To explain how spread bets work, here are some examples of up, down and rolling bets together with an example of how a bet with a Guaranteed Stop Loss can work.
In each of these examples, the figures used for interest rates and Notional Trading Requirements (NTR) are indicative. Interest rates and NTR change from time to time and from market to market. You should always read the market information sheets for your account before trading CFDs.
Placing an up bet in FTSE 100
Opening Bet
The FTSE 100 is trading at 4964. The Selftrade Spread Betting quote for Daily FTSE is 4962/4966 and you decide to place an up bet of £10 per point at 4966 in expectation of the market rising. The NTR required for the bet is £1,250.00 (£10 x 125).
Closing Bet
The same day the FTSE 100 rises to 5094. The Selftrade Spread Betting quote is 5092/5096 and you close the position by setting a down bet of £10 at 5092.
| Closing Price |
5092 |
| Opening Price |
4966 |
| Difference |
126 |
| Profit on Bet |
126 x £10 = £1,260 (Tax free) |
Placing a down bet in ABC Plc quarterly future
Opening Bet
ABC Plc is trading as 2068/69 and you think the share price may fall. The Selftrade Spread Betting quote for March ABC Plc is 2092/2104 and you sell £5 per penny (equivalent to 500 shares). The NTR neded for the bet is £1,046 (10% of contract value).
Closing Bet
In February, the market rises to 2209/2221 and you close the position by setting an up bet of £5 at 2221.
| Closing Price |
2221 |
| Opening Price |
2092 |
| Difference |
129 |
| Loss on Bet |
129 x £5 = (£645) |
Rolling bet on Dax 30
Opening Bet
The Selftrade Spread Betting quote for the Dax 30 rolling bet is 5359 - 5362. You decide to place an up bet and go long £10 per point at 5362 in an expectation of the market rising.
Financing
On a nightly basis you pay financing for this position. The financing rate is Euro Rate + 1.5%, which might equate to 3.75% (2.25% + 1.50%). If the end of day price is 5364, and you bought at £10 per point, the overnight financing is calculated as 10 x 5364 x 3.75% / 360 = £5.59. This will be debited from your account overnight.
Closing Bet
After 3 days Selftrade Spread Betting quote for Dax 30 rolling bets is 5475-5478. You decide to close the position by placing a down bet of £10 at 5475.
| Opening Price |
5362 |
| Closing Price |
5475 |
| Difference |
113 |
| Profit on bet |
113 x £10 = £1,130 |
| Overall profit on bet |
£1,130 - £16.77 = £1,113.23 |
Buying Wall Street with a Guaranteed Stop Loss
Opening Bet
The Wall Street is trading at 10865 and you think that it may fall. The Selftrade Spread Betting quote for Daily Wall Street is 10860/10870 and you decide to sell at 10860 for £10 per index point with a Guaranteed Stop Loss.
Your position is opened at 10860 - 3 = 10857 (3 points is the GSL premium). The NTR for this trade is £2,500 (250* stake). You decide to set your guaranteed stop at 10927, which is 70 points (minimum distance) away from your opening level.
Closing Bet
Unfortunately the market moves against you to stand at 10990. Your position is automatically closed at 10927.
| Closing Price |
10927 |
| Opening Price |
10857 |
| Difference |
70 |
| Loss on Bet |
70 x 10 = £700 |
| Loss without a Guaranteed Stop |
(10990 - 10860 x 10) = £1,300 |
This is your maximum loss regardless of what happens to the market. Your profits are not limited by a Guaranteed Stop Loss.
Examples of specific investments used in our material should not be taken as an advice to purchase or to sell a particular investment.
