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Spread Betting Example

With spread betting, your profit or loss is determined by the difference between the buy price and the sell price of the financial instrument that you are trading. Imagine this scenario about a fictional telecommunications provider called Talktone PLC (TT Plc):

A long trade

Placing a long trade

Placing a long spread bet

Talktone Plc is trading at 1.59/1.60

You think the price is going to rise in value so you decide to go long. Since you are new to spread betting you place a buy bet of the minimum bet size of £1 per point at the buy price of 1.60.

You place a buy bet on Marketmaker at 1.60 on TT Plc at £1 per point.

You now have the equivalent of 100 Shares with a value of £160

Margin requirements

Margin

Your margin requirement with Digital Look Markets for TT Plc is 10%, therefore £16 will be allocated from your account against this trade as initial margin.

£160 x 10% = £16

Remember if the share price moves against you, it is possible to lose more than this £16 initial margin.

Closing your position

Closing your position

Later that day you see that TT Plc has risen to 1.85/1.86. You choose to sell at 1.85 and realise your profit.

Your P and L

You bought at 160 and sold at 1.85 which is a difference of 25 points

25 x £1 = £25 profit.

Had the price fallen by 25 points instead of risen, you would have lost £25. Remember that profits made from spread betting are tax free. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future.

Spread Betting, is a leveraged product and carries a high degree of risk to your capital and it is possible to lose more than your initial investment. Only speculate with money you can afford to lose. These products may not be suitable for all investors, therefore ensure you fully understand the risks involved, and seek independent advice if necessary.

Digital Look Markets is a trading name of CMC Spreadbet Plc who are authorised and regulated by the Financial Services Authority 170627. Spread betting services are provided by CMC Spreadbet Plc trading as Digital Look Markets, to whom you have been introduced by Digital Look Ltd. All dealing, administration and settlement in relation to these services is undertaken by CMC Spreadbet Plc. You and CMC Spreadbet Plc not Digital Look Ltd will be counterparties to each transaction.

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