Spread Betting pricing

Discussion in 'Strategy Building' started by mauzj, Jan 16, 2003.

  1. mauzj



    I've found a trading strategy which exploits what I can only describe as a pricing error on behalf of my broker.

    I have yet to trade it, but if I do and my broker takes offense what action will/can the broker take? I've seen a few BIG spikes in prices that look unrelated to underlying prices and have heard rumours that brokers use these to close out their custommers' stops.

    Thanks in advance,

  2. My advice, don't even try it because they make the market and you will only be able to sell (for example) if their price goes bid, and how are you going to prove it went bid, they can make the time and sales up if they want.

    And even if you do get past this hurdle as soon as they see what you're up to they'll refuse to take your action, because if you're correct then they will be paying you money and they don't like that.

    Also the skew tends to happen only when the underlying get's very volatile so you may be waiting many weeks for 5 mins of action.

    The SB firms are sharp and always on the lookout for arbers, but anyway good luck if you have a go.
  3. I assume you are using a uk spreadbetter.

    If you consistently make trades that he can't successfully hedge in the mkt, he will have to i) change his quoted prices to stop you; ii) delay your trades; iii) put them through a human dealer, or iv) close your account.

    If his price spikes are deliberate he's not likely to do i) - ultimately iv) sounds likely.

    In any case, if your system works you will probably get away with it for a while - good luck.
  4. bone

    bone ET Sponsor

    The UK spreadbetter's "spread" is ridiculously wide. Look at the LIFFE Euribor quotes versus the spreadbetter's market.