 The concept
Financial spread
betting is based on a simple concept. If you think that an
underlying instrument will rise in value, then you ‘buy’ it (known
as going ‘long’). Conversely, if you think that it will fall in
value, then you ‘sell’ it (go ‘short’). However, unlike full
value trading where you actually take possession of the underlying
instrument, with financial
spread betting you are simply taking a position that allows you
to speculate on movements in its price.
How does it work?
Rather than buying the investment directly, with spread betting
you bet an amount on each point or 'penny' that its price moves. As
the price moves, your profit or loss is simply the price movement
multiplied by your stake. You can see how this works in our
Trading Examples section.
As with traditional share dealing, you will be quoted two prices
on an instrument that you choose to trade. The lower of the two
prices is called the ‘bid’, and is the price that you will receive
if you sell. The higher of the two prices is the ‘offer’ and is the
price you will pay if you buy. The difference between these two
prices is known as the ‘spread’, and represents the cost of
trading.
For example, if the UK 100 Rolling bet has a quote of 6134
Bid / 6136 Offer, you could either Buy at 6136 if you think that
the UK 100 index will rise, or Sell at 6134 points if you
thought the index would fall.
Margin
Spread betting is a
margined product, which means you only need to deposit a small
percentage of the full value of your trade in order to open a
position. This deposit is known as ‘margin’ and varies between
instruments, but can be as low as five per cent of the total value
of your position. Details of our markets can be found in the
on-line Market Information icons on the Trading Platform. Note that
this leverage can result in losses quickly exceeding an initial
outlay, so please ensure that you fully understand the risks
involved.
Access to global markets
Spread betting gives
you the ability to trade on the movement of thousands of
instruments across the world's financial markets from a single
account. You can speculate on price movements of equities, indices,
currencies, commodities and many other financial products. Full
details of our markets can be found in the on-line Market
Information icons on the Trading Platform.
Spread betting carries a high level of risk to your capital with
the possibility of losing more than your initial investment and may
not be suitable for all investors. Ensure you fully understand the
risks involved and seek independent advice if necessary.
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