Trade shares with ETX Capital
Trading shares with ETX Capital couldn’t be easier.
You can place rolling daily bets on shares from a range of international indices using our trading platform.
Here is the list of the indices on which we offer shares spread betting:
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What are shares?
Shares - also called stocks - offer investors the opportunity to buy a stake in a specific company and to benefit from any profits that this firm makes.
Traditional share trading enables you to buy and sell your shares on the stock market, allowing you to take advantage of favourable price movements. Alternatively, you can remain a shareholder with any given company and receive dividend payments when it does well.
Spread betting on shares is an alternative way to speculate on the performance of a particular firm, although you will never actually own the stocks in question.
Instead, you can place a bet per point of movement on the share price. As you will not hold the underlying shares, you can bet on a firm's share price going up or down, giving you the chance to profit from a rising or falling market. Remember should the markets move against you losses will be incurred.
All about shares trading
There are stock exchanges all over the world, each one listing the largest publicly traded companies in the country in which it is established.
Share prices are based on expectations about a firm's future performance. This means businesses with good prospects for growth and earnings are likely to command a higher share price than those where investors are uncertain about the outlook.
There are several fundamentals that are taken into account when calculating an organisation's share price, including the industry it operates in, its financial standing, growth plans and the management team.
Company news and announcements - particularly those relating to earnings - can have an impact on the share price.
Share values can also be affected by the overall performance of the sector in which the business works. For instance, if the outlook for the mining industry is negative, this is likely to drag shares in mining companies lower.
A shares spread betting example
When spread betting on shares, you won't be buying the underlying stocks, you will simply be speculating on their performance.
This means you will need to decide whether you expect the share price in question to rise or fall and place your bet accordingly.
Spread betting is a form of leveraged trading, which offers the potential for much larger profits or losses than the initial stake you invest in the position.
You will be quoted two prices by your ETX Capital - the bid and the ask. If you believe the value of the stocks in question will fall, you would 'sell' at the bid price (always the lower figure). Conversely, if you anticipate the share price rising, you would 'buy', taking the offer or the ask.
Here is an example of a daily rolling shares spread bet:
We'll use the fictitious company ABC Industries.
The quote is 396p - 397p. The firm is due to announce its interim results and you believe these will be better than expected.
You therefore decide to accept the offer price of 397p and you wager £10 per point that the share price rises.
At this point, you should calculate your total trade consideration - 397p x £10 = £3,970. You will then need to use this figure to work out the margin requirement in order to secure the trade.
ETX Capital has a five per cent margin requirement on this stock, so in this case you will need £198.50 in your account to open the position.
Four days after you open the position, ABC Industries announces its results and your predictions are correct.
The share price climbs and is now trading at 413p - 414p. You decide to close your position by 'selling' at the bid price of 413p.
This equates to 16p movement - so a £160 profit for you. However, because you allowed the trade to rollover for four days, you need to deduct the rollover costs from this sum.
ETX Capital charges 2.50 per cent plus the LIBOR rate (let's say this is one per cent for this example) - so 3.50 per cent of the trade.
The fee is worked out by multiplying your total trade consideration by the rollover percentage, dividing this figure by 365 and multiplying it by the number of days you keep your position open.
So, in this instance, it would be calculated as:
£3,970 x 3.50 per cent / 365 x 4 = £1.52
Therefore, you total profit for this trade is £160 - £1.52 = £158.48
Of course, you should note that had the share price fallen, rather than risen, you would have stood to lose £10 per penny of movement. When spread betting, you always need to bear in mind that you can incur substantial losses should the markets move against you.