If you decide to spread bet on a commodity such as US Crude Oil then, looking at a spread trading website like FinancialSpreads.com, you might see the crude oil spread of $72.85 – $72.90.

Therefore, you can spread bet on US Crude Oil to move

• Higher than $72.90
• Lower than $72.85.

When spread trading, you bet on every unit the market rises or falls; specifically, for the US Crude Oil market a unit is $0.01 of the commodity’s price movement.

In this case, you could decide to bet £2 for every $0.01 US Crude Oil moves up or down.

Buying – Spread Betting on the Market to Rise

If you bought US Crude Oil at $72.90 and the commodity went up then the spread might become $73.56 – $73.61. If that happened, you might choose to close your spread bet for a profit at $73.56.

Your Profits (or Losses) = (settlement value of the market – opening value of the market) x stake per $0.01
Your Profits (or Losses) = ($73.56 – $72.90) x £2 per $0.01 stake
Your Profits (or Losses) = $0.66 x £2 per $0.01
Your Profits (or Losses) = £132 profit

The markets can of course fall, if the market had moved down to, as an example, $72.21 – $72.26, you could choose to close your spread bet to prevent further losses. Assuming this was the case, you would sell your trade at $72.21.

You would close your bet with the same £2 per $0.01 stake:

Your Profits (or Losses) = (settlement value of the market – opening value of the market) x stake per $0.01
Your Profits (or Losses) = ($72.21 – $72.90) x £2 per $0.01 stake
Your Profits (or Losses) = -$0.69 x £2 per $0.01
Your Profits (or Losses) = -£138 loss

 

Selling – Spread Betting on the Market to Fall

A key advantage of placing a spread bet is that investors can sell the markets.

If you recall, initially the spread betting price was $72.85 – $72.90.

If you were to go short of US Crude Oil at $72.85 and the commodity decreased then the market might be re-priced at $72.21 – $72.26. If this were the case, you might choose to close your bet for a profit by buying at $72.26.

Your Profits (or Losses) = (opening value of the market – settlement value of the market) x stake per $0.01
Your Profits (or Losses) = ($72.85 – $72.26) x £2 per $0.01 stake
Your Profits (or Losses) = $0.59 x £2 per $0.01
Your Profits (or Losses) = £118 profit

However, if the market had moved up to, as an example, $73.42 – $73.47, you could choose to close your bet to limit your losses. If so, you would buy back at $73.47.

With the same £2 per $0.01 stake:

Your Profits (or Losses) = (opening value of the market – settlement value of the market) x stake per $0.01
Your Profits (or Losses) = ($72.85 – $73.47) x £2 per $0.01 stake
Your Profits (or Losses) = -$0.62 x £2 per $0.01
Your Profits (or Losses) = -£124 loss

US Crude Oil (March) prices taken as of 14-May-10.

More on Crude Oil Spread Betting

1) Where can I Spread Bet on the Crude Oil Market?
2) Where can I find Real-time Spread Betting Prices for the Crude Oil Market?
3) Where can I find Live Charts / Candlestick Charts for the Crude Oil Market?
4) How do you Spread Bet on the Crude Oil Market to Go Up?
5) How do you Spread Bet on commodities markets like Crude Oil to Go Down?
6) Where can I find more on trading commodities markets?

Risk Warning: Spread Betting carries a high level of risk to your capital and you can lose more than your initial investment, it may not be suitable for all investors. Ensure you only speculate with money that you can afford to lose and that you fully understand the risks involved and seek independent financial advice where necessary.