How does a Spread Betting Work?
Spread Betting is a product used to speculate on the price movements of stocks, commodities, shares, stock market indices and currencies. The spread bet broker will quote you a two-way price. The lower of the two prices is called the bid price while the higher price is called the offer price.
If you believe the share price to go up, you bet or 'go long' at the offer price. Similarly, if you believe the price will go down, you sell or 'go short' at the bid price. While placing the bet, you will need to decide on the associated per point value. It is normally suggested that while starting out, you bet in smaller amounts. For instance if the S & P 500 market is quoted at 3200-3202 and you, in anticipation of a price rise, decide to go long at 3202, at £1 a point.
If eventually, your prediction works out to be true and you sell at 3212, your profits will be: 3212 - 3202 = 12 × 1 = £12.
On the other hand, if the market falls, and you sell out at 3190, you will incur a loss of: 3202 - 3190 = 12 × 1 = £12.
To limit your risk, you can place a stop loss limit. This will be activated in case the price moves down below the specified point and thus, limits your loss.
Courtesy: Spread Betting Companies
If you believe the share price to go up, you bet or 'go long' at the offer price. Similarly, if you believe the price will go down, you sell or 'go short' at the bid price. While placing the bet, you will need to decide on the associated per point value. It is normally suggested that while starting out, you bet in smaller amounts. For instance if the S & P 500 market is quoted at 3200-3202 and you, in anticipation of a price rise, decide to go long at 3202, at £1 a point.
If eventually, your prediction works out to be true and you sell at 3212, your profits will be: 3212 - 3202 = 12 × 1 = £12.
On the other hand, if the market falls, and you sell out at 3190, you will incur a loss of: 3202 - 3190 = 12 × 1 = £12.
To limit your risk, you can place a stop loss limit. This will be activated in case the price moves down below the specified point and thus, limits your loss.
Courtesy: Spread Betting Companies
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