Overnight funding is one of the most important costs to understand in spread betting, especially if you hold positions beyond the end of the trading day. It often looks small in isolation, but over weeks or months it can materially reduce returns and change whether a trade is worth taking in the first place.
For short-term traders, overnight funding may barely matter because positions are often closed the same day. For swing traders and position traders, however, it is a real and recurring cost that should be built into trade planning from the start rather than treated as an afterthought.
What Overnight Funding Is
Overnight funding is a daily financing adjustment charged when you keep a spread betting position open past the provider's daily cutoff time. It exists because spread betting is a leveraged product, so you are controlling a larger market exposure than the cash you have actually deposited.
In simple terms, the provider is effectively financing the position for you. Because of that, the open trade attracts an interest-style adjustment based on the size of the position, the market involved and the broker's pricing formula.
This applies mainly to daily funded bets, also called cash or spot spread bets. If you close the position before the overnight cutoff, the charge usually does not apply.
Why It Is Charged
Overnight funding exists because leverage has a financing cost. If you are holding exposure overnight without paying the full notional value up front, the broker applies a daily adjustment to reflect the cost of carrying that position. See our margins and leverage guide for how margin works alongside funding costs.
The benchmark rate matters here. For GBP positions, UK brokers commonly reference SONIA, the Sterling Overnight Index Average, and then add or subtract their own administrative spread or financing margin.
That means overnight funding is not usually a flat fee. It is more often a formula based on benchmark rates, your exposure and the provider's markup.
How Overnight Funding Is Calculated
For GBP-denominated trades, many brokers use SONIA as the base reference rate and then apply an adjustment on top. The simplified structure is usually:
The notional value is the real market exposure of the trade, not the margin you deposited. The annual funding rate is typically benchmark rate plus an admin charge for long positions, while short-position treatment varies depending on the market and the provider.
A common day-count divisor is 365 for sterling-based products, though some instruments may use 360 or market-specific conventions. That is why two apparently similar trades can still produce slightly different daily charges across firms.
Simplified Formula
A practical beginner-friendly version is:
- Notional value = stake per point × market level.
- Annual funding rate = SONIA + broker markup for longs, or SONIA minus/plus a broker adjustment for shorts depending on the market.
- Daily cost = notional value × annual rate ÷ 365.
Example: Suppose you open a long FTSE-style spread bet with £10 per point at a market level of 10,800. Your notional exposure is £108,000, and if the annual funding rate used is 6.23%, your daily cost is about £18.43.
That is a meaningful cost if the position is held for several weeks.
Typical Overnight Funding Rates Across UK Brokers
There is no single standard overnight funding rate across the UK market, because each provider uses its own pricing policy and administrative margin. However, published broker material shows a common structure in which long daily funded positions are charged at a benchmark rate such as SONIA plus a broker spread, while short positions may be charged less, break even, or occasionally receive a small credit depending on the market and rate environment.
In practice, many UK traders will see annualised funding rates on long daily funded bets that end up several percentage points above SONIA once the provider's adjustment is included. When interest rates are elevated, the difference between short-term trading and longer-term holding becomes much more noticeable.
The important point is that traders should check the live product details rather than assume all brokers treat funding identically.
Which Positions Incur Funding Charges
Long daily funded positions usually incur the clearest and most visible funding charge because you are effectively paying to hold leveraged exposure overnight. This is the scenario most traders think of when they hear the term overnight funding.
Short positions can be different. In some markets, especially when benchmark rates are high, short positions may attract a smaller charge or even a credit, because the rate mechanics can work in the trader's favour after the benchmark component is applied.
That said, short positions are not automatically "free to hold". Certain markets can include other adjustments, such as borrow-related costs or product-specific pricing factors, so traders should not assume a short trade will always generate a funding benefit.
Daily Funded Bets vs Forward or Futures Spread Bets
This distinction matters a great deal. Daily funded bets are designed for short-term or medium-term trading and incur a daily financing adjustment if left open overnight.
Forward or futures spread bets work differently. Instead of charging overnight funding as a separate daily item, the financing and carrying cost is built into the quoted spread or price level of the forward contract.
That means the cost is still there, but it is packaged differently. For short-term traders, daily funded bets are often more flexible and tighter. For longer-term traders, futures or forwards can be more cost-efficient because they remove the visible drip of nightly charges.
How Overnight Funding Erodes Profits
Funding drag is one of the easiest costs to underestimate because it does not feel dramatic day to day. But even modest daily charges compound into a real drag on performance over time.
Suppose a trade is making a small unrealised profit, but you keep holding it because the trend still looks intact. If the market stalls while funding continues to accrue, a once-profitable position can gradually lose much of its edge simply through time.
