Winspreads

What is Spread Betting?

Financial Spread Betting allows you, an investor, to speculate on the directional movement of the price of a financial instrument, without requiring you to physically own the instrument or to physically settle it.

In order to trade, you have to decide the amount that you wish to trade on each point movement of the underlying instrument. Every point movement that the price of the underlying instrument moves in your favour, will result in a profit for you. In contrast, every point movement of the price of the underlying instrument against you, will result in a loss for you.

However, Spread Betting carries above average risk and is not for everyone, so please ensure you understand the risks. You should be aware that it is possible to lose more money than your initial deposit and that you may be required to make further deposits at short notice. You should not engage in Spread Betting unless you understand the nature of the transaction you are entering into, the risks involved and the true extent of your exposure to the risk of loss. Please see the Risk warning section.

Range of Markets

Because Spread Betting does not require you to actually buy or sell the financial instrument in which you are trading, the range of instruments in which you can trade the upwards and downwards movements can be far greater than the physical markets. You can Spread Bet on markets including, but not limited to:

1. Stock market indices such as the UK100 and US30
2. Individual shares from the UK100, US30 and GERMANY30
3. Bullion such as Gold and Silver
4. Currencies (Majors such as EUR/USD, GBP/USD and Crosses like EUR/JPY, GBP/CHF)
5. Commodities such as Crude Oil and Soya Beans

Each of these market types can be traded for different periods; a spot contract (today’s prices) and at least one forward contract (future prices).

Making Profits from Spread Betting

There are two main ways in which you can make a profit from Spread Betting:

1. Buy at one price then sell at a higher price
   For example, if you were to buy US30 at 8500 and then sell US30 at 8510, you would make a trading profit of $10 per Spread Bet bought, and then sold, at these prices.
2. Sell at one price then buy at a lower price
   For example, if you were to sell US Crude Oil at 70 and then buy US Crude Oil at 60 you would make a trading profit of $10 per Spread Bet sold, and then bought, at these prices

There are two main ways in which you can lose from Spread Betting:

1. Buy at one price then sell at a lower price
   For example, if you were to buy US30 at 8500 and then sell US30 at 8490, you would make a trading loss of $10 per Spread Bet bought, and then sold, at these prices.
2. Sell at one price then buy at a higher price
   For example, if you were to sell US Crude Oil at 70 and buy US Crude Oil at 80, you would make a trading loss of $10 per Spread Betting sold, and then bought at these prices.

The Spread

The spread is the difference between the price at which you can buy and sell the Spread Bet. It is sometimes referred to as the "bid / offer spread" or the "dealing spread".

The spread is the way in which market makers like us are compensated for creating a market in which you can Spread Bet. A narrow or small spread is cheaper to you. A wide or large spread is more expensive to you.

For example:

If we are quoting the UK100 at 6001/6003, the lower figure (6001) is the sell price and the higher figure (6003) is the buy price. This means that you can sell the UK100 at 6001 and buy at 6003*. The spread in this example is 2 pips.

*Subject to quantity limits set according to current market depth and other conditions.

The spread is how market makers are compensated for creating a market for you to trade. A wide or large spread is more expensive to you. A narrow or small spread is cheaper to you.

The size of the spread represents how much the market must move in your favour before you begin to make a trading profit.

Spread sizes vary by instrument depending on:

1. the liquidity of the underlying financial
2. the volatility of the underlying financial instrument
3. for equities, the amount of freely traded shares that exist for the underlying company being bought or sold

The size of the spread represents how much the market must move in your favour before you begin to make a trading profit. You buy at one end of the spread and sell at the other end of the spread. If the spread moves far enough in your favour, you will begin to make a profit. If it doesn’t, you will incur a loss.