The concept of spread trading is very simple. The sell and buy price are called the bid and offer prices. If you think a market is set to rise, you buy at the offer price, or if you think the market will fall, you sell at the bid price.

Example 1: Buying the Daily Yahoo

• Imagine that it is 1st November and Yahoo is trading at 2311 (which is US\$23.11).
• You check the spread betting company’s price which shows the underlying market, and it is 2306.7 – 2312.3
• This is a spread aof 5.6 points.
• The period is Daily – the est is just for the day and would be appropriate for someone looking for an intraday movement in the stock price.
2306.7 is the sell/bid price, and 2312.3 is the buy/offer price.
• You decide to buy at £1 per point at 2312.3.
• You will be making £1 for every point that Yahoo rises above 2312.3, and lose £1 for every point the price falls below 2312.3
• Over the course of the day Yahoo rises to 2392.3 and you decide to sell your position and take profit.

Your profit is calculated as follows:

You sold at: 2392.3
You bought at: 2312.3
Number of points profit: 80
80 points profit x £1 per point = £80 gain

Example 2: Selling the Daily Dell

• Dell is quoted at 2400 – 2405.
• After performing your analysis, you feel Dell is going to fall, and you decide to place a spread bet, selling Dell.
• You sell at £ per point at 2400.
• After some hours, Dell rises to 2430, hitting your stop loss.
• You lose £30, which was the rise you were comfortable with when you placed the trade.