Rolling Spread Bets

• What is a Rolling Daily Spread Bet?
• Which Companies Offer Rolling Daily Markets?
• Why Use Rolling Daily Spread Bets?
• Rolling Daily Costs, Financing and Dividends
• Which Markets Can I Trade With Rolling Daily Spread Bets?
• Rolling Futures Contracts

Rolling Spread Bets Financing Examples

For a detailed look at the main 'fee' of a rolling daily trade we have prepared a number of worked examples: UK Shares Rolling Daily US Shares Rolling Daily UK Index Rolling Daily US Index Rolling Daily FX Rolling Daily (Buy) FX Rolling Daily (Sell) What is a 'Rolling Daily' Spread Bet? A number of operators like Financial Spreads offer spread bets in the popular 'Rolling Daily' format. A rolling daily spread bet: Offers a cost-effective short-to-medium term way of trading Does not expire at the end of the day or on a set date like a futures market Offers a cost-effective short-to-medium term way of trading

• Does not expire at the end of the day or on a set date like a futures market
  
  
• If an investor has not closed their rolling daily trade by the end of the day then the position automatically rolls over into the next session
  
  
• When a trade is rolled over, any corresponding orders such as Limits or Guaranteed Stops are also automatically rolled over
  
  
• If a trade is rolled over then an investor is normally either credited or debited for overnight financing based on whether they are speculating on a market to go up or down
  
  
• The overnight financing rate is applied on a daily basis
  
  
• All the normal benefits of financial spread betting still apply to rolling daily trades, including the ability to go long or short of a market, tax free trading*, no broker's fees and no commissions
  

Which Companies Offer Rolling Daily Markets?

• Capital Spreads
• Financial Spreads
• InterTrader
• Tradefair Spreads
  

Why Use Rolling Daily Spread Bets?

1. The spreads on rolling daily markets are normally tighter than the corresponding futures market
   
   
2. Many firms offer a wide range of rolling daily markets including the key shares, index, FX and commodities markets
   
   
3. As mentioned above, they can be a cost-effective solution for short-to-medium term trades
   
   
4. If you sell a market then there's a potential credit to your account because of the overnight financing
   
   
5. If you open and close a trade on the same day then there is no overnight financing
   
   
6. The overnight financing fee is typically just the relevant base rate +2%
   

Rolling Daily Costs, Financing and Dividends

Rolling Daily Spread Bets and Dividend Adjustments

Rolling Daily Spread Bets and Overnight Financing

• RFR + 2% on Buy (Long) trades
• RFR - 2% on Sell (Short) trades
  
  

Relevant Funding Rate (RFR) for Shares and Stock Market Index Spread Bets

Normally, the RFR is the equivalent of the base rate of the country of the relevant market. If you are long of a share or index then this equates to real market cash exposure. As such, 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 or index contract, an interest credit may be paid to you on the equivalent funds.

E.g. the RFR for selling the Apple rolling daily market would be based on the US Federal rate minus 2%.

Relevant Funding Rate (RFR) for FX Trades

With FX, the RFR =

(The funding rate of the second currency) - (The funding rate of the first currency)

E.g. the first currency of the sterling/dollar is the pound and the second currency is the US dollar.

Therefore, if the US base rate is 2% and the UK base rate is 3.25% then the RFR for the sterling/dollar market would be 2% - 3.25% = -1.25% (a negative).

The rates used within these examples are not necessarily representative of current rates.

If the base rates were as follows:

• Sterling: 3.25%
• Euro: 1.0%
• Dollar: 1.0%
  
  

then the RFR of the following FX markets would be calculated as:

FX Market	Relevant Funding Rate	Calculation
euro/sterling	2.25%	(3.25% - 1.0%)
sterling/euro	-2.25%	(1.0% - 3.25%)
euro/dollar	0%	(1.0% - 1.0%)

NB: Remember to add 2% to the RFR for long positions and minus 2% for short positions.

Unit Risk

This is the smallest movement of the relevant market that equates to a profit/loss change that is the same as your stake.

E.g. with a sterling/dollar spread bet a movement of $0.00010 in the market would mean a profit/loss shift on your trade of the full stake size and therefore the unit risk would be $0.00010.

Rolling Daily Spread Bets Examples

• UK base rate: 4.75%
• Euro base rate: 2.0%
• US base rate: 2.0%

1. UK Shares Rolling Daily - Buy Example
   
   

   Market	Rolls Royce Rolling Daily
   Trade	Buy
   Stake	£5
   Unit Risk	1p
   Applicable Interest Rate (Ir)	6.75% (4.75% + 2%)
   Closing Price	740.50p

   
   A £5 per penny buy of the Rolls Royce rolling daily market, which has a closing price of 740.50p, would be equal to a market exposure of £3,702.50. This equates your trade to the number of shares you would have to buy through a stockbroker in order to create the level of risk, in this case, a £5 trade = 500 UK shares.
   
