What are Exchange Traded Funds?
Launched in 1993, Exchange Traded Funds (ETFs) have continued their growth in popularity amongst trading professionals and the broader active investor community. Structurally similar to a tracker fund, an ETF is a security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. By owning an ETF, investors get the diversification of an index fund as well as the ability to sell short, buy on margin (leverage) and purchase as little as one share.
When trading an ETF as a Spread Bet the investor will additionally receive very attractive tax advantages*. For UK investors all spread betting profit are free from Stamp Duty, Capital Gains and Income tax. (Tax laws may change and vary in jurisdictions that are outside the UK)
Spread Betting on an ETF – A Trading Example
A customer thinks that the Brazilian markets are going to rise in value and so looks to buy the MSCI Brazil Index Rolling Daily. ETX Capital is quoting a two way price of 5902 to 5905. The customer buys at 5905 (the offer price) at £1 per point. For every point the stock goes up the customer will make £1, for every point the stock goes down the customer will lose £1.
This product has a margin rate of 10% therefore the customer must have £590.50 in their trading account to cover this trade.
Margin Calculation
£1 per point x 5905 x 10% = £590.50
The Brazilian market increases in value now trading at 5920/5923 and the customer chooses to close the trade (selling the ETF) at the 'bid price' of 5920 thereby making a profit of £15.
Profit Calculation
5920 - 5905 = 15 points x £1 per point = £15.
If the customer had held the stock overnight they would be charged £0.49 financing charge.
Obviously had the market fallen then the client would have incurred a loss.
Overnight Financing Charge Calculation
One night financing charge = Total Consideration of trade x (Libor + 2.5%) ÷ 365
Total consideration of the trade = 5905 x £1 = £5905
So the financing charge = £5905 x 3.05% ÷ 365 = £0.49
At ETX Capital we offer Spread Betting on a wide range of global ETFs:
Commodities
All markets are Rolling Daily
- ETFS Coffee
- ETFS Corn
- ETFS Cotton
- ETFS Crude Oil
- ETFS Gold
- ETFS Natural Gas
- ETFS Sugar
- ETFS Wheat
- Mark Vectors Gold Miners
- Oil Services Holdrs Trust
- Powershares DB Agriculture
- Powershares DB Base Metals
- Powershares DB Commodity
- SPDR Gold Trust
- SPDR Utilities Select
- US Natural Gas Fund
US Based Indices/Trackers
All markets are Rolling Daily
- DJ US Utilities
- Market Vectors Russia
- MSCI Australia Index
- MSCI Brazil Index
- MSCI China 25
- MSCI Emerging Markets
- MSCI Hong Kong Index
- MSCI Mexico Investables
- MSCI Singapore
- MSCI Taiwan Index
- Powershares QQQ
- Proshares Ultra SP 500
- SP Latin Amercia 40
- SPDR Energy Select
- SPDR Trust Series 1
UK Based Indices/Trackers
All markets are Rolling Daily
- MSCI Brazil
- MSCI Japan Fund
- MSCI Korea
- MSCI Taiwan
- MSCI Turkey
- UK 100 Tracker
- UK 250 Tracker
- UK Dividend Plus
Financials/Real Estate
All markets are Rolling Daily
- Cohen and Steers Realty
- Direxion Daily LG Cap
- DJ US Real Estate
- Financial Bear (3X)
- Financial Bull (3X)
- Proshares Ultra Financials
- Proshares Ultra Real Estate
Member of the London Stock Exchange. Authorised and Regulated by the Financial Services Authority, FSA registration number 124721.
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