Why is interest charged on rolling long positions?

As regards rollover when rolling a daily position overnight, spread bet rollover is earned if you are happen to be short on a position (i.e. long cash, and thus earning interest); you stand to pay if you are long a contract (this is because capital is borrowed to purchase the contract using leverage).

Future contracts like June or September contracts will include a cost of financing within the spread of the contract. Normally, you may only need to put down 5% to 10% of the value of your position, with the spread betting provider financing the remaining 95% of your exposure. The spread betting provider is not going to lend you money for nothing so they charge you a little bit more the further out the contract is. For this reason the June contract is slightly cheaper to buy than the September one.

The amount of rollover interest is based on a rate determined by your broker; typically, it is based on the LIBOR or a central bank target rate. With today’s very low interest rates this amount to around 5% or 6% for a holding a trade over the course of a year. In practice I have found that the financing charges of just a few pence per day are dwarfed by the magnified gains that are possible, and are more-than-offset by not having paid stamp duty and dealing fees.

“Given that overnight financing charges are very low at the moment, it’s a good idea to use financial spread betting for longer term trades.”