Trading Corn Futures on IB vs IG via Spread Bet

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I'm trying to understand the differences in costs between trading real corn futures, versus a spreadbet on corn futures, provided by IG (details here: https://www.ig.com/uk/ig-commodities/corn).

As best as I can tell, when trading the spread bet futures contract (not the DFB on the underlying, although I'm curious about that too):
  • There are no overnight funding charges
  • No commission
  • You still need to roll it over to the new contract, so there's some spread here. Unsure what this will be, but imagine it is around 1-1.2 points.
  • I can't see a cost of carry anywhere
  • There are no taxes to pay
The problem is, these derivative providers have a funny way of adding mysterious costs to make up their margins.

I pay tax on profits at 28%, so it seems that trading with spread bets will be cheaper overall than trading with real futures.

What am I missing?
 
by spreadbet you trade against IG and spread between bid and ask is 4 ticks. Futures on Corn are traded on exchanges and the spread is only 1 tick.
 
As the other poster mentioned, the only two differences you may be missing are bid/offer (if you're holding this over a longer period, you need to include the roll bid/offer, although IG may help you with it) and margin. Other than what you have already mentioned, you need to compare these things to get a sense of what's advantageous.
 
Are you in the UK? Some countries consider spread betting gambling and so its tax free.

Ig is a bucket shop. I recommend staying away from them. Just my opinion. Mbey google "IG markets Scam" and do some light reading.
 
You're not missing anything but take plenty of time to really calculate the costs of spread bets versus the tax saved, it's not 28% (assuming profits).

As others have noted the bid-offer spread is hard to overcome if short term trading but if you're looking to hold for several days (with a good move) or a few weeks/months, they're hard to beat. Plus, you won't really be trading against IG as they won't do much 2 way grain business so they'll hedge your position in the market and make their profit via the spread.
 
If IG are a bucket shop they're probably the Rolls Royce of bucket shops, big market cap, decades of existence.

Believe me, they have better things to do than legally steal from their clients via tripping stops etc. Plus there's a lot of regulation in the UK and it's pretty good. Are there some problem with clients, sure, but let's hear both sides of the story rather than the client writing on a message board giving only his version.

Personally the bigger spread betters follow in the footsteps of Meyer Lansky and the mob casinos down in Cuba. They were all crooked before he came on board, then he convinced the dopey mob bosses that there was far more money to be made via running a 100% clean casino than a dirty one. He was right, when word got out that the casinos he controlled were clean, the number of customers went through the roof alongside profits.
 
I am based in the UK.

As best as I can tell, on the DFB, which is a spread bet on the underlying:
  • No rolling costs, or rolling required in general.
  • Funding charge that works out to roughly 3.5% of the exposure per year.
So for a long position on Corn today:
  • That's £15 per point @ 380. (spread = 0).
  • Interest charge = 3.5%*380*15 = £199.50 per year
Surely that's got to work out cheaper than the equivalent futures trade (due to slippage/rolling)?

What I don't understand is that IG must be taking out an equivalent position somewhere and has to make a profit somehow. What have I missed?
 
You don't want to do the DFB bets for anything longer than 1-2 weeks, the costs will be a killer. Far better to use the traditional months, May or July for example (if they offer those on grains).

You need to sit down for an hour or so with a spreadsheet, use a sample of a profitable trade and a losing one, work out all the costs involved for a spread bet versus a future including the tax. Then you will get a far better idea of the positives and negatives of using a spread bet versus futures in regards to the total costs (which includes tax). Plus, you better make sure you're a profitable trader using spread bets otherwise futures will be a lot cheaper to trade.

IG will make a profit via the bid-offer + financing it's as simple as that, they don't need to take the opposing trade against you and I don't know if that is allowed re the regulation. So if you go long they go long the future when you get out they get out.
 
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Specifically, why is the DFB more expensive; do I pay the spread every day? (if so, that isn't clear on their website).

I have such a spreadsheet, just trying to make sense of it now!
 
A DFB has a financing charge levied at the end of every day. If trading a traditional month, say July, there is a wider bid-offer but no financing charges.

DFB for short term trading, in/out, or for a few days. Use the Month bets for longer term bets (1 week+).

The overall costs to spread bets can look seductive but they are not as cheap as they first look (unless day trading something like the Dax with a 1 or 0.8 spread, then they're great). If one is a proven money maker with longer term positions then yes, spread bets are a gift from heaven.
 
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