The Long and Short of Financial Spread Betting
A 2009 report on financial spread betting revealed that many traders who spread bet do so because of the shorting techniques it allows. “Shorting” is the term given to speculating that a market will fall in value, something which cannot be done directly in standard shares trading. Through shorting, spread betting provides the opportunity to profit from a falling market as well as a rising one. This makes traders better placed to react to sudden market movements. For example, imagine the UK 100 index price is trading at 5000/5001. You believe the price is going to decrease, so you short (sell) at £10 per point. Over the next week, the UK 100 price falls to 4950/4951, and you close your trade by selling your stake back at 4951. This represents a 49-point gain in your trade which, when multiplied by your £10 stake, equals a £490 profit. Naturally, if the index had risen by 49 points instead, you would incur a loss of the same amount. Ultimately, whether you decide to go long or short with your spread bets, you can still lose more than your initial deposit. Solid market analysis is crucial, as is spread betting only with money you can afford to lose. Spread betting is a leveraged product which can result in losses greater than your initial deposit. Ensure you fully understand the risks. About Finspreads Finspreads is a leading online financial spread betting firm, offering access to thousands of instruments on the world’s financial markets. We pioneered fully interactive online spread betting in 1999 and we continue to invest in technology to ensure that our service remains amongst the market leaders. Our goal is to make spread betting as straightforward as possible. We focus on delivering quick and easy access to the tools and information our customers need to make their trading decisions, act on them, then monitor their performance. We also offer a comprehensive education and support package to help our customers understand and take advantage of the opportunities offered by spread betting. For more information, go to http://www.finspreads.com/. Finspreads is a trading name of City Index Limited, one of the world’s largest providers of derivative trading services for retail investors. Visit http://www.cityindex.co.uk/ for more information.
Published on Feb 27, 2013
A 2009 report on financial spread betting revealed that many traders who spread bet do so because of the shorting techniques it allows. “Sho...