Indices Spread Betting Examples: FTSE, Wall Street
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Spread betting the indices is best understood by looking at examples. Spreads are found on a variety of indices like Wall Street and FTSE. No matter which index a bet is made all bets on indices work the same.
The daily FTSE market is quoted at 6301-6305 early in the morning. A trader expects the FTSE to increase in price above the quoted 6305. A buy bet is placed on the FTSE 6350 for a wager amount of £10.
The FTSE rises and by the end of the day closes at 6332 and is a win. The profits are found by the difference from the opening and closing. The difference of (6332-6305) is multiplied by the £10 wager.
Spread betting allows investors to cut losses on a losing bet. Using this same FTSE buy bet example at 6305 and the £10 wager. Let's look at what might have happened if the price of FTSE fell.
The FTSE began at 6281 and began to rise but shortly started to fall. By mid afternoon, the FTSE rose in the market to a price of 6292. The trader closes by placing a sell bet at the current quote.
The point difference is calculated by the opening and closing prices. In this case, the FTSE opening and closing are 6305 and 6292. The difference of 13 is multiplied by £10 wager for a £130loss.
Futures spread bets on indices are a fairly common bet on exchanges. One index spread betting example is betting the Wall Street future. The June quote for this is 12256-12259 and the price now is 12139.
The market has been steadily increasing but at a rather slow rate. A trader decides to sell Wall Street at 12256 at £4 per point. The price can rise from 12139 as long as it does not pass 12256.
The price continues to increase but never reaches the sell level. In June the contract closes at 12221 creating a spread difference. The difference is 35 multiplied by £4 which results in £140 profits.
Had the market closed above 12256 there would have been a loss. If the market closed at 12288 the difference would have been 32. The total loss for this bet would be 32 times £4 which is £128.
Spread betting on the indices is not really all that difficult. Looking at a few examples prior to making actual bets is helpful. One can understand how profits and losses are found by examples.
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