Trading Corn Futures on IB vs IG via Spread Bet

[isotope1]

I'll add, it's practically impossible to figure out how much a trade with IG on a future will cost you before you do it. Mystery fees include the interest, spread, the small print says there's a carry charge, including 2.5% admin charge... etc etc.

You kinda get the feeling like you're being screwed.

 

[isotope1]

That's my experience as well. I did well with an unleveraged stock portfolio. Stock picking is fun, but slow. Thought I'd try a CFD portfolio. Initial success led to hubris, which led to bust account, which led to a more methodical way of approaching risk.

 

[Martinghoul]

1. Spreadbet firms use OTC products offered by investment banks to hedge net exposure.
2. Do not use spreadbet firms for anything other than longer term* (i.e. at least overnight and preferably longer!) trading. They are very expensive (about 5x to 10x as much as Interactive Brokers).
3. The odds are of course that you are a losing trader, so what difference does the tax exempt status make!
4. If you are a rare winning trader, 10% tax isn't very much and you have an £11k exemption anyway in the UK.
5. One big legit reason to use a SB firm is because your acct cannot support the bigger contract sizes on the exchange. Even then u can use mini contracts etc.

* An excellent use of a spreadbet firm is if you are into passive index investing. No need for ISAs. You can simply buy as much as you like of say ES contracts, replicating the S&P500 and keep rolling them over every quarter. Would cost very slightly more than using SPY but you would have zero tax to pay and unlike ISAs, the amount you can do is limitless! You may be able to do this with individual stocks as well.

I broadly agree with this and what the others have said. I have used the SB firms, including IG, for long-term bets. Generally, I am a big fan, but everything depends on whether the terms you get are decent.

I am not really sure it's all that great for passive index, tax-free, ISA-like investing. One issue is the cost of the roll, which, if you're sb'ing, will add up over the long term. Another is the need to post relatively hefty margin, but then I guess you get some leverage if you use futures. Finally, let's not forget the IG credit risk, which you will necessarily be exposed to.

 

[Visaria]

Finally, let's not forget the IG credit risk, which you will necessarily be exposed to.

IG is pretty big, (billion pound?) market cap. You also have the FSCS insurance up to £50k. There are other SB firms like Ayondo which offer £500k worth of insurance (backed by Lloyds) if they fail. Also, note Prospreads* which offers daily marked to market like a futures broker so you could withdraw profits without having to close long term positions.

* actually for the OP, Prospreads probably does the best deal for trading corn etc amongst SB firms. I think they charge $20 on top of the underlying market spread for a full sized $50 a point contract.

edit: actually Prospreads seem to be 4x more expensive than IB. But that is far better than IG's 10x multiple!

 

[Quiet1]

A few advantages to places like IG:
- with IG you can ask them to automatically roll your position on expiry.
- you trade in your currency, not the underlying's currency. There is some value to the clarity this gives if holding for longer periods. Obviously not a huge deal as we're just talking bets/cfds rather than fully funded positions but still...
- if in the UK their annual FTSE 100 contract might be an interesting method of having a tax-free low cost index tracker.

Just avoid DFB bets for anything other than shortest-term trading. For longer-term positions dated contracts are fine

 

[yiehom]

I believe they charge you interest when you are short with overnight positions.
Talking of spreads, you never know what they are at time of news release.

Thing is, with the Future. You can sit your side of the market and not pay any spread at all.

I forgot IG charges interest for some strange reason. I would like to know how many different ways they milk their clients accounts. All to easy.