If the FTSE 100 Share Index is currently trading at 5278, Capital Spreads may quote 5277 (the sell price) – 5279 (the buy price). This quote (which has a 2 point spread) allows you the opportunity to bet that the value of the FTSE will fall or rise. If you believe that the value of the FTSE will fall, you should Sell (or make a down bet) at 5277 or if you think the FTSE will rally, you would Buy (or make an up bet) at 5279.
Assuming you decide to sell, the following example is based on a bet of £5 per point movement:
The market falls and you decide you would like to realise your profit. The FTSE 100 is trading at 5154 and our quote is 5153-5155. You will need to make a buy bet at 5155 to close your original sell bet. Similarly, if you had opened your position with a Buy bet, you would need to Sell to close.
In the example above if you close your position with a buy bet as quoted by Capital Spreads, your winnings would be calculated as follows: 5277 – 5155 = 122 x £5 = £610
Obviously, if the market begins to rise, you have speculated incorrectly and your trade will begin to incur a loss. This is calculated in the same way as your profit.
