Options Spread Betting Examples

Prior to trading options, it is best to look at some trading example. These show the different types of bets and what can happen in them. They are very useful in learning about spread betting options.

They show how profits are found and how losses and profits are fixed. Examples show how the expiration date affects options spread betting. A trader can learn a lot from examining betting options examples.

Sell Call Option

The first options spread betting example is a sell call option. Traders will sell a call when the market is bearish or declining. Selling a call is very different than buying options in trading.

In selling a call option, there is no limit on a trader’s losses. Selling a call on options is a much higher risk for a trader. Therefore, a trader must understand this bet option before betting.

March FTSE is trading at 5261 and the call is June 5400 Call 62-66. A trader sells the option at 62 for a stake size of £7 per point. The maximum profit available to a trader on this trade is £434.

In this sell call option example the potential losses are unlimited. The sell call options expires under certain market conditions. These are if the March expiry date results in the FTSE trading below.

If the FTSE is trading at 5612 at the March expiry it is a loss. Options bet losses are calculated per point times the wager. Initially, the premium or cost of the options bet is removed.

The trader paid 62 for the option and is deducted from the points. In this particular options betting example this number is 212. Figuring the cost of the options is essential before betting.

Points lost are figured by deducting the closing and selling value. The total loss is £150, the stake size times 150. Each calculation is carefully configured for a trader to know losses.

Buying a Put Option Example

This options example shows buying a put option on the FTSE. A trader anticipates this market to decline in the coming weeks. The September FTSE is currently trading at 4782 on the exchange.

The June 4600 Put is priced at 74-79 for the FTSE index with a firm. This particular bet is a buy bet so a trader buys 79 for a £10 wager. This shows the maximum risk to a trader on this trade is £790.

If in September the FTSE is higher than 4600 then the option expires. The full loss on this buy put option of £790 is due at expiry. A trader must pay this loss amount in full using one’s account.

If the option at expiry is trading below 4600, a profit has been made. As a trader paid 79 for the bet, the option must fall below 4521. It must fall below this in order to break even from the trade.

The profits are computed by subtracting the strike and ending value. This number is multiplied by the bet wager initiated by a trader. If the options market closed at 4486 the profit would have been £350.

The benefit to trading options is one will know potential losses. This helps traders manage their risks in options betting better. Using examples can help a trader understand the bets in options.

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