You can use spread betting to speculate on the future direction of market prices, enabling you to profit irrespective of whether underlying market prices are rising or falling.
If you believe a market will rise, you buy (go long) and your profits will rise in line with any increase in that price. Similarly, if you expect a market to fall, you can sell (go short) and your profits will rise in line with any fall with that price. Equally, your losses will rise if the market moves against you.
Our UK 100 index price is currently trading at 6500/6501 (sell price/buy price). You believe the UK 100 index will rise over the next two weeks and decide to buy at our current price of 6501. You buy with a stake size of £10 per point.
Over the next two weeks, the UK 100 price rises to 6550/6551.
Deciding to cash in your profits, you now close your trade by selling your stake back at our new sell price of 6550. This represents a 49-point gain in your trade which, when multiplied by your £10 stake nets you a £490 tax-free profit*.
Let's look at what would have happened if the UK 100 had fallen.
Over the next two weeks, the UK 100 falls to 6450/6451, putting your spread bet into an open loss.
Deciding to take your loss, you now close your trade by selling your stake back at our new sell price of 6450. This represents a 51-point loss in your trade which, when multiplied by your £10 stake, leaves you with a £510 loss.
Still unsure about how you can spread bet with City Index? Call 0800 0721107 for answers or let one of our in-house sales executives give you a run-through of the City Index trading platform.
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