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Spreadbetting costs

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valueinvestor123
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Spreadbetting costs

#83290

Postby valueinvestor123 » September 25th, 2017, 10:31 am

Part of my portfolio is with IG Index in a spreadbetting account (mainly for tax reasons). I have held this account since 2006. Until now, they used to offer concessions on rollover charges so that the overall annual cost for holding a ftse100 share for example worked out to be around 1.6% or thereabouts and 2.5% on other shares. However they decided not to offer this concession anymore, almost doubling the cost for long-term holders like myself (you used to only pay about 60% of the cost).
I was wondering if anyone knows of a provider that offers cheap rollover charges - I will either need to migrate or close the IG account. It now costs 4%+ to hold a share (looking at the difference between Sept-17 and Dec-17 spread and multiplying it by 4) making a long-term strategy essentially unviable. FTSE100 shares still cost around 2.35% - I might keep these positions only for now.
Very annoying change - I guess they are trying to get rid of long-term buy and hold investors. I appreciate there are not many of those but still.
thanks vi123

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Re: Spreadbetting costs

#83489

Postby moorfield » September 25th, 2017, 9:30 pm

valueinvestor123 wrote: It now costs 4%+ to hold a share (looking at the difference between Sept-17 and Dec-17 spread and multiplying it by 4) making a long-term strategy essentially unviable.


How much leverage you are using, out of interest? To what extent will affect your long term return on investment (obviously).

I'm afraid I don't know any alternatives, but this article may be of interest - comparing the costs of spread betting and share dealing.
http://www.financial-spread-betting.com ... -cfds.html

M

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Re: Spreadbetting costs

#83572

Postby valueinvestor123 » September 26th, 2017, 10:21 am

moorfield wrote:
valueinvestor123 wrote: It now costs 4%+ to hold a share (looking at the difference between Sept-17 and Dec-17 spread and multiplying it by 4) making a long-term strategy essentially unviable.


How much leverage you are using, out of interest? To what extent will affect your long term return on investment (obviously).

I'm afraid I don't know any alternatives, but this article may be of interest - comparing the costs of spread betting and share dealing.
http://www.financial-spread-betting.com ... -cfds.html

M


Thanks - I think the article may only be looking at costs for daily funded bets. Those are much more expensive than the quarterly bets (at least they used to be).
This article also doesn't take into account cash kept earning an interest (equivalent to the exposure).

When the funding costs at IG were around 1.5%-2% on average for the share portfolio, it was manageable (and cheaper than holding physical) as I could get this (or more) from keeping the equivalent somewhere else. Now with costs rising to 3-4%, it may not be worth it. What a pain.

The margin requirements vary between 5% (for FTSE100 shares) and 15% for smaller shares. It's much less for indices (0.5%).

Will have to figure out how to unwind this.

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Re: Spreadbetting costs

#83588

Postby moorfield » September 26th, 2017, 11:01 am

valueinvestor123 wrote:
Will have to figure out how to unwind this.



Just don't rollover next time?

And then start spreadbetting put options. It's much more fun. :twisted:

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Re: Spreadbetting costs

#83598

Postby valueinvestor123 » September 26th, 2017, 11:30 am

moorfield wrote:
valueinvestor123 wrote:
Will have to figure out how to unwind this.



Just don't rollover next time?

And then start spreadbetting put options. It's much more fun. :twisted:


But then the positions might close at a market low. Will have to do it manually.
Are put options cheaper?

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Re: Spreadbetting costs

#83685

Postby GoSeigen » September 26th, 2017, 2:48 pm

valueinvestor123 wrote:
moorfield wrote:
valueinvestor123 wrote:
Will have to figure out how to unwind this.



Just don't rollover next time?

And then start spreadbetting put options. It's much more fun. :twisted:


But then the positions might close at a market low. Will have to do it manually.
Are put options cheaper?


If they close at too low a price, then simultaneous with expiration you just buy the equivalent in an ISA at the market low, surely?

Unless of course you're using leverage to take unhedged bets on a mature bull market without any backing collateral... :shock:

GS

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Re: Spreadbetting costs

#83704

Postby valueinvestor123 » September 26th, 2017, 3:42 pm

GoSeigen wrote:
valueinvestor123 wrote:
moorfield wrote:

Just don't rollover next time?

And then start spreadbetting put options. It's much more fun. :twisted:


But then the positions might close at a market low. Will have to do it manually.
Are put options cheaper?


If they close at too low a price, then simultaneous with expiration you just buy the equivalent in an ISA at the market low, surely?

Unless of course you're using leverage to take unhedged bets on a mature bull market without any backing collateral... :shock:

GS


The collateral is there (most of it anyway...). It's just that replacing 200ish holdings with physical shares will take me weeks.

Anyway - IG just emailed me a ledger summary at my request for all the trades since 2008 (when i started) and it looks like I am bout 120k ahead so maybe I will just bite the bullet and close out all the positions (except for indices and ftse100 positions, for now). Interestingly, most of the return came from dividends :-)
But with increased charges I don't see making the same returns in the future. So:(semi)-goodbye IG!

