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Spread Betting and spread bet firms - Advice

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The following advice is important for all spread betting or CFD (contract for difference trading). By acquainting yourself with this basic advice you will minimize delays and find that the companies treat you respectfully.

If you are confused see the spreadbet example. For a directory of the best firms to start spread-betting with click on the UK Spread-bet directory.

Before you place your order
When spreadbetting there are various factors you must adhere to in order to avoid confusion or errors and minimize delay, especially in a fast moving market.

Before calling the dealing room you must:
1. Know the Instrument (i.e. Vodafone, UK100 or T-Bond) of the bet you wish to place;
2.Know the Tenor (this is the period of the bet i.e. Rolling Cash, Monthly or Quarterly) of the bet you wish to place;
3. Decide in advance whether you want to buy (place an ‘Up Bet’) or sell place a ‘Down Bet’ (see below);
4. Decide in advance on the size/amount of the bet (see below)
5. Have your account details to hand;
6. Ideally have a good idea of where the market is trading i.e. the level or price of a particular share, index or exchange rate. This can be checked on a website such as Yahoo or ADVFN.

Example:
“Hello, can I have a dealing quote for Vodafone Rolling Cash for a £10 a point bet please?”
You do not at this point have to declare whether you want to buy (place an ‘Up Bet’) or sell (place a ‘Down Bet’).

The dealer will then quote a price, for example “98 / 99”. This quote represents the bid / offer spread for Vodafone ‘Rolling Cash’. The rate of 98 pence is the rate at which you can sell your bet (place a ’Down Bet’). The rate of 99 pence is the rate at which you can buy your bet (place an ‘Up Bet’).

Continuing with this example and with the assumption that you think that Vodafone will weaken (or go down) - on hearing the dealers quote, if the price is acceptable, you would say: “sell £10 a point”.

The dealer will then confirm the trade to you: “At 98 - you sell £10 per point Vodafone Rolling Cash ”.

 Types of Bet: Rolling Cash Bets
A ‘Rolling Cash’ spread bet is a daily bet that we will automatically ‘roll over’ to the next trading day unless and until you (or we) close this bet or give an instruction to the contrary. This means that you can effectively keep your bets open for as long you are able to fund them. You do not have to close your bets at the end of each trading day to have to re-open a new position with a new spread the following day. The ‘Rolling Cash’ spread bet enables you to compare spread bet prices directly with published share or indices prices transparently. It also provides you with the flexibility offered by the cash market, as a more efficient funding method to the traditional future bet.

Types of Bet: Rolling Future Bets
Rolling Future Bets are bets placed for a given period, generally one or three months. The prices for ‘Rolling Future Bets’ are different from cash bets because they carry an interest premium built into the price to account for the time the bet can remain open and any dividend payments during that period. This interest charge is generally called ‘cost of carriage’ and is the normal method of calculating a future bet price.

OPENING A POSITION
How to Open a Bet Position

A position is opened by either buying (placing an up bet) or selling (placing a down bet) on a share, index, treasury, currency or other financial instrument offered.

Buying / Placing an Up Bet.
You can open a bet by ‘buying’ or placing an ‘Up Bet’ on the share, index, treasury or the first named currency (and selling the second named currency). To make a profit, you want the price of that instrument to rise, or the first-named currency to strengthen or rise against the second-named currency.

The ‘Rolling Cash’ spread bet enables you to compare spread bet prices directly.

 Selling / Placing a Down Bet
You can open a bet by ‘selling’ or placing a ‘Down Bet’ on the share, index, treasury or the first named currency (and buying the second named currency). To make a profit, you want the price of that instrument to fall, or the first-named currency to weaken or fall against the second-named currency.

Minimum Bet Size
The minimum bet size varies according to the company you are trading with, but is typically £1 per point.

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