Let’s say you are interested in spread betting on Gold, you look on a spread betting website eg Financial Spreads and see the current1 spread betting quote:
Gold (June): $865.6 - $865.4
Here’s how it works...
The Market
Gold (June)
The Spread
$865.6 - $865.4
What this means
You can spread bet on the Gold (June) market to close:
Higher than $865.4, or Lower than $865.6
This is a ‘June’ futures market. ie this market will close when the June Gold futures contracts are settled, in this case 27-May-08.
Units Traded
You spread trade the Gold market in £x per point
A point is 10¢ ($0.10) of the price of Gold
Eg if Gold moves $5 (500¢) then you would win or lose 50 points or 50 times your stake.
Stake per Unit
You choose to how much you want to stake per point, eg £1 per point, £2 per point, £10 per point, etc
Staking example
If your stake is £4 per point and Gold moves 50¢ (5 points), you would win or lose £4 per point x 5 points = £20.
WORKED EXAMPLE – Buying Gold
Spread betting on the price of Gold to go up
You choose to buy or sell
Higher than $865.4? Or
Lower than $865.6?
Let’s say you choose
Higher than $865.4
You choose your stake, let’s say you opt for:
£3 per point
What now?
a) You win £3 for every point (10¢) Gold finishes above $865.4 on the expiry date
b) You lose £3 for every point (10¢) Gold finishes below $865.4 on the expiry date
Note
You can close this bet before the expiry date but in this example you let the bet run until the expiry date, 27-May-08.
When you Buy a spread bet your profit / loss =
(Closing Price – Opening Price) x stake per point
Scenario 1
Gold closes higher than $865.4 eg $874
Your P&L =
(Closing Price – Opening Price) x stake per 10¢
($874 – $865.4) x £3 per point (£3 per 10¢)
($8.60) x £3 per point
86 points x £3 per point
Your P&L =
£258 profit
Scenario 2
Gold closes lower than $865.4 eg $858
Your P&L =
(Closing Price – Opening Price) x stake per point
($858.0 – $865.4) £3 per point (£3 per 10¢)
(-$7.40) x £3 per point
-74 points x £3 per point
Your P&L =
-£222 loss
WORKED EXAMPLE – Selling Gold
Spread betting on the price of Gold to go down
You choose to buy or sell
Higher than $865.4? Or
Lower than $865.6?
Let’s say you choose
Lower than $865.6
You choose your stake, let’s say you opt for:
£2 per point
What now?
a) You win £2 for every point (10¢) Gold finishes lower $865.6 on the expiry date
b) You lose £2 for every point (10¢) Gold finishes higher $865.6 on the expiry date
Note
You can close this bet before the expiry date but in this example you let the bet run until the expiry date, 27-May-08.
When you Sell a spread bet your profit / loss =
(Opening Price - Closing Price) x stake per point
Scenario 1
Gold closes lower than $865.6 eg $853
Your P&L =
(Opening Price - Closing Price) x stake per point
($865.6 - $853.0) x £2 per point
($12.6) x £2 per point (£2 per 10¢)
126 point x £2 per point
Your P&L =
£252 profit
Scenario 2
Gold closes higher than $865.6 eg $876
Your P&L =
(Opening Price - Closing Price) x stake per point
($865.6 – $876.0) x £2 per point
(-$10.40) x £2 per point (£2 per 10¢)
-104 points x £2 per point
Your P&L =
-£208
Gold Spread Betting Notes:
1Spread betting prices taken from FinancialSpreads.com on 1 May 2008
You can also spread bet on Gold in $ per Cent and Euro per Cent
Where can I find Gold Charts and Real-time Gold Prices?
Financial Spreads – provide free Gold Charts and Live Prices to all account holders
'Gold Spread Betting', Guide by D. Jones, last update: 29 Jun 09
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Trade the tightest FTSE spreads available² & find a range of benefits at:
FinancialSpreads.com
£1 per point: Start trading £1 per point/tick & an initial deposit of £30
Multiple markets: Forex , Commodities, Indices & Equities
Risk Warning - Spread betting carries a high level of risk to your capital & you may lose more than your initial investment. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved, seek financial advice where necessary & make sure spread betting meets your investment objectives.
(1) The FTSE Rolling Daily Spread is 1 tick during market hours & 4 ticks out of hours. 1 Tick is defined as a full FTSE point. See our Product Information for more details. (2) The above information is correct at time of writing. (3) Tax Law can change.
FinancialSpreads.com is a trading name of London Capital Group Ltd which is authorised & regulated by the Financial Services Authority (FSA). Registered address: is 4th Floor, 12 Appold Street, London EC2A 2AW. All information correct at time of publication.
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.
Disclaimer:
Online-Spread-Betting.com does not endorse the information and
analysis available on this site. It is provided purely for information
purposes and is delivered as a personal view of the writer. Under no circumstances
is the information hereon to be used or considered as, an offer to sell, or a
solicitation of any offer to buy. The website content does not constitute investment
advice and neither the individual contributor nor Online-Spread-Betting.com accepts any
responsibility for any use that may be made of the content.
* Tax Free Trading:
Tax law is subject to change. It may also differ if you pay tax in a jurisdiction outside the UK.
