Spreads on Spread Betting

While I never considered the spreads on retail betting sites to be fair or even remotely liquid, I thought they should be better then this:

Demo Portfolio

Demo Portfolio

I tried a little experiment, to synthetically recreate the payoff of a Touch Option by utilizing a directional Range Expiry with skinny range. IOW in a bear signal, create a range bet a .01 wide and pay very low premium. My hope was to gain multiples on movement to neutrality. However as a friend explained to me, I was mistakingly assuming convexity or in other words, that the Range bet with such a small range would be sensitive or react to delta movements in my favor. As you can see there are worse problems then just convexity with this type of bet.

~ by largecaptrader on July 20, 2009.

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