This matters even more in leveraged trades. The larger the notional exposure, the larger the financing adjustment, even if the margin posted was relatively small.
Worked Examples
The examples below use simple rounded assumptions for clarity. Real broker calculations vary, so these are illustrations rather than exact platform quotes.
Assumptions used:
- GBP-denominated daily funded bet.
- Annual funding rate on long positions: 6.23%.
- Day-count divisor: 365.
- No dividend or special market adjustment.
- No spread or commission included; this section isolates funding only.
These numbers show why holding costs matter. On a large position, three months of overnight funding can easily absorb several hundred pounds or more before spread costs are even considered.
Funding Cost Calculator
A simple funding cost calculator can be built with four inputs:
- Stake per point.
- Current market level.
- Annual funding rate.
- Number of days held.
Then use these formulas:
- Notional value = stake per point × market level.
- Daily funding cost = notional value × annual rate ÷ 365.
- Total cost = daily funding cost × number of days.
Example Calculator Use
Suppose you trade the FTSE 100 at 10,800 with a stake of £5 per point, and the annual funding rate is 6.23%.
- Notional value = £5 × 10,800 = £54,000.
- Daily funding cost = £54,000 × 6.23% ÷ 365 = about £9.22.
- 7-day cost = £64.52.
- 30-day cost = £276.51.
- 90-day cost = £829.53.
That is the true financing cost of holding the trade, and it should be weighed against the size of your realistic expected move.
Quick Calculator Template
Use this structure before opening any longer-term daily funded bet:
- Market level
- Stake per point
- Notional value: market level × stake per point
- Annual funding rate
- Daily funding cost: notional value × rate ÷ 365
- 1-week cost: daily cost × 7
- 1-month cost: daily cost × 30
- 3-month cost: daily cost × 90
If the 1-month or 3-month funding number feels uncomfortably large, a futures/forward bet may be the better vehicle.
Worked Examples in Detail
Example 1: One Week
A trader opens a daily funded long position with £10,000 notional exposure and an annual funding rate of 6.23%.
Daily cost = £10,000 × 6.23% ÷ 365 = about £1.71.
Over 7 days: about £12.95.
That is manageable for a short swing trade, but it still needs to be built into the expected reward.
Example 2: One Month
Now assume the same trader keeps the same £10,000 position open for 30 days.
30-day cost = about £55.50.
If the trade was only expected to make £120 to £150, funding alone has already taken a large share of the potential gain.
Example 3: Three Months
Hold the same £10,000 notional position for 90 days:
90-day cost = about £166.50.
At this point, the trader should seriously question whether a daily funded bet is the right product. A forward or futures spread bet may be more efficient for this time horizon.
When Overnight Funding Works in Your Favour
Overnight funding can occasionally benefit traders who are short, especially when interest rates are high and the broker's calculation allows for a benchmark-linked credit on the short side. In that environment, a short position may face a lower carrying cost than a long, or in some cases receive a modest daily adjustment in the trader's favour.
This is most relevant on index-style markets rather than every asset class. Even where a short credit exists, it is usually small relative to the market risk of the position, so it should be viewed as a secondary effect rather than the main reason for the trade.
Strategies to Minimise Funding Costs
- Close short-term trades before the overnight cutoff when possible.
- Use daily funded bets for short holding periods, not for slow multi-month ideas.
- Consider forward or futures spread bets when planning to hold for several weeks or longer.
- Reduce position size so financing cost stays in proportion to expected reward.
- Avoid "hope holds" where a weak trade is left open simply because it might recover.
- Check the product-specific overnight formula before placing the trade.
A useful habit is to add funding to your risk-reward calculation before entry. Use our spread calculator to model total costs. If the holding cost makes the trade unattractive, it is better to know that up front.
Practical Decision Rule
A simple rule is this: the longer the planned holding period, the less suitable a daily funded bet becomes. If your trade thesis is measured in hours or a few days, daily funded bets can make sense. If your trade thesis is measured in months, you should at least compare the all-in cost of a futures or forward alternative.
That one habit can prevent a lot of avoidable cost leakage.
Final Thoughts
Overnight funding is not just a minor admin detail. It is a real trading cost that affects the economics of every leveraged position held overnight.
For short-term traders, it may be small enough to ignore. For anyone holding spread bets for weeks or months, it should be treated as part of the trade setup, right alongside entry level, stop-loss and target.
Between 51-82% of retail investor accounts lose money when spread betting. You should consider whether you understand how spread betting works and whether you can afford to take the risk of losing your money.
