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A Spread Bet Example

Spread betting will always involve two prices – the price at which you can buy and the price at which you can sell. You will always buy at the higher of the two, and sell at the lower of the two. The difference between the buy price and the sell price is the spread. Here is an example of what a spread bet profit and loss could look like.

 

For example: The FTSE 100 Index is quoted at 5500-5501.

 

You are bearish so you sell £10 per point at 5500.

The FTSE falls to 5400-5401, and you buy back at 5401.

Your profit is (5500 minus 5401) x £10

You win £990

The FTSE rises to 5600-5601, and you buy back at 5601.

Your loss is (5601 minus 5500) x £10

You lose £1,010

You are bullish so you buy £10 per point at 5501.

The FTSE falls to 5400-5401, and you sell at 5400.

Your loss is (5501 minus 5400) x £10

You lose £1,010

The FTSE rises to 5600-5601, and you sell at 5600.

Your profit is (5600 minus 5501) x £10

You win £990

 

Basically, if you are right you win, if you are wrong you lose, regardless of whether the underlying market is gaining or losing value.  You are betting on the movements.  The potential gains or losses are multiples of your stake.

Further Reading:

1. Spread Betting Explained

2. Advantages of Spread Betting

3. A Spread Betting Example

4. Spread Betting FAQs

5. Risk Management
 

 

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