FX Spread Betting on GBP / EUR
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As per most days at the moment the GBP / EUR market was in the papers again today. As it stands the GBP / EUR (December) market is 1.4634 - 1.4642 with FinancialSpreads.com.
As with many financial markets, spread bettors can spread bet on the future price of Foreign exchange markets. As an example, spread trading on the GBP / EUR (December) price going up to more than 1.4642 by 14-Dec-07.
Note that for the GBP / EUR value, you trade in £X per point, where a point is 0.0001 of GBP / EUR movement. eg if your stake was £10 per point and the GBP / EUR rate moves 0.0006 then that would be an £60 difference to your profit / loss.
So let's say that you check the live price on a spread betting website and it shows the above spread of 1.4634 - 1.4642. Let's also say…
Financial FX Spread Bet on GBP / EUR Example
1) You like the price because you think that the GBP / EUR market will go up above 1.4642 by the settlement date
2) Therefore you go long (buy), let's also say you invest £5 per point
3) The market increases. You run the bet until the settlement day (14-Dec-07)
4) The price settles at 1.4702
5) Opening value = 1.4642
6) Profit / loss = ((closing level - opening price) / per point) x stake
7) Profit / loss = ((1.4702 - 1.4642) / 0.0001) x £5 per point stake
8) Profit / loss = (0.006 / 0.0001) x £5 per point stake
9) Profit = £300
But if the market didn't work as expected and had the GBP / EUR (December) value decreased in value and the market closed at a lower than expected price of 1.4626, you would have made a loss on this spreadbet.
5) Price you bought the spread at 1.4642
6) Profit / loss = (closing price - opening price) / per point) x stake
7) Profit / loss = ((1.4626 - 1.4642) / 0.0001) x £5 per point stake
8) Profit / loss = (-0.0016 / 0.0001) x £5 per point stake
9) Loss = - £80
"FX Spread Betting" written by RThomas, last updated 12-Sep-2007
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