Spread Trading Glossary

Below you can find our spread trading glossary – a reference of industry terms and jargon which hopefully should prove useful to explain the intricacies of spread betting.

  • Buy – Placing a bet if you think the market will rise
  • Closing a Trade – Where you place a second bet of equal size in the opposite direction to your first bet, thus establishing your profit or loss.
  • Contract Note – A document sent out confirming the bets you placed via the phone.
  • Expiry Date – The date beyond which a contract can no longer be traded.
  • Fill – The execution of an order.
  • Futures – These are markets which trade on the basis of predicting the level of a market at a date in the future.
  • ‘Fully closing’ – The term usually refers to bets or orders which when actioned close the whole stake of an existing bet.
  • ‘Gaps through’ – If the market trades through the level specified by you in an order, without actually trading at that given level.
  • Guaranteed Stop – An order level which is guaranteed and therefore offering protection from the market gapping through the level.
  • Over closure / ‘Cut and Reverse’ – This is where you close a position and open a position through one trade. e.g. You are Buy 10 and then you Sell 15, resulting in a position of short 5.
  • Last Day of Dealing – The last day on which the client can open or close a bet in a relevant market.
  • Limit Order – An order placed against your account where the action at this order level is at a better price than the current quote.
  • ‘Long’ – Having a position where you have bought the market in the hope it will go up.
  • Margin – The total amount of resources you need to open and maintain a position.
  • Margin (Call) – The cash amount required when you open bets move against you over and above your existing resources.
  • Margin (Factor) – Each financial spreads market has a margin factor. They represent the multiple of your stake required in your account resources when you want to open a position.
  • Margin (Initial) – The amount of resources required to open a position.
  • Margin (Variation) – The is the amount of resources required to maintain a position. e.g. You Sell 10 which closes two positions of buy 4 and buy 6.
  • Mark to Market – Valuing positions at the true closing price of our current quote. e.g. Buy positions are valued at the lower (Sell) price and Sell positions are valued at the higher (Buy) price.
  • Multi Close out – This phrase describes the closure of more than one position through a single trade.
  • Option – The right, but not the obligation, to buy or sell an underlying financial instrument on or before a specific date at the given price, (strike price). i.e. A call =right to buy, a put = right to sell.
  • Out of Hours – The phrase used to describe the period outside a markets’ normal opening hours.
  • ‘Our Quote’ – The spread betting prices generated by the financial bookmaker.
  • Over trading – Where a client opens more positions than their account can support.
  • Part close – Closing only part of an existing position e.g. You have a position of Buy 5, you then Sell 3 to leave yourself long 2.
  • Roll Over – Transferring a trade that is near to expiry into the next contract period.
  • Screen Price – When an order level specified actually trades in the underlying market.
  • Sell – Placing a trade if you think the market will fall.
  • Settlement Price – The make up or official expiry level of a market at which any open bets will be closed.
  • ‘Short’ – Having a position where you have sold the market in the hope it will go down.
  • FSA – The governing body which regulates much of the UK Financial Services industry including spread betting. ASIC is the equivalent body in Australia.
  • Spread – The difference between the ‘Buy’ and ‘Sell’ price.
  • Stake – Bet size in £ (or another currency) per ‘tick’ that you nominate when placing a bet.
  • Statement – Details all trading activity over a weekly period, shows open positions, cash on deposit, open profit or losses, adjustments and closed positions.
  • Stop loss – An order placed against your account where the action on the order level is at a worse price than the current quote.
  • Tick – Denotes the minimum point movement on a market. As a market moves for or against you, you will win or lose a multiple of your stake for each tick from you opening price.
  • Trading Resources – This is a combination of your Cash balance, Credit allocation, Open P&L and Initial margin.