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| Spread betting differentials becoming more common | | Print | |
| Written by Sam Coventry |
| Thursday, 07 April 2011 15:28 |
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A perfect example of the financial market innovation that spread betting allows. Financial Spreads have today announced the introduction of three differential markets. A differential market is simply the difference between two markets. It is often referred to as the spread. The most popular differential market is the spread between WTI Crude and Brent Crude. Those that have a good understanding of oil markets will understand just how significant the driver of the differential in oil prices is. They will also understand what drives the difference, and therefore have an idea on the outlook of that differential and be able to make a spread betting call accordingly. Financial Spreads Spokesperson Adam Jepsen says that introducing differential markets not only offers spread betting account holders more choice, but better value too: "The introduction of the differential markets is the latest in a range of improvements to the service that we offer, and one that we hope will be very popular with our clients. "We are constantly looking to offer new markets and services to our account holders, and we feel that the latest one will increase both choice and value. Not only will this improvement increase the range of markets that our clients can speculate on, but it also offers them a way of getting tighter spreads." The new differential markets include: * UK 100 / DAX 30 * UK 100 / Wall Street * Brent Crude Oil / US Crude Oil An index example. If the FTSE 100 is 5950 and the German DAX 30 is 7050 then the difference is 1100. Therefore, Financial Spreads might offer a UK 100 / DAX (June) differential market of 1098 - 1102. This means clients can spread bet on the differential getting larger than 1102 or getting smaller than 1098. Differential markets are normally monthly or quarterly futures markets and therefore they have an expiry date. The above example is a 'June' market so if you haven't already closed your trade beforehand the market, and any open trades on it, will be closed and settled on 17 June. |
Spread Betting Lessons - Cut out the emotion!
Oh, and also a lesson why the Stop Loss is your Friend !
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Spread betting at a glance
- Spread betting is a financial product that allows retail and professional investors access to the widest possible number and types of exchange traded instruments.
- The spread betting company that you trade through is the market maker, the trader does not actually take ownership of any underlying product. Hence, most jurisdictions do not charge stamp duty on any gains.
- The notion that you don't actually own the product ensures spread betting platforms are able to almost instantaneously execute orders on behalf of their client.
- Spread betting is a leverage product, your money is able to realise you impressive gains as your earnings come in multiples of the actual change in the underlying product that you are trading.
- This is of course where spread betting can also go spectacularly wrong. Losses can be huge, therefore we advise those that are spread betting, or are looking to go into spread betting, to enter each trade with a well thought out strategy. This also means setting a pre-determined stop loss so that losses are cut at a manageable level.
- This website is here to offer more insight into this fascinating trading instrument.