Example: Rolling a Long Bet
Opening Your Bet
It is 10 March 2009 and you decide to open a long position on daily Vodafone. The stock price is 114.10, and we quote a spread of 114.05/114.15. You buy £10 a point at 114.15. The share price rises throughout the day, and you believe it will continue the following day. You submit a request to roll your position overnight.
As you have requested to roll your position, we close your position at 120.30 at the end of the day, and you realise your profit of £61.50:
Profit on deal
| Closing Level | 120.30 |
| Opening Level | 114.15 |
| Difference | 6.15 |
Profit on deal: 6.15 x £10 = £61.50
We then calculate the adjusted opening price.
Interest Adjustments on Long Spread Bets
Interest adjustments to opening prices are calculated daily in relation to the latest one-month interbank offered rate of the currency in which you are dealing. They also incur a rollover fee.
Therefore, the annual interest adjustment rate on bet on a sterling denominated share is found by adding the latest one-month LIBOR (London Interbank Offered Rate) to a small rollover fee. On 10 March 2009, LIBOR was at 1.2181%, so, assuming a rollover fee on 2.5%, the annual interest adjustment would be 3.7181%:
| LIBOR: | 1.2181% |
| Rollover Fee: | + 2.5% |
| Annual Adjustment | : 3.7181% |
This annual rate is then divided by 365 to ascertain the daily rate:
| Annual Adjustment: | 3.7181% |
| Days in a Year: | ÷ 365 |
| Daily Adjustment: | 0.0102% |
The daily rate is then added as a percentage of your opening price:
| Closing Level: | 120.30 | |
| Daily Adjustment: | + 0.0123 | (0.0102% of 120.30) |
| New Opening Price: | 120.3123 |
Your new opening price is 120.3123. This interest is added to reflect the cost of borrowing money to fund a position in the underlying market. It is cheaper to roll a position than to close and reopen the position yourself, as you do not need to pay a new spread.
Closing Your Bet
Despite your prediction, Vodafone begins to fall the following day. By late afternoon on 11 March 2009, the spread price is 115.95/116.05. You decide to close your position before the market falls any further. You sell at the bid price of115.95. Your loss on the second day is calculated in this way:
Loss on deal
| Opening Level: | 120.3123 |
| Closing Level: | 115.95 |
| Difference: | 4.3623 |
Loss on deal: 4.3623 x £10 = £43.62
The combined total for the two day's dealing is therefore a profit of £17.88:
Combined Profit/Loss
| March 10 2009: | £61.50 |
| March 11 2009: | -£43.62 |
| Total Profit: | £17.88 |
Remember of course that if the market had moved further against you, you may have lost more than your initial deposit.
See a detailed example for rolling a short bet on Daily Vodafone.
- Related Info
- Dealing Handbook
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