You predict the direction - you make a profit
What is Financial Spread Betting? - Financial Spread Betting is unique in that it allows you to be very flexible with regards to the direction of your trades. Since you can go short as well as long, you can ask yourself the following before opening a position: "In which direction do I think my selected market is going to move?" As soon as you've decided on an answer, you can open a position by “buying” if you think the price will go up and “selling” if you think it will go down.
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When you trade, you stake a certain amount, for example £10, for every point that the share price moves. If the share price moves in the direction that you predicted then you make a profit. If, on the other hand you are wrong about the price movement, you make a loss of £10 for every point it moves against you.
Take a look at the example below, which takes you through the potential results of two spread betting trades.
In both situations the price has to move by more than the spread before you start making a profit. In this case the spread is ten points (the difference between 1530 and 1540) so as soon as the share price has moved more than ten points you start making a profit. The spread on most of our equity contracts is between 0.15% and 0.3% of the price.
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Going Long and Short
As outlined above, financial spread betting gives you the advantage of being able to trade on whether a price is going to rise or fall. If you believe that a contarct is going to rise in value, you buy it – this is known as going long.
If on the other hand you believe that a contract is going to go down in value you open your position by selling it – this is known as going short.
Risks
Financial Spread Betting involves high risk and is only suitable for those willing to accept that risk. Wins and losses on spread bets can be many times your original stake. Depending on the nature of your bet your losses may exceed your initial deposit. You should only bet if you are prepared to accept that degree of risk. You should always estimate the worst case scenario before you bet.
Spread betting or any investment in shares, currencies, commodities and similar and derivative products carry a high degree of risk and uncertainty and you are solely responsible and liable for decisions and transactions which you make in your trading account. Please remember that past performance is not necessarily indicative of future results.
Please refer to Section 1 of the Delta Index Financial Spread Betting Terms and Conditions for full details of the Risk Warning Notice.
Disclaimer
Current US legislation prohibits Delta Index from entering into spread betting transactions with US residents. US residents include any natural person resident in the US (other than on a short term basis) and any account held for the benefit of a US person.
We recommend you seek independent advice regarding your personal situation.
Trading different contracts
Delta Index offers a wide range of spread betting contracts for you to trade, including indices, commodities, equities, currencies and interest rates. It is important to remember that different classes of contracts have varying levels of leverage. Remember, leverage multiplies both gains and losses. Leverage on shares is usually 5 to 10 times, on indices and commodities 20 to 30 times and on currencies 50 to 60 times. Simply put, a contract being leveraged 10 times means that your position value is going to be 10 times the amount you have to put up as margin for your trade.
Each market is open at different hours. To see the precise opening hours of a specific contract just click on the "i" button beside the market in the tarding platform or call us on 0871 948 000.
New, Stop Loss and Limit Orders
New Orders
A 'New' Order is an order that is not attached to any existing position and is independent of any other instruction. A new order is used to open a position at a price that differs from the current price. New orders may be placed above or below the current Delta Index price outside the excluded zone. This is to ensure that your order is not triggered by market noise.
Suppose that the FTSE is trading at 4200/02. If you want to open a long position at any price other than 4202 you have two options: you either wait for the price to move to the desired level and open your position by placing a trade or you place a new order at the chosen price. If you want to open your position at 4150 points all you need to do is create a new order with the target level set to 4150.
It is important to note though that any order activated by 'gapping' or fast market action will be filled at the first price at which Delta Index could reasonably be expected to attain (See Term 13 in our Terms and Conditions). No orders are guaranteed. A new order will not be cancelled by any other actions on an account and will only expire when it is cancelled, when the relevant market expires, or when it expires due to any Good For The Day (GFTD) instruction.
The new order functionality is useful for placing orders at critical market points; it will ensure that you do not miss an opportunity. When a new order is executed, it automatically creates a new stop loss order if you have automatic stop losses enabled. You may then add a limit order to position if you wish.
Stop Loss Orders
Stop Loss orders allow you to limit your risk when opening a new position. Our trading platform generates a default stop loss at a level where 50% of the margin needed for the position would be lost. However, you can adjust the stop loss distance before opening a position or at any time during trading hours while your position is open. Stop loss orders will be triggered automatically when the target price is hit and the linked position will be closed. If the original position is closed manually or by a limit order then the associated stop loss order will be automatically cancelled. This means you do not have to worry about outdated orders remaining in the system. Please note that stop loss orders are not guaranteed on standard accounts and there is a risk that gapping may occur. In this event, orders will be filled on a best efforts basis.
Limit Orders
Limit orders complement stops in as far as they allow you to set a level where you would like to take your profit and close your positiion if the price moves in your favour. They can be added while a new position is being opened or at any time while a position is open. Target levels may adjusted at any time. Note that if the position is closed manually or by an alternative order, the associated limit order will be automatically cancelled. Naturally, you can attach both a stop and a limit to your open positions.
Closing a Bet
Closing a bet can be done in two ways:
- Go to the open positions tab, choose the trade that you wish to close and click on the close tab on the right hand side. This brings up a box with a live price and a sell button (or a buy button if your trade was a short). Click the button and your trade will be closed.
- Go to the markets tab, choose the instrument that you want to close and make an opposite bet to the one you are closing. For example, if you bought £10 on Eurodollar, just enter a sell for £10 on the Eurodollar. This will net off one trade against the other and both positions will be closed.
Expiry of Trades and Rollovers
Typically there are three types of financial spread bets:
- Daily bets: expire at the end of the trading day
- Future bets: expire monthly or quarterly
- Rolling bets: Do not expire and carry a financing charge in the same way as a Contract for Difference (CFD)
Rollovers
If your bet is nearing expiry, you can easily roll it over into the upcoming future. Within a month of expiry, Delta Index opens the new far contract; during the crossover period you can 'roll' your position over to the new contract, which means that your existing position will be closed at the mid market price and a new position will be opened on the new contract . Any open profit or loss will continue to be shown in the account summary, however the new open position will be priced at the current price level.
In the case of a rollover you are paying only half of the spread on the new contract rather than the full spread as you would have been charged had you opened a new contract in the conventional way. You can roll over as many times as you wish, each time paying only half of the regular spread.
To discuss rolling over your position, call us on 0871 948 000 or email us at client@deltaindex.com. Alternatively use the online ‘rollover’ facility in the open positions tab.