There are several different styles of spread bets as explained earlier, so to make it clearer I’ve included some sample bets here.
Rolling Daily Bet
This type of bet is automatically rolled over by your bookmaker each day. You pay a little overnight interest each time it is rolled over, which is usually taken by the bookmaker adjusting your opening position each day.
For instance, Vodaphone Group plc rolling daily bet is currently quoted at 164.25p – 164.50p. You feel that it is going to increase in price, and buy it at £10 per point, at the price of 164.5. In three days it has gone up to 168.25p – 168.50p and you sell your position of £10 per point at the price of 168.25. You have gained (168.25-164.5) x £10 per point, that is £37.50, less the overnight interest you have been charged.
Index Futures Bet
The FTSE100 for September is quoted at 5250p – 5252p. You think it is going down, so you open a sell bet for £2 per point at 5250. A week later the quote is given as 5180 – 5182, and you suspect that a recovery may be due, so decide to close the winning bet. You buy to close your bet at 5182.
You have made a profit of (5250-5182) x £2 = £136.
Shares Futures Bet
March Royal Dutch Shell has a price of 1957 – 1961. You believe it will go up, so open a bet at £5 per point at a price of 1961. Although it starts up, there is bad news that was not anticipated and the shares fall in value. Your stop loss is set at 1930, and this is triggered on the second day. Your bookmaker closes your position, but because the price is falling rapidly on the news, your bet is closed at 1926.
You bought at 1961, and were taken out of the bet at 1926, for a loss of 35 points. At £5 per point, this is a loss of £175 from your account. The price dropped a lot further so you were glad you had set a stop loss. In this case the technical indicators showed you when the market had over-reacted and the price had become oversold, so you were able to take out another long bet and profit from the bounce back.
As the FTSE100 has been strong, you decide to risk a binary bet, and are quoted 60 for the up bet for the day. You open at £10 per point. As the day goes along, it seems that the markets are struggling, and when they open the US markets immediately sink, with a knock-on effect on British traders. By 3:30pm, you can’t see the FTSE recovering enough to finish in the black.
Rather than lose everything, you decide to close your bet, which is now priced at 56 – 65. You sell at 56, losing (60-56) x £10 = £40 rather than the £600 you would have lost if you had waited and the FTSE did not recover.