What are Overnight Financing Charges?

✅ Trade with our Sponsor Broker: Trade Nation [CoreSpreads are now Trade Nation]

In his video trades we’re gonna cap account charges overnight financing stay tuned hey guys a very warm welcome up to you alright so this video is sponsored by our channel sponsor which is core spreads there’s a link to them in the description below go and check them out spread betting cfds tight spreads and currency pairs indices commodities etc go see if they’re

Right for you it’s a link in the description below ok but in this video what i want to talk about is financing fee for non forex instruments and the financing fee forex instruments because overnight we see these charges appear on our account so all logged into the core trader to platform and gone ok or sis account charge for this hopefully will give you an idea of

What it’s all about so theoretically when we are trading on margin with borrowing money from core spreads so let’s say we have a 10% margin quite high actually but mud is gonna range depending on the instrument of trading currency pairs all the way up to bitcoin and shares big variety so that’s the margin requirement so in theory if we have a notional value of

A hundred thousand okay we are going to have to put up 10 grand worth of margin and obvious it’s going to depend on the notional value depends on what we’re trading higher notional values generally for currency pairs for indices not so much for shares 100 grand and reasonably high position in a share not so much in a currency pair so that’s what the margins are

See also  Business Tips: Scott Tallon, Bond Street Finance.

Adjusted accordingly so anyway the point is we’re borrowing 90 grand to allow us to have control of that size position so this is a margin trade we’re trading on margin so effectively it’s a loan to us if we’re long so because it’s a loan we’re gonna have to pay an overnight charge the overnight charge is made up for the libor rate plus an admin fee if you like

Or financing fee and that financing fee is how course spreads make one of the ways that they make their money or how all brokers make their money under they spread betting brokers this is a commercial business they’re providing us with a service the spread is one way and this overnight financing charge is the other way so small charge added to the libor rate and

Build every night normally about 10 o’clock at night so if you’re borrowing money because you’re long you’re going to get billed the charge plus libor if you’re sure theoretically you are loaning course breads money so theoretically they will pay you the libor rate however with the admin charge understand them the fair enough then the equation basic works out

That you’ll pay a little bit so in theory for an interbank and this is how the whole thing works right if we were interbank we would receive money for being sure if we long then we’re going to actually pay money and obviously is gonna be a little bit less get just the libor rate because their financing charge it works out in the wash you pay a little bit of both

See also  Personal Finance: Government Shutdown & MAJOR Budget Changes Coming

Ways at the moment anyway things can change of course right let’s look at forex so forex it specifically rolling cash different for futures futures the the charge overnight charges are rolled up into the spread you’re buying one currency and you’re selling another so it’s not as clear-cut as they just buying a share or buying an index with your basket of shares

You’re buying one currency and selling another you know because you have that pair approach so you’re effectively borrowing in one currency and lending in the other so really the charge is the difference between the two so they look at it and say well if i was buying and going along usd and if i’m selling and going short jpy for example what would be the financing

Charge on that part of it what would be the financing charge on that part of it and work out a differential between the two so your charge is the differential between the two and this is in theory where we have long time ago that carry trade where you know if you’re trading interbank and you didn’t have an admin charge you could have the interest rate differential

Between the two and you’d be effectively paid to hold a position because you’re shorting one a boring the other so you’re receiving the interest rate in one and you’re paying the interest rate in the other if you’re receiving say 10% and you’re paying 2% you’re making 8% to hold that currency however you know because most of us are short to turn traders because

See also  Do I Really Need A Financial Advisor? When To Hire A Financial Advisor

Most of us are training through a broker then this is how it works we get a financing charge every nights more financing charge that will appear on your statement on your blotter normally that says about ten o’clock few seconds after ten o’clock there’s the adjustments made and that’s the to carry that amount of emotional value if you like overnight so to account

Charges guys overnight financing slight difference between forex and non forex instruments that’s how it works like i say checkout call spreads they other channel sponsors sponsoring this video and there’s a link to those guys in the description below take care see you next one bye bye you

Transcribed from video
What are Overnight Financing Charges?❓ By UKspreadbetting