Two spread betting posts in two days. I must have time to spare, I wish I did. The truth is I had a stop out today and I decided to make time to post/moan about it.
My position in RBS stopped out today. I made a whopping £0.18. Although I made money on this trade I think it still works out at a loss because of the overnight financing charges. I think CMC must round up to the nearest 1p on overnight financing. Not really fair as I’m sure the interest on my £1 per point spread bet would not equate to over £3 a year. Lets take a quick look at the maths of the over night financing charges spread betting companies charge.
So for this case. Looking at the limited figures I have it would appear CMC don’t charge more for the spread bet being left open over the weekend. So lets take the case of RBS. I went long £1 per point at 43.5p. Going long £1 per point is equivalent to buying 100 shares which would cost me £43.50. The margin requirement for RBS is 8% so I’m required to put up 8% of £43.50 which is £3.48. Therefore they are putting up the remaining £40.02. They charge me £0.01 per day. So that’s 0.02% per day. Since they don’t charge for the weekends we times 0.02*5 = 0.1% per trading week. 52 weeks in a year so 0.1*52 = 5.2% APR. Not mega money but still seems a little high considering the base rate is 0.5%. Does this mean when the base rate is 5% again I’ll be charged 9.7%?
I think my calculations here are correct, please correct me if there wrong. Don’t get me wrong I’m not complaining. Spread betting companies offer me a way of trading the financial markets that I didn’t even know was possible a few years ago. It’s a great way to speculate with limited trading funds, as I do. The thing is if my calculations are correct and interest rates do start to rise the 9.7% overnight financing charge will be a little excessive, in my opinion.
I’ve always regarded the rolling charges as negligible but looking at this I’m not so sure they are. I think it’s certainly highlighted something that I need to look into a bit deeper. It’s my fault really, It could very well be the case that I agreed to these charges when I opened the account. Still It’s something that needs further investigation.
To top it all off my RBS position suffered slippage before it stopped out. My stop value was set at 44 and it didn’t get filled until 43.61. Yet another case of slippage at CMC Markets. I think it may be time to change spread betting firms. To be honest I can’t even be bothered to phone them up and complain. I think I might just vote with my feet on this one and move my spread betting home.
Until next time,
“May the markets be with you!”
The Spread Betting Beginner