LONDON, February 21, 2012 /PRNewswire/ --
Indices such as the UK 100, Wall Street and Germany 30 are some of the most popular choices amongst spread bettors.
City Index offers traders spread betting on a range of global indices markets including the above and US S&P 500, Japan 225 and Australia 200.
In this easy-to-follow guide we show you an example of spread betting indices using the UK 100.
Going Long on Indices
In this example, let's say our current UK 100 Rolling Bet spread is 5820/5821 - the 'sell' and 'buy' price.
Say you predict the UK 100 to rally over the coming days and therefore open a buy position (go long) of £10 per point at 5821.
Over the coming days, the UK 100 rallies following the release of some positive UK economic data.
The latest UK 100 rolling bet price is now at 5860/5861.
Having reached a comfortable level of profit, you decide to cash in your gains by selling £10 per point at 5860 (the latest sell price).
As a result, there is a 39-point movement in your favour netting you a tax-free profit* of £390.
Alternatively, had you predicted wrongly and the UK 100 had fallen 39-points to 5782 - you would have made a loss of £390.
Going Short on Indices
Continuing with the above example, let's say you predict that the UK 100 will fall over the coming days and therefore open a 'sell' position (go short) of £10 per point at 5820.
Following an announcement of poor company earnings, the UK 100 falls and the latest UK 100 rolling bet price is now 5790/5791.
Having reached a comfortable level of profit, you decide to cash in your gains by buying back £10 per point at 5791 (the latest buy price).
As a result, you net a tax-free profit* of £290 after selling at 5820 and buying back at 5791 with a stake size of £10 per point.
However, had you been wrong and the price of the UK 100 rose to 5849, you'd have lost £290.
*All profits are free from Capital Gains Tax (CGT) whilst there is also no Stamp Duty - though this is subject to change.
Spread betting is a leveraged product which can result in losses greater than your initial deposit. Ensure you fully understand the risks.
About City Index:
Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through City Index.
As a group, we transact in excess of 1.5 million trades every month in over 50 countries worldwide. We provide access to a wide range of instruments including margined foreign exchange, CFD trading and, in the UK, financial spread betting.
SOURCE City Index