Financial spread betting – types of bets

When considering Spread Betting FTSE stocks, it is essential to first have a good understanding of the different types of bets available. This article shows that there are a number of types of financial spread bets available in the market. Indeed we will look at five different types and evaluate how you might use them in financial spread betting.

1. Futures Style

Futures style bets normally expire on a quarterly basis (March, June, September and December). There will normally be two quarters open at any time. The date expiring first is known as the 'near' quarter and the date expiring 3 months later is known as the 'far' quarter. The price of the bet is based on the underlying futures price of the underlying asset. This will not normally be the same as the spot price, as the market will have factored in things such as the Risk Free Interest rate, the yield and the underlying futures market. As time passes and approaches expiry date, those things factored in below will diminish and the futures style price will converge on to the spot price.

2. Daily

Daily bets are straightforward as they are based on the cash market and expire each day

3. Rolling Daily

Rolling Daily bets were introduced a few years ago and have increased in popularity over time. As their name suggests, they are based on Daily bets but are rolled over each day to the next days market. The impact of interest and corporate actions are dealt with on a day by day basis. On long positions you effectively get charged interest daily and receive a benefit to the price in respect of any corporate actions. For short positions the reverse is true, you effectively get an interest rebate but suffer the cost of corporate actions.

4. Binary Bets

Binary bets have only two possible outcomes at expiry. So you may �" for example �" bet that the Dow Jones will finish up. The price may be 45-55. If it finishes up you win 45 points (100 -55) and if it finishes down you lose 55 points (100-45). The amount the Dow Jones finishes up or down is irrelevant, and it is in this way that these bets differ from normal spread bets.

5. Betting Exchange

Newer ways of betting have resulted in Betting Exchanges being developed. These allow individuals to bet directly with other individuals. This method can be useful where vastly different views of an outcome are available for betting (and traditionally you can find opportunities if �" for example �" football, where a supporter may well wish to bet on his own team even though logic dictates their chances are poor)

Stuart Smith writes widely on Financial Spread Betting Matters and is the owner of information site www.spreadbettingftse.co.uk