Spread Betting Index / Indices

Spreadbetting on a stock index, or multiple indices, has big advantages. For one, it is a great way to get macro economic exposure without having to buy a fund. After all spreadbetting is 100% tax free (in the UK at least) and all profits are also tax free. Moreover, a spreadbet on an index can be set up and closed within seconds.

Compared to buying individual shares, an index bet can be lower risk. Although they can still be volatile, a large index such as the DJIA, FTSE, Nasdaq or S&P500 is made up of many stocks, so an index inherently moves with less volatility than individual shares. The ease of setting up a new account makes spreadbetting a simple way to hedge against exposure in a recession or a falling market.

For trading indices, we recommend Financial Spreads, or World Spreads, both of which offer the cheapest rates, and very low spreads. In both cases, far far cheaper than buying a fund or a basket of stocks.

Spread betting guide Stock market indices example

Stock market indices represent the underlying performance of a group of stocks from a particular stock market. In the example below we quote the FTSE 100 index, which encompasses the top 100 companies, by market capitalisation, traded on the London Stock Exchange.

Stock markets can move in reaction to a variety of economic and political factors, so Spread Betting on these indices is one of the most interesting and exciting forms of speculation available.

We will call you Arthur Dent, with the following account details:

You call the Spread Betting trading desk (or log on to the site) and ask for a quote on the December FTSE (the expiry date being in the morning on the third Friday in December). The actual December FTSE future in the market is trading at 4233.5 - 4234.5.

We quote a spread of 4230 - 4238.

Now you have two choices to make:

• Choice 1: you think the spread is too low and you purchase the December FTSE at the higher figure of 4238 for your chosen stake of £5 per point.
• Choice 2: you think the spread is too high, and you sell the December FTSE at the lower figure of 4230 for your chosen stake of £5 per point.

To place a bet, you must have sufficient funds on account to cover the initial margin (deposit). In the case of FTSE futures, the initial margin is charged at a fixed rate of 300 times the stake. So for a £5 per point bet, the initial margin requirement is £1,500. All or part of the margin requirement is removed from your account when the position is full or part closed respectively.

Your Account status after opening the position:

On expiry, the December FTSE closes at 4350.

Result 1:

You were correct in thinking that the FTSE would rise. Your profit is £560, calculated as follows:

4350 (market closed) - 4238 (bought) = 112 ticks

112 x £5 (stake) = £560 (PROFIT)

Result 2:

You were incorrect in thinking that the FTSE would fall. Your loss is £600, calculated as follows:

4350 (market closed) - 4230 (sold) = 120 ticks

120 x £5 (stake) = £600 (LOSS)

Get Started!

If you would now like to get started have a look at some of the reviews on the spread betting companies page and choose one to spread bet on any market index.