Forex Spread Bet
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The GBP / USD Forex market is on the move again. At the time of publication the GBP / USD (December) market has a spread of 2.0221 - 2.0229.
As with many markets, spread bettors can bet on the Foreign Exchange markets, ie you can financial spread bet on the Forex prices rising or falling.
With the above price, available at the time of writing with FinancialSpreads.com, you can bet on the GBP / USD rate being below 2.0221 or being above 2.0229 by 14-Dec-07.
Note that for the Sterling / US Dollar market, you trade in £X per point, where a point is 0.0001 of GBP/USD movement. For example if your stake was £5 per point and the GBP/USD moves 0.0009 then that would be a £45 difference to your bottom line.
So looking at an example, let's say you check the price and it shows the above spread of 2.0221 - 2.0229.
Forex Spread Trade on GBP / USD
1) You feel that the GBP / USD (December) should rise above 2.0229
2) So you go long (buy). You invest £5 per point
3) The value increases. You run the spread bet until the settlement day of 14-Dec-07
4) It settles at 2.0245
5) Opening value = 2.0229
6) Profits = ((closing price - opening level) / per tick) x stake
7) Profits = ((2.0245 - 2.0229) / 0.0001) x £5 per point stake
8) Profits = (0.0016 / 0.0001) x £5 per point stake
9) Profits = £80
But if the market didn't move as expected and had the GBP / USD rate gone against you and closed lower at 2.0215, then you would have made a loss.
5) Opening price = 2.0229
6) Profit/loss = ((closing level - opening price) / per point) x stake
7) Loss = ((2.0215 - 2.0229) / 0.0001) x £5 per point stake
8) Loss = (-0.0014 / 0.0001) x £5 per point stake
9) Loss = -£70
Where to spread bet on Gold:
You can currently spread bet on Gold and other commodities at:
FinancialSpreads.com
Capital Spreads
"Forex Spread Bet" written by RThomas, last updated 12-Sep-2007
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