Holding long term positions using spread bets

[Sprotty]

Hi

 

I want to hold a number of stocks and ETF's long term, many of these are on the NASDAQ.

If I buy the shares directly via the share dealing account, then there are large exchange rate fees (and I believe I will be paying tax on any gains).
So I'm looking at using spread bets to achieve this goal, from what I understand their is no tax, and the exchange rate issues seems to be just factored into the spread.

 

What I would like to know, is there a down side to holding spread bet positions long term?

 

Your docs suggest there is interest due for holding long term positions, but it’s unclear how this works.
https://www.ig.com/uk/help-and-support/spread-betting-and-cfds/fees-and-charges/what-are-igs-shares-spread-bet-product-details

Are these %'s per trade, per year, per day, per 3/6/9 month interval?
Do they get worked out automatically as I hold a position for longer or do I need to make some selection when creating a spread betting position?

 

Thanks.

[JamesIG]

From a financial perspective if you are holding a share in a spread bet account via a forwards contract then you will pay the spread to get into the trade and that's it. You will also have to close, or roll the position at the date of expiry. 

 

If you are holding a DFB then you will pay an overnight charge as laid out here. These are done automatically if you hold a trade through 10pm UK time. 

 

Advantages of spread betting 

https://www.ig.com/uk/spread-betting 

https://www.ig.com/uk/spread-betting/the-benefits-of-spread-betting

 

Advantages of CFD trading 

https://www.ig.com/uk/cfd-trading

https://www.ig.com/uk/cfd-trading/benefits-of-trading-cfds

[Sprotty]

Thanks, I think I've got that, but just to be clear, given the formula in the link

 

Size for spread bets means size of bet

Size × closing price × LIBOR +/- 2.5% ÷ 365

 

So if I have a spread bet on say the FSTE 100, which had a value of 7500,

If my bet size was 10, and the LIBOR is 2%

If I keep that open past 10pm then my daily interest would be

 

10 * 7500 x (2 + 2.5) / 365 = £9.25 per day.

 

 

OK, got that I think, so what are the %'s listed in
https://www.ig.com/uk/help-and-support/spread-betting-and-cfds/fees-and-charges/what-are-igs-shares-spread-bet-product-details

 

Specifically these ones; which imply you expect some bets to be held for months, but given the daily interest that doesn't seem  to be a good strategy?

 

[JamesIG]

Hi  

 

You are correct in your first calculation at £9.25 /day. 

 

In regards to your second question, these percentages are how much the spread increases by (the difference between the buy / sell values). 

 

It maybe useful to check out our education section here.

[Guest Bruce Lythe]

I would like to know the typical total annual cost of holding a £1m long FTSE futures for a decade (rolling as needed I assume twice a year if I start off with the futures 9 months away and roll at 3 months to maturity). I assume pay a reduced roll spread twice each year?

I understand I put up initial margin but does that earn interest?.

The futures is priced I understand assuming I hold underlying cash so I get the total return on the FTSE less that cash rate on £1m.

Do I pay any other costs apart from two rolls a year and spreads at establishment and liquidation of the position?