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Re: Spreadbetting costs

#83732

Postby moorfield » September 26th, 2017, 5:10 pm

valueinvestor123 wrote:
The collateral is there (most of it anyway...). It's just that replacing 200ish holdings with physical shares will take me weeks.

it looks like I am bout 120k ahead so maybe I will just bite the bullet and close out all the positions (except for indices and ftse100 positions, for now). Interestingly, most of the return came from dividends :-)



200... I see...

Look at it from another perspective. If you know all the cashflows/dates into your account then you can compute an annualised XIRR up to your position today. If that is acceptable then close the lot, have a break, and start again.

Re: put options costs, I don't know how they compare tbh, but as you may be aware from my other thread, I measure my progress in terms of the account XIRR. 62.8% at close yesterday.

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Re: Spreadbetting costs

#83780

Postby valueinvestor123 » September 26th, 2017, 7:49 pm

I am not sure how to calculate the XIRR.
I did separate the payments in/out of the spreadbetting account from the P/L and separated all of those into individual years.

So the P/L for each year is:
2008 -34285.54
2009 11198.76
2010 16817.26
2011 -12639.83
2012 28573.89
2013 27648.05
2014 -56919.86
2015 -91812.33
2016 187503.88
2017 42926.48

Total: 119010.76

And the payments in/out of the account look like this:

2008 41722.60 (paying in)
2009 -8810.42 (withdrawing)
2010 -21000.00
2011 23800.00
2012 -30400.00
2013 -27500.00
2014 48100.00
2015 90000.00
2016 -149000.00
2017 -44000.00


The spreadsheet doesn't mention what my exposure was at any given time or what the funds were in the account so I am not sure how to perform a XIRR calculation or how to estimate it. My exposure was significantly higher in the last few years (I added many oil/mining stocks close to the bottom).
But if I were to guess, my average total exposure must have been around 300k over the years so in terms of xirr, a 119k profit is probably not that great over this timescale.

Looking back, I did some horrible things (shorting the VIX in 2009 and watch it go to 80, trading currencies: oh why?, going long oil without understanding contango...But the best returns came from simply replicating a share portfolio (and not trading it at all) and directional bets on the markets were largely right/lucky as well).
I guess that's why IG are increasing their costs. To get rid of LTBH people in favour of short term traders.

Must go to bed...big liquidation day tomorrow. Watch out for those market falls :-)

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Re: Spreadbetting costs

#83810

Postby moorfield » September 26th, 2017, 10:27 pm

valueinvestor123 wrote:I am not sure how to calculate the XIRR.


valueinvestor123

I've taken the liberty of retabulating the cashflows in/out of your account with dates as below, and taking the residual balance today as 41922.94, ie Cashflows In (203622.60) - Cashflows Out (280710.42) + P&L (119010.76).



Running that through the Excel XIRR(CASHFLOWs, DATEs) function gives you an estimated annualised return of 18.1%. Clearly you've had peaks & troughs along the way!

[Edit: By way of comparison my own HYP has returned 12.4% over the same period.]

M

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Re: Spreadbetting costs

#83868

Postby valueinvestor123 » September 27th, 2017, 9:37 am

moorfield wrote:
valueinvestor123 wrote:I am not sure how to calculate the XIRR.


valueinvestor123

I've taken the liberty of retabulating the cashflows in/out of your account with dates as below, and taking the residual balance today as 41922.94, ie Cashflows In (203622.60) - Cashflows Out (280710.42) + P&L (119010.76).



Running that through the Excel XIRR(CASHFLOWs, DATEs) function gives you an estimated annualised return of 18.1%. Clearly you've had peaks & troughs along the way!

[Edit: By way of comparison my own HYP has returned 12.4% over the same period.]

M


This seems too high. It doesn't take into account the exposure levels though this may not be relevant in spreadbetting. I was always treating it as if it was a real part of the portfolio (which it was). The sharpe ratio must be terrible with those swings. About 74k came from dividends alone over the years though.
I am not sure what the actual residual balance will be after liquidation: it says there's 38k equity, 42k funds, 80k margin, 12k available to deal and collateral in use: 54k

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Re: Spreadbetting costs

#83888

Postby moorfield » September 27th, 2017, 10:41 am

The XIRR makes no assumptions about what’s going on inside your account or the costs involved, it’s an externalised view based on the cashflows in/out. By “residual balance” I mean what your broker (mine does) probably calls “net equity” which I’ve inferred from your data above. You will certainly get different numbers if you play around with the dates which I've inferred also, so the 18.1% should be treated as a best estimate.

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Re: Spreadbetting costs

#83892

Postby valueinvestor123 » September 27th, 2017, 10:58 am

moorfield wrote:The XIRR makes no assumptions about what’s going on inside your account or the costs involved, it’s an externalised view based on the cashflows in/out. By “residual balance” I mean what your broker (mine does) probably calls “net equity” which I’ve inferred from your data above. You will certainly get different numbers if you play around with the dates which I've inferred also, so the 18.1% should be treated as a best estimate.


Yes, I thought so. Thanks for running the numbers through btw.

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Re: Spreadbetting costs

#84372

Postby BobGe » September 29th, 2017, 4:55 am

If you phone IG near expiry you can ask them to roll over your positions to the far quarterly contract. If repeated, that would mean two roll-overs p.a. rather than four. That can be more attractive for some positions than others.


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