Spread Bet Shares : Examples

Spread betting on shares may profit on rising and falling prices. The reason is traders are betting which way the market prices will go. The profits are determined by the stake size and the prediction.

The trader is awarded for every movement if predicted correctly. In other words, profits continue to rise as the market price rises. Examples of spread betting shares can demonstrate theses ideas.

Shorting the Stock Example

A current share from Company XYZ is trading at 136 on the exchange. A spread betting firm is offering a quoted spread at 135-137. A trader decides to short the stock and wagers £1 per point.

The stock falls as predicted and at the end is trading at 123. The profits available are £12, but a trader wants to ride it. The next day the share continues to decline in price on the exchange.

The trader closes the bet when the current share is priced at 115. The total profits are £20 and are configured easily for the bet. One takes the opening price and subtracts the closing price.

The difference is multiplied by the wager which in this case was £1. Therefore, the difference of 20 times 1 is £20 profit to the trader. All profits are configured in the same manner for betting shares.

In the above case, the trader increased the winnings by rolling. The trader’s profits increased and went from £12 to £20 a net gain. The profits could have been more if the wager had been a higher stake.

Higher Stakes and Profits

If the stake size had been £3 then the profits would have been £60. It is important to remember losses could easily have resulted. This would have happened if the market went in the other direction.

A guaranteed stop loss is helpful and some firms require stop losses. The stop losses are required on all trades especially for new traders. There is a cost of a stop loss and it is factored into the spread.

A spread is offered at 452-454 and a trader places a buy bet. However, one also wants to put a guaranteed stop loss on the bet. This company charges 2 points for the price of the stop loss.

This fee for the stop loss is added to the quoted share spread. This changes the quoted share spread from 452-454 to 454-456. Nothing is else is different and profits are calculated the same way.

Reviewing spread betting examples really shows a trader outcomes. These examples show potential losses and profits for a trader. One can best trade the market and know risks of high wagers.

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