What is the spread?
The spread is the difference between the buy price and the sell price of a market and is in effect the cost of trading that market. We quote a two way price on all our markets, the bid price at which you can sell and the offer price at which you can buy. The tighter the spread between the two, the quicker the trade can move into profit earning territory.
How to read the spread
The spread on index A is 20609/20613 or 4 points. If you buy (go long), you do so at the higher price of 20613. The market needs to rise 4 points before the sell price (the bid) reaches 20613 and your position is at break-even.
If the index has a 1 point spread, your position will potentially turn a profit much quicker.
There is no charge for placing standard stop and limit orders. There is, however, a one-off fee for guaranteed stop losses which is charged upon trigger.
Please note, guaranteed orders are only available on certain markets during the relevant market hours and the charges associated with them vary. Please see the relevant Market Information sheet on the trading platform for full details.
Overnight financing charges
- Financing is a fee that you pay to hold a trading position overnight on Daily Funded Trades (DFTs) with no set expiry date.
- Essentially it is an interest payment to cover the cost of the leverage that you use overnight.
- You will not pay a finance charge on futures trades (such as options or bonds) as they already have the cost of carry built into the spread.
- Financing charges reflect the cost of borrowing or lending the underlying asset
- Overnight financing is charged at LIBOR (or equivalent rate) +2.5% on long positions and you will receive LIBOR -2.5% on short positions
- There may be instances when a daily finance fee is charged to you on short positions if the underlying base rate is low
If, for example, you decide to go long £10 per point on UK Company ABC, at 435p. The trade is doing well and the price has increased to 450p at the end of the day. However, it is still some way from your target price of 480. You decide to keep the trade open overnight. Assuming an illustrative LIBOR rate of 0.73%, the overnight financing is calculated as:
Please note that you must have sufficient funds in your account to cover the financing charge.
The daily financing fee will be applied to your account each day that you hold an open position (including weekend days).
Rolling over contracts with an expiry date
When futures contracts are nearing their expiry date you can, if you wish, roll your trade into the following contract. You can do this by selecting the auto – roll tick box in the order ticket. You pay half the spread to carry out this transaction. If you are going long, your position will be closed at the mid-price and re-opened in the next contract at the buy price. If you are going short, your position will be close at the mid-price and opened again at the sell price in the back month.
It is cheaper to roll over to the next contract than closing the trade yourself and then reopening it. This is because when closing and opening manually you pay the full spread, whereas "rolling over" you pay just half.
You have decided to roll over your long position in Company XYZ March contract into the next contract, which will be June.
At the time of the roll over, the March spread is 630 / 635 whilst the June spread is 640 / 645. Your position is closed at the March mid-price of 632.5 and then automatically reopened at the June offer price of 645.
Had you closed the trade yourself, you would have closed at 630, before re-opening at 645.