Example: Controlled Risk
A Controlled Risk bet is the ideal way to guard against large losses. The following example shows how this works in practice.
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It is March 2008 and you believe that Wall Street will fall in the next three months. You check our live quote for June Wall Street. We quote 12220 - 12228 You decide to sell £15/point, but are keen to limit your risk to a maximum £900. The opening price for a Controlled Risk 'sell' is our bid price minus our Controlled Risk premium of 4: 12220 - 4 = 12216 You sell £15/point at 12216
You have bet £15/point, but only want to risk losing £900, so you can only afford the market to go 60 points against you, in this case up to 12276 from 12216 You put a Controlled Risk Stop at 12276 A few days after opening the bet, Wall Street does fall. Do you want to take your profit? | |
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