather than long term investing?

Does anybody use spread betting for long term investments to take advantage of the tax breaks or is it just not feasible unless your doing big trades?

Also Im a little confused about the comments re:leverage? I was under the impression you just pay the bid and hold your "bet" until some future date....I dont see how leverage comes into it?

Maybe I should've been a bit more specific in my post. Again Im not really interested in getting into the whole spread betting thing....Im just looking for the most tax efficient way to make a long term investment.

mickman

spread betting is by far and away the most tax effecient way of trading / playing the stock market etc

the leverage works like this : if you want to trade the dow jones for example and put 1 euro per point on it. you could stand to lose 10000 if the dow were to go to zero but you wont actually have to have 10k in your account. you will only need 10% of it i.e. 1000 so you are leveraged for the other 9. thats if you dont use a stop loss of course.

you can use it for long term trading, just let your quarterly trades roll over

the irish companies only offer short term contracts i.e. monthly but ig offers contracts that dont expire for up to 9 months

Idu

You pay a minimum price per point. In Delta I believe its €1 a point. So for example if you want to invest long term in a product that is trading at 77.70 for example then your leveraged up to €7770. So if you only have 2000 in your account you are in danger of having to add more money to your account if the trade goes against you. Obviously you would have stops in when you hit that margin but thats why its not feasible for longer term investments because you dont want to be being stopped out in a buy and hold situation

mickman

why isnt it feasilbe for long term investing

you can just put in a lot of capital and dont use stops or use very wide stops

the best thing about spread betting is you get to trade stocks like google etc (albeit with tight stops) cos one thing for sure i couldnt afford to actually buy many google shares at 500 bucks a pop

Idu

Well buying 500 shares of a company worth €1 is the same as buying 1 share in a company worth €500. Your return will still be the same.

As for the spread betting I dont think you would want to be running that risk on a long term trade when you want to be riding out of ups and downs without having to worry about your stops or meeting margin requirements

Raskolnikov

No offence Running Bing, but you don't sound like you know an awful lot about spread betting?

The best thing you could do is to set up a Demo account over at PaddyPowerTrader - www.paddypowertrader.com/ If you can make money after a few months, then by all means, give the real thing a go.

For my two cents; spread betting is very, very, very difficult. Out of the ten or so people who I personally know that have used spread betting (me included); I only know one person who can actually make money out of it.

rinnin

@Raskolnikov
Thanks for that bit of info. Good to get some info on how these actually work out for people in the real world.
Best of luck
R

Running Bing

Raskolnikov wrote: »

No offence Running Bing, but you don't sound like you know an awful lot about spread betting?

The best thing you could do is to set up a Demo account over at PaddyPowerTrader - www.paddypowertrader.com/ If you can make money after a few months, then by all means, give the real thing a go.

For my two cents; spread betting is very, very, very difficult. Out of the ten or so people who I personally know that have used spread betting (me included); I only know one person who can actually make money out of it.

I know absolutely nothing about spreadbetting.:D

As I said by aim was not to make money out of spread betting by exploiting different strateguies, I was merely looking for the most efficient way to employ a buy and hold strategy.

Seems pretty clear spread betting is not the best option open to me so Ill probably just invest thorugh Quinn or Rabo or buy a few etf's.

Thanks fella's.

mickman

i dont understand

why cant you keep positions long term in spread betting, i do it all the time

rabo and quinn will rob you with fees

Running Bing

mickman wrote: »

i dont understand

why cant you keep positions long term in spread betting, i do it all the time

rabo and quinn will rob you with fees

But wont the rollover fee's be pretty steep anyway if Im holding long term?


If I invest say €1000 euro's is it possible to set the stop loss at €1000 euros so thats the maximum I could lose?

Like I said I will also be adding a few hundred quid a month to my investment so spread betting might not be the best option for this?

And I didnt think the fees where that bad with Rabo or quinn seeing as their passive funds? (I wouldnt be investing in any actively managed funds).

mickman

1. the fees are steep with rabo and quinn
2. you have to pay CGT on any gains

of course you can set a stop loss to make sure you dont lose more than 1000. you can make whatever stop loss you wish

yeah to be honest if you are going to averaging in with a few quid every month then spread betting might not be for you

as regards the rollover. i will give you an example. you can open a position with ig on the dow jones which will expire at end of march 2010. the spread is 10 points. when that rolls over a new position is automatically opened at half the original spread. to be honest if your trading something like the dow which is 10000 points then you dont notice a 10 point spread at all unless you were day trading

ED 209

Spread betting is just that, betting. I think it's crazy and stupid. May as well bet on horses or play blackjack. You don't own the underlying asset. It's quite dangerous. The house always wins.

