Indices
One of the most popular forms of spread bet trading are on Indices. Investing in Indices hold a number of advantages over investing in stocks & shares as many traders prefer to take a view on the direction of the market as a whole; rather than trade on a particular stock or share.
This type of spread trading can provide a measure of risk management to an investment trading strategy given that the trade is placed on the respective stock market indices.
Professional Investors choose ETX Capital as we offer a vast range of Indices on which spread bets can be placed, including: the UK 100, France 40, US Wall Street, Japan 225 & many other European and Global market indices.
Trading Example
A customer visits ETXCapital.co.uk and thinks that the stocks in the USA have been over priced and are going to fall, so decides to place a spread bet trade to sell the Wall Street Index.
There are various options open to the customer depending on the length of time their spread bet trade is to be kept open. The trade can be kept open for 1 day, as a rolling daily or to the near or far quarter.
A quarterly index is priced from the future price available; this price includes expected dividend payments in the 20 companies comprising the Wall Street and the 'cost to carry' to the expiry date.
The profit and loss calculation for trades in the quarterly stock market indices is very straight forward.
The two-way spread price is quoted by ETX Capital in the Wall Street Mar 10 future is 9664 - 9672, the client sells £10 per point at 9664. The margin requirement for this trade is 5% of the nominal value - 9664 x 5% = 483.2 x £10/tic = £4832
Four months later the market has fallen to 9540 - 9448 leading the customer to buy back his £10 per point at 9448. The profit on the trade is 9664 - 9448 = 216 x £10/tic = £2160. On the other hand, if the market had risen the client would have incurred a loss.
An ETX Capital customer can also decide to trade just for the day in this market in which case they would trade either the Wall Street Daily Cash or the Wall Street Daily Future. The dealing spreads on the daily markets are less than the quarterly markets.
The Daily Cash market will close at 21:00 (BST/GMT) and will settle to the official settlement price of the Dow Jones Industrial Average Index. The Daily Futures market will close at 21:13 and will settle to the last price received at that time.
Profit and loss is the open price minus the close price multiplied by the stake of the trade. So, if the customer had sold the Wall Street Daily Cash at 9791 and the official settlement price was 9763.47 the profit would be 27.53 x £10 = £275.3. Conversely, had the customer decided to go ‘long’ on the Wall Street Daily Cash they would have made a loss.
The customer can also trade the Wall Street Rolling Daily market, this has the same spread as the other daily markets, and the margin requirement is 5%.
For rollover funding and dividend examples please see the section Shares Trading.
Rolling daily*, daily, monthly & quarterly spread bets available
- Australia 200
- Belgium 20
- China H Shares
- Denmark 20
- Euro Stocks 50
- France 40
- Germany 30 *
- Hong Kong 40
- India 50
- Italy 40
- Japan 225
- Netherlands 25
- Norway 25
- SP 500
- Spain 35
- Sweden 30
- Swiss 30
- UK 100 *
- US Tech 100
- Wall Street *
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