Speculating on Daily Futures

10futures280813Daily Trades           

In terms of spread betting, Daily Futures are also referred to as Daily trades. These particular bets have been specifically designed to have just a lifespan of 1 day and to exhibit small spreads. You can execute this type of trade at any time but you must realize that they will terminate at the end of the current trading day.

When you do decide to open spread bets using daily contracts, you should first familiarize yourself with the trading times of the underlying asset relative to your own trading zone. For instance, if you reside in the USA and trade a UK-based asset, then you must appreciate the influences on your trade caused by the differing time zones. Similarly, you need to realize that there is a significant difference between trading Japanese and European securities because of the time variances involved.

One of the biggest advantages of using daily contracts is that their spreads are much lower than those associated with quarterly contracts. As such, you should evaluate the benefits of the lower spreads offered compared to the increased risk levels associated with shorter expiry times whenever you consider activating a spread bet based on a daily contract.

You will discover that nearly all spread betting brokers support both the quarterly and daily contracts. However, some also offer weekly and rolling contracts. The basic concept of the weekly is quite obvious as it supports an expiry time that terminates at the end of the trading week. However, as rolling contracts possess some innovative features, they will be analyzed in more depth later in this article.

 

Quarterly Trades

Quarterly contract months are March, June, September and December. When you select and execute a quarterly contract trade it will remain active for three months before closing on the 3rd Friday of the chosen quarter. For example, envisage that you opt to place a spread bet on Google with June specified as its quarterly contract. Consequently, your trade would expire on the 3rd Friday in June.

Don’t be surprised if you notice that some assets have spreads offered which are supported at two quarterly contract periods at the same time. Such occurrences can happen depending on your spread betting broker and the current time of the year. For instance, you could see two quotes for gold with the first displaying a quarterly contract of June while the second is associated with September. Under such circumstances, you need to study the other key parameters associated with the two bets in order to ascertain which is more suitable for your trading aspirations and objectives. An important point to appreciate is that the September quarterly contract will, of course, automatically terminate later than the June one.

 

Rolling Trades

A rolling share trade is based on the standard daily contract but is automatically rolled over into the next trading day. These spread are closed at 9.00pm (UK time) for USA assets and 4.30pm for UK securities. They are then re-activated automatically when the markets recommence business the following day. As such, your rolling spread bets will remain active until either you decide to exit them or you simply run out of funds to support them.

One of the main benefits of Rolling Trades is that they offer smaller spreads than other contracts, such as the daily and quarterly. You can choose underlying assets from an extensive selection including firms that are members of the most popular indices, such as the FTSE100 and the S&P500, etc.

The big difference between a rolling bet and a standard one is that you will earn interest for every day that you maintain your trade open. The equation that is used to calculate the daily interest payable varies among spread betting brokers but basically follows the following formula:

Interest payable = ((LIBOR 1 month – 2%)/365) *(the total underlying value of your position) where LIBOR represents the current standard base interest rate.

 

An Example of a Rolling Trade

Envisage that your spread betting broker has offered you a spread for company ABC at 400.0:402. Your technical and fundamental analysis of the trading performance of this firm convinces you that its shares will decline over the coming weeks. You therefore opt to implement a short rolling spread bet at 400.0 @ £20 per point.

Imagine that the market closes the first trading day with your bet recording a loss. Consequently, your broker posts a new spread of 410:412. Your loss for the day would be 12 times £20 = £240.

You rolling bet automatically reopens the following day at 410. You are still short at £20.00 per point. Assume that your asset does drop in value during the course of the day so that it closes at 350:352. Consequently, you would make a profit of about £1,200 for the second day.

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