| MARKETS
Range of Markets
E*TRADE Spread Betting offers the facility to spread
bet on a wide range of products from the UK and international
financial markets. These include major indices, currencies,
equities, commodities and treasuries.
We quote Futures markets as well as Daily and Rolling
Daily bets. Please click
here to see a full list of the products we offer.
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What are Rolling Daily bets?
Our Rolling Daily Bets provide a cost-effective
solution for short-medium term trading. Rolling Daily
Bets are even more cost-effective than other daily
bets as you will find that the spreads are significantly
narrower.
Any corresponding orders are also rolled over automatically.
An overnight financing rate is applied on a daily
basis.
The standard benefits of spread betting still apply,
such as the ability to go long or short and tax free
profits.
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Advantages of Rolling Daily Bets
- Tighter spreads
- Available on indices, equities and FX markets
- Cost-effective solution for short-medium term trading
- Potential payment due to overnight financing
- Automatic order rollover facility
- Familiarity of trading underlying market but with
benefits of futures-style trading
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Overnight Financing
Rolling Daily Bets incur a charge or income for
each day that they are held overnight.
For a position held on a Friday or prior to a E*TRADE Spread Betting non-business day, financing will be
applied according to the number of days until the
subsequent E*TRADE Spread Betting business day.
For example, for a position that is rolled from a
Friday to a Monday, financing will be applied for
3 days. Any profits/losses are realised when the bet
is closed.
Overnight financing calculations
for Rolling Daily Bets?
The overnight financing for a rolling position can
be calculated using this formula:
F = [ (price / u) x stake x i ] / b
F = overnight financing
p = closing price
u = bet unit risk
s = stake
| i = applicable interest rate: |
long bets: |
RFR + 2% |
| |
short bets: |
RFR – 2 % |
b = day basis (365)
Rolling Daily bets,
Relevant Funding Rate (RFR):
· Shares & Indices: The
RFR is generally equivalent to the base rate of the
underlying currency of the country of the market concerned.
If you are long of a share/index contract, this equates
to real market cash exposure and so interest may be
charged on this cash value for each day that the position
is held open overnight. If you are short of a share/index
contract, an interest return may be paid on these
equivalent cash funds.
E.g. the RFR for a short rolling daily bet on Google
may be based on the US Fed Funds Rate minus 2%.
· Currencies: The RFR is
calculated as the base rate corresponding to the 2nd
currency minus the base rate corresponding to the
1st currency. E.g. the 1st currency of GBP/USD is
sterling and the second is the US dollar. Therefore,
the RFR for GBP/USD can be calculated as follows:
2.0% (USD) minus 4.75% (GBP) = a negative differential
of minus 2.75%.
If we assume the base rates as follows:
| GBP: |
4.75% |
EUR: |
2.0% |
USD: |
2.0% |
The RFR of the following currency pairs would therefore
be calculated as:.
| FX Pair |
RFR |
|
| EUR/GBP |
2.75% |
(4.75% - 2.0%) |
| GBP/EUR |
–2.75% |
(2.0% – 4.75%) |
| EUR/USD |
0% |
(2.0% – 2.0%) |
Note: Remember to add 2% to the RFR for long bets
and minus 2% for short bets.
Bet unit risk:
The smallest movement on the relevant contract that
equates to a profit/loss change that is the same as
your stake. E.g. on GBP/USD a movement of 0.0001 in
the price would mean a profit /loss shift on your
bet of the full stake (bet) amount and so the bet
unit risk would be 0.0001.
WORKED
EXAMPLES
1. Equities
· UK Equities
BUY £10 Rolling Daily Bet – HBOS
| Bet unit risk |
1 |
(4.75% + 2%) |
| Applicable interest rate |
6.75% |
| Closing price |
750.10p |
A £10 long bet on HBOS which has a closing
price of 750.10p would be equal to £7,501 market
exposure (this equates your bet to the number of shares
you would have to buy from your stockbroker to create
the same market risk, a £10 bet = 1000 UK shares).
(750.10 / 1) x 10 x 6.75% = £506.32
This is the annual cost of borrowing £7,501
at 6.75%.
Divide this by 365 to reach the daily charge:
£506.32 / 365 = £1.39
As you are long of an equity, your account would
be debited this amount for the overnight funding.
· US Equities
BUY £10 Rolling Daily – Microsoft
| Bet unit risk |
0.01 |
(2% + 2%) |
| Applicable interest rate |
4% |
| Closing price |
$26.49 |
[ (26.49 / 0.01) x 10 x 4% ] / 365 = £2.90
Your account would be debited £2.90 for the
overnight financing.
2. Indices
· UK Indices
SELL £10 Rolling Daily - FTSE Cash
| Bet unit risk |
1 |
(4.75% - 2%) |
| Applicable interest rate |
2.75% |
| Closing price |
4722 |
[ (4722 / 1) x 10 x 2.75% ] / 365 = £3.56
Your account would be credited £3.56 as overnight
financing.
· US Indices
LONG £1 Rolling Daily – Wall
Street Cash
| Bet unit risk |
1 |
(2% + 2%) |
| Applicable interest rate |
4% |
| Closing price |
10350 |
(10350 / 1) x 1 x 4% = £1.14
You are charged £1.13 for holding this position
overnight.
3. Currencies
· LONG £10 Rolling Daily GBP/USD
| Bet unit risk |
0.0001 |
(2% – 4.75% +
2%) |
| Applicable interest rate |
– 0.75% |
| Closing price |
1.8550 |
[ (1.8550 / 0.0001) x 10 x – 0.75% ] / 365=
–3.81
Your account would be credited £3.81 as overnight
financing.
Normally, for a buy bet you would be charged the
overnight financing but because this calculation has
returned a negative number, you will actually receive
this amount.
· SHORT £5 Rolling Daily GBP/USD
| Bet unit risk |
0.0001 |
(2% – 4.75% –
2%) |
| Applicable interest rate |
– 4.75% |
| Closing price |
1.8550 |
[ (1.8550 / 0.0001) x 5 x –4.75% ] / 365 =
–12.07
Your account would be debited £12.07 as overnight
financing.
Please note that as with the previous example of
a long bet, this has returned a negative number but
in this case, as this is a sell bet, instead of you
receiving the money you will be paying it!
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Dividend adjustments
The morning after a share goes ex-div the price
of the share will drop approximately by the amount
of the dividend. Dividend adjustments are credited
to long positions and debited from short positions
held at the close of business on the day before the
ex-dividend date.
If you are long, you will receive 80% of the dividend
and if you are short, you will be debited 100% of
the dividend.
Payment is credited/debited to your account on the
ex-dividend date. Dividend adjustments apply to equity
and index bets.
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How do you calculate your Daily FTSE and
Wall Street prices?
This is a common question for Spread Betting companies
as it does cause some confusion with clients.
All major indices quoted by E*TRADE Spread Betting
have a Futures market related to them (i.e. the FTSE
100 has the LIFFE FTSE Futures market). This Future
trades at a price which reflects the underlying market
plus some adjustments. These adjustments are calculated
from the theoretical value of dividends payable between
today and the expiry of the Future AND the cost of
carry for the index over the same period.
This Adjustment is called the 'Fair Value'. E*TRADE Spread Betting will adjust the Daily Cash price of
each index by it's own Fair Value number each day.
E*TRADE Spread Betting links the 'Daily Cash' quote
to the relevant future concerned and offsets the quote
by the current Fair Value. Therefore the Cash Daily
price is moved by the Futures price and not vice versa,
this is because the cash price is a lagging market
indicator which does not react in a timely manner
to market moving news.
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