If you are serious about finding the best value then you should consider opening accounts with several indexation companies so that you can compare the spread prices they offer.
They all use similar data to decide what spreads they offer, so there won't be much difference in the prices, but occasionally a bet will be cheaper at one firm than at others. By holding accounts at more than one firm and shopping around you can be sure that you will always buy the lowest spread available and sell the highest spread.
You can also take advantage of "arbitrage" opportunities that pop up.
Arbitrage occurs when indexation companies take very different opinions on the same subject, such as grey markets. If two companies put out a spread on the same market, and there is a gap between the buying price on the lower spread and the selling price on the higher, then there is an "arb" and the investor cannot lose.
Example
| Spread 1: | 125 - 135 |
| Spread 2: | 117 - 123 |
If you can buy at 123 and sell at 125 you have an automatic profit.
These occasions are rare, and they do not last long because the companies watch each other's spreads to avoid this situation.
Recommend ReadingBook offers!
|
|
An Introduction to the Mathematics of Financial Derivatives
Salih N. Neftci |
| Our price: £39.19
Normally: £48.99 |
|
|
Computational Finance Using C and C#
George Levy |
| Our price: £39.99
Normally: £49.99 |
|
|
The Origin of Financial Crises
George Cooper |
| Our price: £11.21
Normally: £16.99 |