Buy and hold some good stocks or IMO look at precious metals and commodities. Overtime that's the best way.

mickman

ED - your view is just that of a simple uninformed man

what are you doing when you buy stocks? are you not betting that they will go up? of course you are. the stock market is the largest betting arena in the world and by buying stocks you too are gambling. or maybe you dont care if they go down, im sure you do though

you consider spread betting dangerous but buying stocks isnt dangerous? try telling that to all the pensioners that invested their life savings in a "good " stock like AIB as you put it when it was trading at 20 euro. do you think they care they "own" the underlying asset? of course not, all they want is their money back

spread betting is a tax free alternative to buying stocks. if you know what you are doing then you make money, same as when you buy the underlying asset

gizmo555

Running Bing wrote: »

But wont the rollover fee's be pretty steep anyway if Im holding long term?

Not necessarily. I have medium to long term positions on several stock market indices as spread bets and I do it like this:

Lets say, for example, I have €10k I want to invest in the Dow Jones. This is roughly equivalent to €1 per point. Assume I want to set a 10% stop so I can't lose more than €1,000. This means I need to deposit €1k with the spread betting firm to cover my maximum loss. The other €9k I put on deposit and the interest this yields will cover most if not all of the spreads and rollover fees. This is effectively an ungeared bet on the index, as opposed to if I, say, took all my €10k and bet €10 a point with a 10% stop. This would be 9:1 gearing and extremely risky - not recommended!

Running Bing wrote: »

If I invest say €1000 euro's is it possible to set the stop loss at €1000 euros so thats the maximum I could lose?

Yes. But be aware that standard spread betting stops are not guaranteed. If, for example, there is some major news overnight, the markets may gap open the next morning far below your stop level and that's where your stop will be filled. You can avoid this risk by using a guaranteed stop, which is where for a small extra premium in the form of a couple of extra points on the spread, you are guaranteed your position will be closed at your stop level, no matter what the underlying market does. IG Index and CMC Markets are two firms which I know offer this facility - there may be others. This, by the way, is a feature which is not available in a conventional index tracker fund, so in this respect spread betting could be regarded as being less risky.

Running Bing wrote: »

Like I said I will also be adding a few hundred quid a month to my investment so spread betting might not be the best option for this?

I suppose you could gradually increase your bet per point as your savings increased. You would incur a new opening spread on each new increment, but I imagine you would also incur fees on additional investments in a tracker fund.

Running Bing wrote: »

And I didnt think the fees where that bad with Rabo or quinn seeing as their passive funds? (I wouldnt be investing in any actively managed funds).

IG Index's spread on its monthly Dow Jones contract is 10 points. If you rolled it over 12 times a year, this would equal 120 points, or at current market levels about 1.2%. But, as we've seen, you could offset this with interest on the part of your funds which are not lodged as a deposit with the s.b. firm. There are also quarterly and annual contracts which would incur lower overall spreads in the course of a year. You'd need to do your own arithmetic to see how this compares with the tracker funds.

merc998

I have a friend who is using delta index.He seems very happy with the company and mostly spread betting itself. They are regulated by the Irish regulator and relative low spreads on Indices.
Just be carefull because it is risky so always set up your stop/loss.

Hope this helps.

paulmooney

Just a quick bit of advice, Always set up stop/loss, I have seen so many amateurs make this mistake and not set it up and loss alot. There is alot of risk invovled.

petestan

I'm new to the spread betting game but, using IG Index's Guaranteed Stop means that I cannot lose more than I am comfortable depositing on each particular bet. So I can set a maximum loss of €10 if I feel like it and I'm guaranteed not to lose more than that. If my bet then goes in my favour, there is still no limit to the amount I can make on it.

Wisely using the facilities available makes it a relatively safe, and incredibly cheap and easy, way to get in to the stock market.

betonit

any of ye making a living from spreadbetting...out of interest.