Perfect Example of How Spread Betting Can Hurt

Bad Day at the Office


The political spread betting markets have given us all a good lesson… don’t forget that the markets can be way off, so judge your downside accordingly.

If you bought the Conservative Seats market because you thought they’d walk it, you might have bought the spread, as voting was under way on 8 June, at a price of 368 – 372.

If so, you would have lost (372 – the miserable 318 seats the Tories got) x your stake = (372 – 318) x your stake = losses of 54 x your stake.

If you were betting £10 per seat = 54 x £10 = £540 loss.


Shorting Labour Was Even Worse

If you shorted Labour on the day of the election, i.e. when the spread was 198 – 202, you’d also have taken a hit after Corbyn defied the odds and won an unexpected 262 seats.

You would have lost (262 – 198) x your stake = 64 x stake.

Again, betting £10 per seat = 64 x £10 = £640 loss.


Yes, You Can Win with Spread Betting But…

The point of the real example above is to show how easily you (and the wider market) can get it wrong. And when that happens, spread betting can hurt.

Of course, you might have bought labour seats and/or sold the Tories, if so you’d have done well. Congratulations. See you down the pub.

In the meantime, the rest of us mortals should remember:
  • warningAlways calculate your downside
  • warningSmall stakes are often advisable
  • warningNot trading is always an option
  • warningOnly trade with money you can live with losing
Also see Financial Spread Betting Just Isn’t That Easy.

AuthorAlex Turner

Senior Editor, SpreadBetMagazine

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[…] the kind of story we like to discuss. It will have caught out quite a few investors. It’s a good example of where spread betting can go wrong. With stories like this, we spend time discussing what happened as well as some simple risk […]

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