Spread betting options
Spread Betting On Options Explained. Enhance your trading skills: Options provide the right, but not the obligation, to buy in the case of calls or sell in the case of puts a given security at a predetermined fixed price at some predetermined fixed time period in the future.
They are financial derivatives which allow investors to take advantage of the price movements in the underlying market without having to own the actual securities themselves. The key advantage of using these instruments is the significant reduction in initial price outlay and the transparency of potential losses. Options are sold in contracts which typically carry a small fraction of the cost of the underlying market. Buying a contract that gives you exposure to the movement of an equivalent amount of shares would typically cost you a premium which could be a tiny fraction of the total face value.
From this example, it is immediately apparent that one of the biggest advantages is the leverage that they provide, allowing you to gain exposure to larger amounts of the actual shares for less initial cash outlay than would be otherwise possible if you were trading the actual shares by conventional means through a stock broker.
Spread betting options 'calls' or 'puts', you can place up or down spread bets on the quoted price whilst knowing your maximum downside risk without limiting your upside profit potential. This is because the maximum that you can lose is the premium that you paid at the outset. So, say for example that the FTSE is trading at and you think the market is going to rise further.
This is simply the current price of the FTSE minus the strike price. If you are right and the market gains, then you win the difference between the new selling price and your purchase price spread betting options by your stake. In essence, your upside is unlimited. On the other hand if the Footsie dropped and you closed out your position, you lose the difference between the new selling price and your spread betting options price multiplied by your stake.
This is your maximum loss — no matter how far the market falls. In summary, spread betting on options is a highly leveraged activity and prices are very volatile. Yes, you could easily and quickly make a killing but then again, you could lose your stake just as quickly. But at least you know exactly how much you stand to lose the moment you place your bet. The value of the position comes from two main components. The first is the intrinsic value, or how valuable the contract is already.
This is essentially the spread betting options you pay for the likelihood that the value of the option would increase with market movements over the period to the expiry of the contract.
So, at expiry, time value falls to zero and the value of the option is simply its intrinsic value. If you enjoyed this article on spread betting options then check out these other insightful articles to hone your spread betting skills. Effective stop loss and spread betting options management strategies spread betting options spread betting. Financial spread betting process explained. Simple moving average tools can enhance your spread betting profits.
Trader emotion and spread betting performance. Market spread betting options enhances your spread betting profits. Relative strength is a grossly underrated but highly effective spread betting tool. Understanding the foreign exchange markets. Go to the SpreadBetTrader's financial spread betting blog. Content provided for information only. In the markets, timing is everything!
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Free Market Forecast Are you serious about winning at spread betting? I promise to use it only to send you Spread Betting Opportunities. Daily Commentary Options provide the right, but not the obligation, to buy in the case of calls or sell in spread betting options case of puts a given security at a predetermined fixed price at some predetermined fixed time period in the future. Why is spreadbetting in this way appealing? Key points about spread bets on calls and puts In summary, spread betting on options is a highly leveraged activity and prices are very volatile.
Other related articles on spread betting If you enjoyed this article on spread betting options then check out these other insightful articles to hone your spread betting skills Effective stop loss and trade management strategies for spread betting Spread betting options spread betting process explained Simple moving spread betting options tools can enhance your spread betting profits Spread betting gaps in stock prices Trader emotion and spread betting performance Market timing enhances your spread betting profits Relative strength is a grossly underrated but highly effective spread betting tool Understanding the foreign exchange markets Go to the SpreadBetTrader's financial spread betting blog Content provided for information only.
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