Our FTSE® DFB price in mid-March is quoted at 5634-5635.
This means you can 'sell' at 5634 or 'buy' at 5635 ('buy' transactions are made at the higher end of the spread and 'sell' at the lower end).
|You think the market is going to fall, so you choose to 'sell'. You decide to risk £10 per point.||You think the market is going to rise, so you choose to 'buy'. You decide to risk £10 per point.|
|You 'sell' £10 per point at 5634.||You 'buy' £10 per point at 5635.|
|Against your expectations, the market rises. You opt to cut your losses and close your bet in case the market moves further against you.||
As you predicted, the market rises in the afternoon and you choose to take
At midday the price we quote is
At midday the price we quote is
|To close a 'sell' bet you simply 'buy' at the top end of the spread.||To close a 'buy’ bet you simply 'sell' at the bottom end of the spread.|
|You 'buy' £10 per point at 5653.||You 'sell' £10 per point at 5652.|
Your loss is calculated as follows:
Opening price 5634
Closing price 5653
Loss: 19 x £10 = £190
Your profit is calculated as follows:
Opening price 5635
Closing price 5652
Win: 17 x £10 = £170
Spread betting on individual shares provides exposure to corporate movement for a fraction of the cost of buying the shares outright.
Say Vodafone is trading in the market at 124.3/124.6p. Our daily quote for Vodafone stands at 124.1-124.8 and you decide to 'buy' £50 per point at 124.8, our offer price. The margin required is £312.00 – 5% (margin factor for Plus Account holders) x £50 (bet size) x 124.8 (opening level).
With this bet you will make £50 for every point that our 'sell' (bid) price (the price at which you can close the position) rises above 124.8 and lose £50 for every point the bid price falls below 124.8.
Our live price for Vodafone updates with every market move throughout the trading day. By mid-afternoon our daily quote has reached 127.1-127.8 and you decide to take your profit.
You close your bet by 'selling' £50 per point at 127.1, our bid price. You have made (127.1 - 124.8) x £50 = £115.
However, please note that had the price moved against you, you could have lost more than your initial margin.
Compare the cost of purchasing shares
Your £50 per point bet produces a result equivalent to buying 5000 Vodafone shares: with a conventional share holding at this level, each penny movement in the price would also be worth £50 to you. However, the initial outlay to open your spread bet is much more modest:
- Cost to buy 5000 Vodafone shares: 5000 x 1.248 = £6240.00
- Cost to place equivalent spread bet: 50 x 124.8 = £6240 (margin of 5% required for Plus Account holders = £312)
By spread betting you have also avoided paying any commission or brokerage fees, capital gains tax, or stamp duty.† The only charge is our dealing spread. You should, however, be aware that your maximum potential loss is the same whether you spread bet or buy the equivalent shares.
Spread bets are leveraged products. Spread betting may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.