A unique new type of bet from IG Index. Keep your limited risk position 'alive' in volatile markets.
A Bungee bet lets you capture favourable price movements in volatile daily markets while keeping a strict check on your maximum possible loss.
Every Bungee has a built-in 'Floor' or 'Ceiling' level, much like a Stop level, which ensures that you cannot lose more than a given amount on your position. Unlike a normal Stop, however, if the underlying market passes through your Floor or Ceiling your position remains open. So if the market bounces back to your favour later in the day you can still make a profit.
Please note that this graph is intended purely to indicate the general relation between the level of a Bungee bet and the level of the underlying market and does not correspond to any actual price data.
Consider this scenario:
- You 'buy' a FTSE 100 Daily Bungee with a Floor at 6050, on the premise that the FTSE will rise. Say our offer price (there is no bid price for a Bungee Buy) is 6090. This means that if the FTSE 100 closes the day above 6090 you will make a profit, but you know you cannot lose more than 40 points (times your bet size per point) as the Floor level is fixed at 6050.
- The FTSE falls to 6039, meaning your Floor level is breached. The Floor holds your risk at 6050, but your position is kept alive. You decide to wait until the end of the day to see if the FTSE can stage a comeback.
- It does, and closes at 6110, reigniting your profit and earning you 20 points (times your bet size per point).
Why choose a Bungee?
- You know your maximum possible loss before you trade
- You are not 'stopped out' during volatile periods on the underlying market
- Your risk is limited throughout the life of the bet but your profit is not
Bungee bets can help you tackle volatile markets that would otherwise require constant attention. Instead of having regularly to place and monitor your usual Stops and track every movement in the market, Bungee bets allow you to keep your position open in the knowledge that even the sharpest of movements against you will not increase your risk, but that any correction in your favour would still allow for profit.
Look for Bungees on the PureDeal platform. A range of Bungee bets is now offered each trading day for Daily FTSE 100, Daily Wall Street, Daily Germany 30; Spot USD/EUR, GBP/USD, EUR/GBP, USD/JPY (all expiring at 8pm); and Daily Brent Crude, Daily Gold and Daily Silver. For more information visit Bungee Bets.
Updated: 12/05/08