Daily and Rolling Trades

Daily Trades

A quick word on DAILY FUTURES or simply known as Daily trades. These are trades that are designed to have a small spread, however, they only have a shelf life of 1 day of trading. So for instance if you traded the Daily FTSE Index – this is a trade which is quoted on the actual figure or as close as of the underlying and not like that of the FTSE Future mentioned above. You can open Daily Trades during any time on the day. You must remember though that they will be closed at the end of that Indice’s trading hours. So the FTSE DAILY INDEX will be open from 8am to 4.30pm GMT. The trade can be opened and closed at any point during those times, but will be closed automatically as the trade expires at 4.30 GMT that day or at 9.30pm GMT for US trades.

Before you trade DAILY Quotes. Make a note of the times of trading relative to your own time. For instance I find it difficult to trade DAILY Quotes on the Nikkei because of the massive time difference between the UK and Japan. However, I can trade the FTSE obviously and the Dow as that opens mid afternoon and closes at night GMT. So look at the time differences when trading Daily Futures/Quotes.

You don’t have to worry too much by trading contract months. Only trade a daily if you are sure that the money you will save in the spread is worth the risk of the trade expiring within hours, rather than weeks, or months. A great deal of what you will be doing is based on common sense, it just takes a little thinking, that’s all.

One thing I would like to add and that will become more apparent when you begin trading for yourself. Is that most of the following trading products supplied by the spread betting companies tend to be Daily, Weekly, Monthly or the standard 3 month contracts. All spread betting providers have the 3 month standard term contract, the same is true for the Daily contract. Some also offer a Weekly and Monthly contract. Others offer a Rolling contract, which to be honest I have never traded.

Rolling Trades

Rolling bets mirror that of the underlying share price. Whereas other trades tend to mirror that of the futures market. The price has a small spread built in which is usually much smaller than that of the daily and quarterly trades. Rolling bets are usually available on most of the common trades in the Indices but mostly the FTSE100, NASDAQ 100 and the DOW 30.

A rolling share bet is a daily bet that is automatically rolled over the next trading day. The trade is closed at 4.30pm (UK time) for UK trades and 9pm for US trades and automatically re-opened at the market opening the next day. This will continue until you either close the trade yourself or you run out of margin.

Time for an example:

You get a quote on stock XYZ at 345.7 / 346.8.

Now this time you believe that the stock is going to fall so you go Short and sell stock XYZ at 345.7 @ £10 per point on a Rolling bet.

In the place of a normal spread in this Sell example, you will be paid interest for everyday that you hold a position open.

The interest payable by the bookmaker varies but is around the following equation:

(LIBOR 1 month – 2%)/365

LIBOR is the current standard base interest rate.
X
The total underlying value of your position.

Using our current example we have the following equation applied to our trade:

((5% -2%)/365) x (£10 x 345.70)
= 0.0082% x 345.7p = 28p

Now it’s 4.30 on and market closes at 351 at the mid price. The stock didn’t fall as you anticipated and your current loss on your trading account is worked out as follows:

(£53 (351 – 345.7) x £10).

So in essence on that day of trading you have lost £53.00
The trade is automatically re-opened the next day at 351, with you trading Short at £10.00 per point.

Now say the stock falls to the mid price at the close of this new trading day to 337.5 the profit you would make would be approximately £135.00 depending on the true mid price at close.

Rolling bets do have some advantages; namely smaller spreads. There is a premium to be paid in interest of course if you are making that trade, which sometimes equals more than the spread on a standard trade on quarterly and daily trades. Again it’s down to choice. I have students that only trade rolling and those that do both or just quarterly trades.

Hourly FTSE and Wall Street Bets

This is one of the newer trades that can be made. The expiry on these trades are within the hour, that is essentially the only difference between that and any other trade on the FTSE or Wall Street. You can only trade those two at present, but I am sure as they grow in popularity, so will the range of trades that become available for Hourly Bets.

They do tend to have smaller spreads than standard, longer term trades on the same Indices. Personally I can only see hourly bets becoming useful when the stock is reaching a ‘bounce’ and it was obvious that this was about to happen. I do feel though that an hour for one trade to expire is too short and trading these is really entering the realms of gambling, rather than being able to capitalise on analysis.

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