   (740.50p / 1p) x £5 x 6.75% = £249.92
   
   £249.92 is the same as the 'annual cost' of borrowing £3,702.50 at 6.75%.
   
   You then divide this by 365 to reach the daily charge: £249.92 / 365 = £0.68
   
   Therefore, as you are long of Rolls Royce, your spread betting account would be debited £0.68 for overnight financing.
   
   
   
2. US Shares Rolling Daily - Buy Example
   
   

   Market	Hewlett Packard Rolling Daily
   Trade	Buy
   Stake	£5
   Unit Risk	$0.01
   Applicable Interest Rate (Ir)	4% (2% + 2%)
   Closing Price	$26.82

   
   

   Overnight Financing	= [(Closing Price / Unit Risk) x Stake x Ir] / 365
   	= [($26.82 / $0.01) x £5 x 4%] / 365 = £1.47

   Therefore your spread betting account would be debited £1.47 for overnight financing.
   
   
   
3. Stock Market Index: UK 100 (FTSE 100) Rolling Daily - Sell Example
   
   

   Market	UK 100 Rolling Daily
   Trade	Sell
   Stake	£4
   Unit Risk	1 point
   Applicable Interest Rate (Ir)	2.75% (4.75% - 2%)
   Closing Price	5600

   
   

   Overnight Financing	= [(Closing Price / Unit Risk) x Stake x Ir] / 365
   	= [(5600 points / 1 point) x £4 x 2.75%] / 365 = £1.69

   In the UK 100 example you are selling the index and therefore your spread betting account would be credited £1.69 for overnight financing.
   
   
   
4. Stock Market Index: Dow Jones (Wall St) Rolling Daily - Buy Example
   
   

   Market	Dow Jones Rolling Daily
   Trade	Buy
   Stake	£2
   Unit Risk	1 point
   Applicable Interest Rate (Ir)	4% (2% + 2%)
   Closing Price	11,450

   
   

   Overnight Financing	= [(Closing Price / Unit Risk) x Stake x Ir] / 365
   	= [(11,450 points / 1 point) x £2 x 4%] / 365 = £2.51

   Therefore your account would be charged £2.51 for holding the above Dow Jones trade overnight.
   
   
   
5. FX: Sterling/Dollar Rolling Daily - Buy Example
   
   

   Market	Sterling/Dollar Rolling Daily
   Trade	Buy
   Stake	£2
   Unit Risk	$0.00010
   Applicable Interest Rate (Ir)	-0.75% (2% - 4.75% + 2%)
   Closing Price	$1.55500

   
   

   Overnight Financing	= [(Closing Price / Unit Risk) x Stake x Ir] / 365
   	= [($1.55500 / $0.00010) x £2 x (-0.75%)] / 365= -£0.64

   Therefore your spread betting account would be credited £0.64 for overnight financing.
   
   Normally, with a buy trade, you could expect to be charged the overnight financing however because the calculation has returned a negative, your account would be credited.
   
   
   
6. FX: Sterling/Dollar Rolling Daily - Sell Example
   
   

   Market	Sterling/Dollar Rolling Daily
   Trade	Sell
   Stake	£4
   Unit Risk	$0.00010
   Applicable Interest Rate (Ir)	-4.75% (2% - 4.75% - 2%)
   Closing Price	$1.55500

   
   

   Overnight Financing	= [(Closing Price / Unit Risk) x Stake x Ir] / 365
   	= [($1.55500 / $0.00010) x £4 x (-4.75%)] / 365 = -£8.09

   Therefore your spread betting account would be debited £8.09 as overnight financing.
   
   It is important to note that, as with the previous example of a long FX trade, this has returned a negative number. However, because it is a sell trade, instead of you receiving the funds your account would be debited.
   
   The interest rates used for the above examples do not necessarily represent the correct rates, they are for example purposes only. This information and the calculations are subject to change. If in doubt, contact your spread betting provider for full details of their costs and rates.
   
   

Which Markets Can I Trade With Rolling Daily Spread Bets?

• Stock Indices: FTSE 100 (UK 100), Dow Jones (Wall St), DAX 30 and Nikkei 225
  
  
• FX: dollar/yen, euro/dollar, euro/yen, euro/sterling and sterling/dollar
  
  
• Shares: UK, US, German, French, Irish, Indian and South African
  
  
• Commodities: most commodities markets are still traded as Futures Contracts. Note however that you can spread bet on a Gold rolling daily market with firms like Financial Spreads and CMC Markets
  
  

Rolling Futures Contracts