Spread Betting Examples

Spread betting lets you back your judgement in the financial markets. You BUY or SELL a market for a certain stake per point. The more right you are, the more you make, and vice versa. Let’s see how spread betting works in practice.

How to spread bet

If the FTSE 100 currently stands at 6641.6, InterTrader.com may quote 6641.1-6642.1 for our UK 100 (Rolling Daily) bet. This is a fixed spread of 1 point.

If you believe the price will rise you should BUY (or make an Up Bet) at 6642.1. If you believe the price will fall you should SELL (or make a Down Bet) at 6641.1.

Say you decide to sell at 6641.1 with a stake of £5 per point:

Watch our video for an introduction to spread betting with InterTrader.com, 2013’s Top Value-for-Money broker.

Scenario 1: price falls

The FTSE 100 falls to 6518.6 and our UK 100 quote now stands at 6518.1-6519.1. To close your original sell bet you need to buy at 6519.1. Here’s how this works out:

SELL Price 6641.1
BUY Price 6519.1
Difference 122 points
Stake £5 per point
Tax-free* profit £610
decrease

Scenario 2: price rises

The FTSE rises to 6731.0 and our UK 100 quote is now 6730.5-6731.5. To close your original sell bet you need to buy at 6731.5. Here’s the calculation:

SELL Price 6641.1
BUY Price 6731.5
Difference 90.4 points
Stake £5 per point
Loss £452
increase

While your position is open you can see your running profit or loss on the trading platform. Your final profit or loss is only realised when you close your position.

How does margin work?

To open a spread betting position you put down a deposit, known as ‘margin’. This is a fraction of the full value of your position. Trading on margin (also known as taking a ‘leveraged’ position) greatly enhances the potential return on your capital, but also creates an equal possibility for losses, if the price moves in an unfavourable direction.

Your margin is determined by the level of your stop-loss order, as this indicates your potential loss on the position. You should note, however, that you can lose more than your initial margin, unless you choose to make your stop-loss a Guaranteed Stop (for a small premium).

Generally your stop-loss level will cover losses equal to 80% of your margin requirement, subject to our minimum and maximum margin requirements.

For each market we quote a minimum Initial Margin (IM) figure, which determines the minimum margin amount required to open a position. This figure is multiplied by your stake per point to calculate your margin requirement.

We also quote a maximum IM, which determines the maximum margin we will take if you don’t set your stop level when your open your position. Remember, if you don’t set your own stop it will be placed automatically. To see the minimum and maximum IM figures for all our markets please refer to our Market Info tables.

Example 1: UK 100 (Rolling Daily)

You want to open a £2 per point position on our UK 100 market. The minimum IM for UK 100 (Rolling Daily) is 25, so the minimum margin you need to open this position is:

To open this position with a margin of £50 you would need to set your stop level 20 points from your opening level, as 80% of £50 is £40, which equals 20 points at £2 per point.

Minimum IM 25
Stake per point £2
Margin required £50

Example 2: Wall Street (Rolling Daily)

You decide to open a £1 per point positon on Wall Street without setting your own stop level. The maximum IM for Wall Street (Rolling Daily) is 200, so we will take the following margin (subject to there being sufficient funds on your account):

In this case your stop level would be set automatically 160 points from your opening level, as 80% of £200 is £160, which equals 160 points at £1 per point.

If you have less than £200 on your account (but more than the minimum margin requirement for this market), we will take this amount as margin and set your stop level automatically to cover losses equal to 80% of this amount.

Maximum IM 200
Stake per point £1
Margin required £200

Margin on shares

For spread bets on shares, the margin requirement is calculated as a percentage of your full positon value, so you must take your opening level into account as well.

Example 3: Vodafone

You want to open a £3 per point position on Vodafone (Rolling Daily) at a BUY price of 231.0. Our minimum IM for all FTSE 100 shares is 3%, so the minimum margin you need to open this position is:

To open this position with a margin of £20.79 you would need to set your stop level 5.5 points from your opening level, as 80% of £20.79 is £16.63, which equals 5.5 points at £3 per point.

Minimum IM 3%
Stake per point £3
Opening level 231.0
Margin required £20.79

Next steps

For more detail on margin calculations, and further examples, please see our FAQs. There are several ways to find out more about spread betting: