CFD Trading

[1]

I'm looking to buy some shares which I think will go up in the next 6-12mths and am looking into CFD trading and spread betting as an alternative to just buying the shares.

I'm not keen on spread betting, as there are expiry times, and if the stock doesn't rise in next 12mths, then I would just hang onto to it longer.

Being able to leverage doesn't really bring me any benefits either, as I would ensure I could cover my full exposure either way. Although it would allow me to leave the bulk of my cash where it is, (long term savings account) I think any interest rate advantage would be negligible.

so are there any benefits to using CFD or spread betting for the medium to long term, other than being able to leverage?

Edited by 1 on Tuesday 13th January 01:55

[Horse_Apple]

1 said:

I'm looking to buy some shares which I think will go up in the next 6-12mths and am looking into CFD trading and spread betting as an alternative to just buying the shares.

I'm not keen on spread betting, as there are expiry times, and if the stock doesn't rise in next 12mths, then I would just hang onto to it longer.

Being able to leverage doesn't really bring me any benefits either, as I would ensure I could cover my full exposure either way. Although it would allow me to leave the bulk of my cash where it is, (long term savings account) I think any interest rate advantage would be negligible.

so are there any benefits to using CFD or spread betting for the medium to long term, other than being able to leverage?

Edited by 1 on Tuesday 13th January 01:55

No.

A spread bet is a CFD, just wrapped diferently so as to be tax efficient for a UK tax payer (if they gain. Tax inefficient if they lose).

Spreads generally just a more expensive way to trade a CFD and without the benefit of offsetting losses.

Cost of funding, while low will generally negate using either product for an extended period of time, say a month or so.

However, stamp on purchase of physical is 0.5%, which is generally just over a month's worth of funding interest.

Spread bets are regulated slightly differently so any old punter can open an account. CFDs generally require a user to have a level of previous experience.

My general advice is that these two instruments should be avoided if you are just looking to do one trade, don't want leverage, haven't used your annual CGT allowance, never traded before etc.

[Somewhatfoolish]

And you won't get the full dividend passed on usually either... Honestly I would just buy the shares if you're intending to hold them - say they grew ten percent this year you've probably paid five per cent in charges just to hold them!

[1]

Thanks.

Can anyone recommend somewhere I can do all 3 (buy shares, CFD's and spread bet), or do such places not exist.

Hoodless Brenan was recommend to me, but the dont seem to allow me to actually buy shares.

Edited by 1 on Wednesday 14th January 00:20

[Horse_Apple]

1 said:

Thanks.

Can anyone recommend somewhere I can do all 3 (buy shares, CFD's and spread bet), or do such places not exist.

Hoodless Brenan was recommend to me, but the dont seem to allow me to actually buy shares.

Edited by 1 on Wednesday 14th January 00:20

There are varios places which offer all three, but no single broker which actually writes all three, so to speak. The physical brokers all clear via one of the major CFD houses and so will have multiple accounts.

Hoodless certainly used to do cheap equity trading, but their core business has allways been calling up punters and selling them lines of small cap stock. Their CFDs are CityIndex but may be CMC, not sure.

Barclays is allright as a cheap starter. Again they clear their CFDs via CityIndex.

To be completely honest, a broker which offers all 3 you would think would be easier but it isn't. It is best to find a broker for each product, ensuring that this is the area that they focus on.

[gerradiuk]

ETF's are an easy way to go & no stamp duty either.

[1]

gerradiuk said:

ETF's are an easy way to go & no stamp duty either.

Am not familiar with them, care to give me an overview.

[Somewhatfoolish]

Erm... They're totally irrelevant to the question you asked!

[1]

So would the advice be any different if I wanted to trade commodities?

[Horse_Apple]

1 said:

So would the advice be any different if I wanted to trade commodities?

Potentially.

As commods are typically margin traded futures then CFDs and or Spread Bets (typically no difference apart from tax once you move away from equities) become mor relevant.

Typically, with the latter you can trade in sizes less than one futures contract and on smaller margins.

For any average retail punter then I would trend towards saying that CFDs or Spreads are a much better product than a comparable future. But there is a risk due to the fact that futures are standard, transferable instruments and as CFDs/ Spreads are OTC, issued by the broker then your choice of broker becomes more important. Generally, the larger the broker the better their systems and their products, esp price continuity.

[Somewhatfoolish]

Horse_Apple said:

on smaller margins.

You really reckon this is a good thing for a retail punter?

[Horse_Apple]

Somewhatfoolish said:

Horse_Apple said:

on smaller margins.

You really reckon this is a good thing for a retail punter?

Good point , but the margin reductions are normally only achievable by the positioning of stops. Many of the markets at the large houses are 24hr so have limited slippage potential unless a market gas. So not only can you trade in fractions of a contract but also reduce your potential exposure further.

Obviously, as you point out, it will also let a mentalist go more mental.

[gerradiuk]

1 said:

gerradiuk said:

ETF's are an easy way to go & no stamp duty either.

Am not familiar with them, care to give me an overview.

An Exchange Traded Fund (ETF) is a collective investment vehicle that trades like a single stock. This means that it provides the benefits of an index tracking fund and the benefits of owning an individual share. ETFs generally track the performance of a stock, bond, or commodity index. Similar to individual stocks, each ETF has a ticker, SEDOL and ISIN number and is traded on a stock exchange.

http://www.etfsecurities.com/en/about/etfs_about.a...

Straight forward really, WTI would be a v>good investment now & keep for at least a year min.
hope this helps you in someway, I know its not the original question but it may broaden your knowledge & help you decide where & what to invest in.
Spreadbetting is a much quicker way of gainning money but also one the fastest I know (apart from the wife)that can lose it if your a bit green to it all .
Good luck.

[1]

gerradiuk said:

1 said:

gerradiuk said:

ETF's are an easy way to go & no stamp duty either.

Am not familiar with them, care to give me an overview.

An Exchange Traded Fund (ETF) is a collective investment vehicle that trades like a single stock. This means that it provides the benefits of an index tracking fund and the benefits of owning an individual share. ETFs generally track the performance of a stock, bond, or commodity index. Similar to individual stocks, each ETF has a ticker, SEDOL and ISIN number and is traded on a stock exchange.

http://www.etfsecurities.com/en/about/etfs_about.a...

Straight forward really, WTI would be a v>good investment now & keep for at least a year min.
hope this helps you in someway, I know its not the original question but it may broaden your knowledge & help you decide where & what to invest in.
Spreadbetting is a much quicker way of gainning money but also one the fastest I know (apart from the wife)that can lose it if your a bit green to it all .
Good luck.

Looks interesting. So if for example I thought oil prices were going to go up, then I could buy ETFs in Sec Oil Brent and I am essentially buying into "the oil sector".

Have I understood that correctly? Also maybe you could explain why they have a time against them such as 1yr, 2yr etc.

Also what is WTI?

Thanks.

[escargot]

I use http://www.iii.co.uk - Fine for the odd spreadbet/CFD or just buying & selling equities etc.