Spread Betting Examples

1. Forex Trading Example
Trading Forex with spread betting is very simple and easy to understand and is also very similar to traditional forex trading. Quite simply all you do is "bet" or trade an amount per pip in one or other direction from the immediate spread. For example, the EURUSD Is currently quoted at 14789-91 (the spread is virtually the same as with a traditional forex broker). You decide to SELL at $5 per point @ 14789. After 2 hours the price has fallen to 14767-69 and you decide to close out the position. To close out your position you need to BUY $5 @ 14769.
Price to Open Trade 14789
Price to Close Trade 14769
Gain +20
The difference is +20 points so your profit is +20 x $5 = $100 profit.

NB one of the benefits of spread betting is that it would not make any difference if you traded in €, $ or £ the profit would be 20 points x your chosen currency. So if you undertook this trade using your Euro-based trading account, your profit would be 20 points x €5 = €100. Likewise if you traded with a Sterling-based trading account, your profit would be 20 points x £5 - £100. There are no exchange differences unlike with traditional forex trading.

In the above example if the price moved against you to, say 14797-99 and you decided to close out the trade, your loss would be $5 x (14799-14789) = $5 x 10 points loss = $50.

2. Oil Trading Example
Similar to Forex, spread betting commodities like oil and gold is also simple and easy to understand. For example, Brent Crude Oil is currently quoted at 7131-39 (again the spread is virtually the same as with a traditional broker). You decide to BUY at €10 per point. An hour later the quoted spread is 7166-74, so you decide to close out your position for a profit. You SELL €10 at 7166.
Price to Open Trade 7139
Price to Close Trade 7166
Gain 27
Since you were trading at €10 per point your profit is = €10 x 27 = €270.

3. Equity/Stock Trading
Again, equities or stocks are traded in the same way as the other two examples above and profits (or losses) are simply the amount you are betting, or trading multiplied by the movement in the underlying security. Example: say the Microsoft spread is quoted at 2541-2551 and you decide to SELL at £20 per point (assuming your base trading account is in pounds sterling). 4 hours later the price has moved against you and the price spread is now quoted at 2566-75, so you decide to close your position at a loss to prevent further losses. You therefore BUY @ 2575. Your loss can be computed as:
Price to Open Trade 2541
Price to Close Trade 2575
Loss -34
Since you were trading at £20 per point your loss = £20 x 34 = £680.