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Spread Trading

Chrisjan Botha

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Quoting from: http://www.stealthywealth.co.za/2017/09/why-ter-trumps-brokerage.html#more


"In addition, because an ETF trades on the exchange, there are buyers and sellers, which means there is a spread. At a basic level, the spread is the difference between what the buyers are willing to buy at and what the sellers are willing to sell at. For example, an ETF that has a value of R100 may see buyers willing to pay R99.50 for ETF units and sellers wanting to get R100.50 for their units. This means if you went in and bought, you would have to meet the sellers asking price of R100.50 (for something that is worth R100 - i.e. you are already 50c per unit down on your investment just due to the spread. And technically you would be R1 per unit down if you wanted to exit again immediately)."

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