With a quarterly bet
Spread betting on currencies (also known as foreign exchange, or
FX) allows you to speculate on the relative price movements of two
currencies.
In this example we use the sterling/dollar performance.
You should read this example in conjunction with our Spread Betting on Currencies information
page.
If the actual September GBP/USD future in the
market was trading at 1.9553 - 1.9555.
Finspreads quotes 1.9550 - 1.9558
This means that £1 is worth between 1.9550 and 1.9558 US dollars,
depending whether you are buying or selling dollars.
When trading currencies, you are speculating on the relative
performance of one currency against another. If you believe
one currency will strengthen against the other you “buy”, and if
you expect it to weaken, you “sell”.
In this example, if you expect sterling to strengthen relative
to the dollar, you would buy the sterling/dollar. Conversely, you
would sell if you expect the pound to weaken against the
dollar.
Example A
If you decide that GBP will weaken, you sell at
1.9550. In this market, 1 point = 0.0001
If you were to trade at £5 per point.
A month later the pound has weakened as you hoped it would, and
you decide to close your position.
Finspreads quotes 1.9412 - 1.9420 for the GBP/USD September
contract.
To close your position you buy £5 per point at 1.9420 (the offer
price) , and your profit is calculated as follows:
1.9550 (opening price of your trade) - 1.9420 (closing price of
your trade) = 130 points
130 points x £5 (stake) = £650 profit
Example B
If you decide that GBP will strengthen, you buy at
1.9558. In this market, 1 point = 0.0001
If you were to trade at £5 per point.
A month later the pound has weakened and you decide to close
your position.
Finspreads quotes 1.9412 - 1.9420 for the GBP/USD September
contract.
To close your position you sell £5 per point at 1.9412 (the
bid price) , and your realised loss is calculated as follows:
1.9558 (opening price of your trade) - 1.9412 (closing price of
your trade) = 146 points
146 points x £5 (stake) = £730 loss.
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