How do the fees/spreads affect my investments?
The impact of the spread on a customer’s profitability can be best demonstrated using the following example (in this case an actual cryptoasset):
- If TBanque displays the price of an actual cryptoasset to a customer as BUY price $98, and SELL price $100, this means that the customer can open a BUY position at $100 and open a SELLposition for the asset at $98. As described in the FAQ “What is the spread?,” the spread is the difference between the buy (100) and sell (98) prices, and in this case it is 2.
- Therefore, if a customer buys $1,000 of this cryptoasset at the buy price of 100, they will own 10 coins ($1,000 / 100 = 10 coins).
- If this customer then chooses to immediately sell the 10 coins that were bought at a price of 100, with a sell price of 98, they will receive $980 (98 * 10), generating an overall return of minus $20 (i.e., a loss).
This example illustrates the cost impact of the spread. Since TBanque will always show the value to customers of open positions at the prevailing price at which they could be closed on the TBanque platform (i.e., at the sell price for long (bought) positions and at the buy price for short (sold) positions, where applicable), the impact of the spread will always be factored into a customer’s P&L immediately after execution and for the duration of the open position.
This means that the customer’s P&L will immediately show a loss after the opening of a new position simply due to the spread. The spread becomes definite upon closure of the position, subject to any movements in the market price that could occur between the time the customer buys the asset and sells the asset.
