eToro Spreads

Introduction

For starters:
Spread and spread betting are two entirely different trading terms with its own methodologies. We will discuss eToro spreads on this section as well as a brief explanation of spread betting and if this brokerage offers it.

What Is the Spread on eToro?

All trading instruments on the platform has two values: the BID/BUY price and the SELL/ASK price. The difference between these two prices is called the "spread".

Normally, your broker (in this case, your eToro app) base their trading fees on the amount of spread.

The moment an investor opened a trade, it will follow the current BUY price, but the present rate that will appear on an investor's portfolio will be the SELL value.

For instance:
You buy a stock of Company A at $85 and its current SELL value is at $84.50, then the spread will $0.50. The lower the spreads, the better it is for the trader.

In comparison:
While most brokerages charge a "spread" on both the BUY and SELL values of the asset, eToro only charges for a single spread when a trader buys the asset.

What Is Spread Betting?

Spread betting is a trading activity wherein the investor speculates on a commodity or stock that they do not own via an educated stake on whether the value of the asset will rise or fall in the future based on the current value offered by the broker.

To put it simply...
Spread betting, like the term suggests, involves making a bet on the price movements of an underlying assets without having to buy or own it.

Take note: With spread betting, you as an investor is not betting on the stock or asset directly, but the difference between the ask and bid value of the commodity—which investors refer to as the "spread".

As one of the most popular derivative product in which you can apply your financial market investment strategy, spread betting is widely practiced in the speculation of shares, indices, forex and commodities because it doesn't require having to buy or own an asset.

By placing a bet on whether an asset's value will rise or fall, investors can pretty much earn decent income through this investment approach.

Here are some helpful sections for you to learn about eToro spread and spread betting.

Weekend Spreads

eToro’s weekend spreads are overnight fees imposed for OPEN positions made over the weekend.

Simply put:
The eToro weekend spread or fee is triple the amount of an overnight fee. Weekend spread are charged usually on Wednesday or Friday.

This is also called as the rollover fees (weekend and overnight). This spread can fluctuate from time to time based on the status of the global stock market.

Any change in eToro weekend spread always applies on OPEN positions. To keep track with eToro weekend spread, investors are advised to always follow the fees page and any social media announcements regarding eToro spreads from eToro.

Spread Fees on Forex

After listening to user feedbacks, eToro has lowered its spreads on at least 10 currency pairs on eToro. This includes setting spreads on major currencies such as the USD/EUR and USD/JPY to a low of 1 PIP.

But wait, what is a PIP?
A PIP means "point in percent" and it represents the smallest decimal point of a value of a specific financial instrument.

For example: For currency pairs displaying up to 4 decimal places, the value of 1 PIP is 0.0001.

Introducing: Variable Spreads

This newly introduced spreads in eToro makes the Forex spreads more flexible by having it follow market conditions for investors to take more advantage of the stock market volatility.

Please note: This however, will also make it possible for spreads to increase a little higher than the average spreads of other currencies.

Below are the current eToro spreads on its Forex pairs:

Take note: These are the average spread, but it does fluctuate from time to time.

Spread Fees on CFD Stocks

When trading on CFD stocks, eToro spreads and overnight fees are required:

1. The spread that can fluctuate depending on the current conditions of the stock market.
2. Overnight fees - This is for positions that remain in OPEN status after closing hours of trading.

Keep in mind: Triple spreads / fees are applied on commodities positions opened on Wednesday.

Example formula and computations:
Overnight fees formula = (eToro fee + Libor rate) / 365 * Units * Price in USD
eToro Annual fee:
SELL (Short)i: 2.9% + LIBOR
BUY (Long)i: 6.4% + LIBOR
LIBOR: 1.99%
Open BUY (Long) position on AAPL with Leverage: x2
Initial Investment: 1,000 USD
Total Investment worth = Initial Investment 1,000 USD x Leverage 2 = 2,000 USD
APPLE STOCK (AAPL) Ask Rate 250 USD
Position Open 2,000 USD / 250 USD AAPL Ask rate = 8 Units
eToro Typical Spread for AAPL 0.18% per unit
Overnight fees formula = (eToro fee + Libor rate) / 365 * Units * Price in USD
eToro BUY Overnight fee: 6.4%
Libor rate: 1.99%

1. Spread = rate 0.0018 * 8 units * 250 USD = -3.60 USD
   Overnight Fee (for 1 night) = ((0.064 + 0.0199) / 365) * 8 units * 250 USD = -0.46 USD
   Total Cost = Spread + Overnight fee = -3.60 - 0.46 = -4.06 USD
2. Spread = rate 0.0018 * 8 units * 250 USD = -3.60 USD
   Overnight Fee (position opened Wednesday) = [((0.064 + 0.0199) / 365) * 8 units * 250 USD] * 3 = -1.38 USD
   Total Cost = Spread + Overnight fee = -3.60 - 1.38 = -4.98 USD

A Clarity About the Higher Spread

As a singular broker on its own platform, eToro usually has a slightly higher spread compared to others in the industry. However, eToro's advantage can be found on its Copy Trading feature that doesn't create a "slippage" when an investor copy a trader. This advantage makes up for the eToro high spread.

Look: A slippage is the difference in value of a stock that the trader earns, which averages around 1-2 pips each trade.

Spreads on Cryptocurrencies

When trading cryptocurrencies on eToro, a market price premium of 1% is applied to the bid-ask spread. This applies to all the cryptoassets that can be traded on the platform so it doesn't matter if it's Bitcoin, Ethereum, Ripple, Cardano, Shiba Inu, or Dogecoin that you're investing on because a single, uncomplicated, and open fee of 1% is charged.

Keep in mind: When trading Terra (LUNC), there is an extra operational fee of 0.1% added to the bid and ask prices due to Terra's tax burn mechanism, which contributes to a reduction of 0.2% in the supply of tokens.

Comparing eToro Spreads to Other Trading Platforms

When it comes to trading platforms, the spreads offered can vary significantly between different providers. Here are some comparisons between eToro spreads and those offered by other popular trading platforms:

• eToro vs. Plus500: Both eToro and Plus500 offer commission-free trading, but eToro generally has wider spreads for major currency pairs. However, eToro does offer some zero-spread accounts for certain assets.
  
  
• eToro vs. IG: Both variable and fixed spreads are offered by IG, whereas eToro only offers variable spreads. In general, IG’s spreads tend to be narrower than its competitor.
  
  
• eToro vs. XM: XM's spreads are variable and fixed but it tends to be narrower than eToro’s for major currency pairs. For other asset classes, eToro may have more competitive spreads.
  
  
• eToro vs. FXTM: Variable and fixed spreads are also offered by FXTM and for major FX pairs, they are usually narrower as compared to eToro, which on the other hand, have better spreads for other instruments.
  
  
• eToro vs. OANDA: Same as the other brokers, OANDA also has variable and fixed spreads, which tend to be narrower usually on currency pairs particularly the majors in comparison to eToro.
  
  
• eToro vs. Pepperstone: Also offers variable and fixed spreads, Pepperstone's spreads are mostly narrow on forex assets. However, for other markets, eToro has more attractove spreads.

The bottom line: eToro’s spreads may be wider than some other trading platforms for major currency pairs, but they may be more competitive for other asset classes. It’s important to consider the full range of factors when selecting a trading platform, including spreads, commissions, account features, customer support, and more.