Spread Betting Example
Spread Betting the UK 100
In this example we show you how to take a position on the UK 100 through the Finspreads trading platform.
Note: The UK 100 represents the FTSE 100 index within the Finspreads trading platform.
The FTSE 100 index is the benchmark UK index (a basket of the top 100 listed firms on the London Stock Exchange by market capitalisation).
Trading Example: Going Long & Short
In this example, we show you how you can go long and buy the UK 100, and also how you can go short and sell.
Tip. You go long when you expect a market to rise and go short when you expect a market to fall. Find out more about speculating on rising and falling prices in our How to Spread Bet section.
Step 1. Research & Plan
The first step in any kind of trading is to research your chosen market.
Before you place a spread bet, ensure you have researched all factors that could affect the future price movement of your chosen market, in this example, the UK 100.
Tip: You can find out more about analysing your chosen market through our Market Analysis area or via our Trading Platform by using our advanced charting tools.
For each trade you should have a trading plan, which utilises your research, trading strategy and how you are expecting to trade this market (including closing orders, such as limit orders or stop losses).
Tip: Find out more through the Managing your Risk section.
Step 2. Take a Position
Going Long (Buy): Having researched and planned your trade, you believe that following positive economic news out of the UK, the UK 100 will rise in the coming days.
Let us say that through the Finspreads trading platform, the UK 100 is being offered at a spread price of 5200/5201 (sell and buy price).
Therefore, you decide to go long and buy the UK 100 at 5201 (the buy price) for a stake of £10 per point.
You will profit £10 (your spread bet stake) in line with every point the UK 100 rises above your buy price of 5201.
Going Short (Sell): Having researched and planned your trade, you believe that following negative economic news out of the UK, the UK 100 will fall in the coming days.
Let us say that through the Finspreads trading platform, the UK 100 is being offered at a spread price of 5200/5201 (sell and buy price).
Therefore, you decide to go short and sell the UK 100 at 5200 (the sell price) for a stake of £10 per point.
You will profit £10 (your spread bet stake) in line with every point the UK 100 falls below your sell price of 5200.
Tip: Whether going long or short – you can manage your risk using stop losses to ensure that if prices go against your spread bet position, your losses are limited to specific levels, predetermined by you.
Step 3. Close your Trade
Going Long - Scenario 1: The Market Rises
You are correct and the price of the UK 100 rises as the economic data is deemed positive by the market, helping the price of the UK 100 to rally (increase) to 5212.
In order to close your trade you need to sell back your spread bet at the new spread price.
To do so, you go to the Finspreads trading platform and find that the new spread price offered for the UK 100 is 5212/5213.
You sell back your trade at 5212 (the sell price) for a tax-free* profit of £110.
Going Long - Scenario 2: The Market Falls
However, if you are wrong and the price of the UK 100 falls to 5190 (representing a fall of 11 points from your buy price), you close your losing trade by selling back the spread bet at the new spread price.
The new spread price for the UK 100 is 5190/5191.
To close your losing trade, you are required to sell back the spread bet at the new price, i.e. 5190 (sell price), for a loss of £110.
Going Short - Scenario 1: The Market Falls
You are correct and the price of the UK 100 falls to 5190 as the economic data that is released is worse than investors had expected.
In order to close your trade you need to buy back your spread bet (as you had originally sold to open the trade) at the new spread price.
To do so, you go to the Finspreads trading platform and find that the new spread price offered is 5189/5190.
You buy back your spread bet at 5190 (buy price) for a tax-free* profit of £100.
Going Short - Scenario 2: The Market Rises
In the event that you are wrong and the price of the UK 100 rises as the economic data released is better than expected, you would stand to make a loss of £10 (your stake size) for each point the UK 100 rises above your sell price of 5200.
To close your losing trade, you are required to buy back your spread bet (as you had sold originally to place the trade) at the new spread price, i.e. 5210 (the buy price), for a loss of £100.
Want to Know More About Spread Betting?
You can find out more about spread betting and how to place a trade across our full range of financial markets by attending one of our FREE spread betting seminars and watching our video guides/webinars, accessible through our Learn to Spread Bet section.
In addition, you can contact us via our live chat feature where we will aim to answer any queries you may have regarding spread betting and our trading platform.
