Spread Betting in Deutschland – Anbieter Übersicht

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Spread betting examples

Using the UK 100 and shares spread betting as an example, see how you can go long or short on the financial markets, depending on whether you expect prices to rise or fall.

Spread betting example 1: buying ABC Company shares

In this example, ABC Company is trading at 100/102 (where 100 is the sell price and 102 is the buy price). The spread is 2.

Let’s assume that you want to open a buy position (go long) at £2 per point because you think the price of ABC Company will go up.​

Let’s say that our margin rate for ABC Company is 5%, which means that you only have to deposit 5% of the total position’s value (position margin) to place your trade. Therefore, in this example, your position margin will be £10.20 (5% x (£2 x 102)).​​

Remember that if the price moves against you, it is possible to lose more than your outlay of £10.20, as losses will be based on the full value of the position.​ ​

​​P​lease note when spread betting equities an additional spread is built in to the spread bet price displayed on the platform and is applicable upon execution of any order.

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Outcome A: winning bet​

Your prediction was correct and ABC Company shares rise in value over the next week to 152/154. You decide to close your buy bet by selling at 152 (the current sell price).​

The price has moved 50 points (152 sell price – 102 buy price) in your favour. Multiply this by your stake of £2 to calculate your profit, which is £100.​

Outcome B: losing bet

Unfortunately, your prediction was wrong and the price of ABC Company drops over the next week to 72/74. You feel that the price is likely to continue dropping, so to limit your losses, you decide to sell at 72 (the current sell price) to close the bet.

The price has moved 30 points (102 – 72) against you. Multiply this by your stake of £2 to calculate your loss, which is £60.

Spread betting example 2: buying the UK 100

In this example the UK 100 is trading at 5789/5790 (sell price/buy price). Let’s assume that you think the price of the UK 100 will go up and decide to go long (buy) at £2 per point. The UK 100 has a tier 1 margin rate of 0.25%, which means that you only have to deposit 0.25% of the total position’s value as position margin. Therefore, in this example your position margin will be £28.95 (0.25% x (£2 x 5790)).

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Outcome A: winning spread bet

Remember: if the price moves against you, it is possible to lose more than your investment of £28.95.

Your prediction was correct and the price rises over the next hour to 5830/5831. You decide to close your buy bet by selling at 5830 (the current sell price).

The price has moved 40 points (5830 – 5790) in your favour. Multiply this by your stake of £2 to calculate your profit, which is £80.

Outcome B: losing spread bet

Unfortunately, your prediction was wrong and the price of the UK 100 drops over the next hour to 5750/5751. You feel the price is likely to continue dropping, so to limit your losses you decide to sell at 5750 (the current sell price) to close the bet.

The price has moved 40 points (5790 – 5750) against you. Multiply this by your stake of £2 to calculate your loss, which is £80.

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Spread betting example 3: selling the UK 100

In this example, the UK 100 is trading at ​5789/5790. ​You think the price will go down and decide to sell the UK 100 at £2 per point. ​Remember, prices are always quoted with the sell price on the left and buy price on the right.

The UK 100 has a tier 1 margin rate of 0.25%, which means that you only have to put forward 0.25% of the position’s value as position margin. In this example your position margin will be £28.95 (0.25% x (£2 x 5789)).

Remember that if the price moves against you, it is possible to lose more than your investment of £28.95.

Outcome A: winning spread bet

Your prediction was correct and the price goes down over the next hour to 5757/5758. You decide to close your sell bet by buying at 5758 (the current buy price).

The price has moved 31 points (5789 – 5758) in your favour. Multiply this by your stake of £2 to calculate your profit, which is £62

Outcome B: losing spread bet

Unfortunately, your prediction was wrong and the price of the UK 100 rises over the next hour to 5819/5820. You feel that the price is likely to continue increasing, so to limit your losses you decide to buy at 5820 (the current buy price) to close the bet.​

The price has moved 31 points (5820 – 5789) against you. Multiply this by your stake of £2 to calculate your loss, which is £62.

Spread betting holding costs

If you hold any position after 5pm New York time, you will be charged a holding cost, or if the position has a fixed expiry the holding cost will be built into the price of the instrument.

We calculate the holding rate applicable to the holding cost based on the interbank lending rate of the currency in which the instrument is denominated. For example, the UK 100 (pound sterling) is based on the London Interbank Offered Rate (Libor). For buy positions, we charge 0.0082% above Libor and for sell positions you receive Libor minus 0.0082% , unless the underlying interbank rate is equal to or less than 0.0082% , in which case sell positions may incur a holding cost.

You can view the historic holding costs, per product, by clicking on the account menu and then the history tab.

Learn more about some of the risks of spread betting.

Disclaimer
CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

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Spread betting

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What is spread betting?

Managing your risk

What is spread betting?

Although UK tax laws may change, spread betting is currently tax free, making it a very cost-effective alternative to traditional share trading.
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How to spread bet

Do you buy or sell? Check out our videos and working examples to help you get started with spread betting.
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Managing your risk

Spread betting can be risky but there are many
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Spread Betting

What is Spread Betting?

Spread betting refers to speculating on the direction of a financial market without actually owning the underlying security. It involves placing a bet on the price movement of a security. A spread betting company quotes two prices, the bid and ask price (also called the spread), and investors bet whether the price of the underlying security will be lower than the bid or higher than the ask. The investor does not own the underlying security in spread betting, they simply speculate on its price movement.

Understanding Spread Betting

Spread betting allows investors to speculate on the price movement of a wide variety of financial instruments, such as stocks, forex, commodities and fixed income securities. In other words, an investor makes a bet based on whether they think the market will rise or fall from the time their bet is accepted. They also get to choose how much they want to risk on their bet. It is promoted as a tax free, commission free activity that allows investors to speculate in both bull and bear markets.

Spread betting is a leveraged product which means investors only need to deposit a small percentage of the position’s value. For example, if the value of a position is $50,000 and the margin requirement is 10%, a deposit of just $5,000 is required. This magnifies both gains and losses which means investors can lose more than their initial investment. (To learn more, see: Margin)

Key Takeaways

  • Spread betting refers to speculating on the direction of a financial market without actually owning the underlying security.
  • The investor does not own the underlying security in spread betting, they simply speculate on its price movement.
  • It is promoted as a tax free, commission free activity that allows investors to speculate in both bull and bear markets.

Spread Betting Example

Let’s assume that the price of ABC stock is $201.50 and a spread-betting company, with a fixed spread, is quoting the bid/ask at $200 / $203 for investors to transact on it. The investor is bearish and believes that ABC is going to fall below $200 so they hit the bid to sell at $200. They decide to bet $20 for every point the stock falls below their transacted price of $200. If ABC falls to where the bid/ask is $185/$188, the investor can close their trade with a profit of <($200 - $188) * $20 = $240>. If the price rises to $212/$215, and they choose to close their trade, then they will lose <($200 - $215) * $20 = -$300>.

The spread betting firm requires a 20% margin, which means the investor needs to deposit 20% of the value of the position at its inception, <($200 * $20) * 20% = $800, into their account to cover the bet. The position value is derived by multiplying the bet size by the stock’s bid price ($20 x $200 = $4,000).

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