How to Spread Bet Shares and Potentially Profit in a Falling Market

LONDON, April 20, 2012 /PRNewswire/ --

Learn how to spread bet shares with this step-by-step guide - I'll explain not only how you can take a position on a market that's falling, but also provide you with a comprehensive overview of spread betting and how you can access over 12,000 financial markets for only a small initial deposit.

Spread Betting with City Index

Spread betting is a popular product for traders both new and experienced as it offers entry level access into the financial markets.

Spread betting with City Index enables traders to take positions on a range of markets for only a small initial deposit typically between 1% and 10% of an underlying market's value through a low margin feature.

The margin feature increases their market exposure and potentially magnifies profits.

Spread betting is also tax efficient; currently under UK tax laws, all profits made through a spread bet are free from UK Capital Gains tax* and Stamp Duty*, though this remains subject to change.

Profit from a falling market

Spread betting allows traders to go both long (buy) and short (sell) on trades - meaning those choosing to spread bet on shares can profit from a market which falls as well as rises.

However, as a leveraged product; should the market move against your position it can also result in losses greater than your initial deposit, making risk management tools, such as stop loss orders, imperative to a trading plan.

How to Spread Bet Shares

As mentioned above, spread betting offers traders the potential to profit from a market that falls by going short on a trade and selling.

For example purposes only, let's say we are looking to take a position on the future price movement of M&S shares.

Through thorough market analysis, you believe that the market will fall, and decide to go short and sell on the M&S shares' price.

Through the online trading platform, you place a £10 per point sell spread bet at the current sell price of 349p.

By going short and selling, your profits will rise in line with any fall in that shares price, and in turn, your losses will increase with any rise in price.

Over the coming days, the M&S shares price falls. As it reaches 300p, you decide to cash in your profits.

To close your trade and crystallize your profits, you buy back at £10 per point at 300p, netting a tax-free* profit of £490. The market had moved 49p in your favour (349p-300p) and you multiple the market move by your spread betting stake to attain your profit or loss (49p x £10 = £490).

However, had you predicted wrong and the M&S shares price had risen to 398p; you would have net a loss of £490.

Why Spread Bet with City Index

Open a spread betting account with City Index today and start trading on over 12,000 spread bet and CFD markets.

With almost 30 years experience, the spread betting, CFD and forex trading provider has won multiple awards, in particular for its professional mobile trading platform.

Remember, as a leveraged product, spread betting comes with high levels of risk and can result in losses greater than your initial deposit.

*Spread betting is exempt from UK stamp duty and Capital Gains Tax. However, tax laws are subject to change and depend on individual circumstances. Please seek independent advice if necessary.

About City Index:

Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.

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.

We constantly look to improve the performance of our platforms and expand our range of services. The result is that our customers benefit from innovative trading tools with transparent pricing, competitive spreads, and a high standard of customer support.