In the past most spread bets were based on a quarterly basis and quarterly contracts, but that is no longer the case these days as most traders opt for the rolling contracts especially when they're only looking to be in the position for a few weeks as there's a daily charge attached to a rolling contract.
It is 9.30 hrs on Tuesday and the current share price of Marks & Spencer, including the 0.5p market spread, is 346 - 346.5. Therefore the spread betting company's spread for Marks & Spencer rolling is
SELL: 345.7You think the M&S share price is set to fall in the very near future and decide to sell M&S rolling at 345.7p for £10 per point. In place of a normal spread, you will be paid interest for every day that you hold a position open.
The interest payable by spread betting companies varies for rolling share positions and is normally based on the London Inter Bank Offered Rate (LIBOR). This is the interest rate offered by a specific group of London banks for U.S. dollar deposits of a stated maturity.
As such, interest may well be calculated as follows:
(LIBOR 1 month - 2%)/365 x the total underlying value of your position.
So in this case, assuming LIBOR 1 month is 5%, the daily interest payable would be:
((5% - 2%)/365) x (£10 x 345.7) = 0.0082% x 345.7p = 28p.
You think the M&S share price is set to rise in the very near future and decide to buy M&S rolling at 346.8p for £10 per point. In place of a normal spread, you will be charged interest for every day that you hold a position open.
(The interest payable by you on a rolling share position is normally:
(LIBOR 1 month + 1.5%)/365 x the total underlying value of your position.
(So in this case, assuming LIBOR 1 month is 5%, the interest payable would be:
((5% + 1.5%)/365) x (£10 x 346.8) = 0.0178% x 346.8p = 62p.
It is now 16:30 hrs on Tuesday, the M&P share price hasn't moved far during the day and closes with a mid-point of 351p. As you haven't closed your position earlier in the day, it should be automatically rolled over to the next trading day.
As a seller of M&S, you have (incorrectly predicted) the share price will fall. Your original position is closed at the official (mid-close of the share (351), which results in a (loss of £53 ((351 - 345.7) x £10). Your selling position is then reopened for the next trading day at the mid-price of 351p for the same stake (£10).
As a buyer of M&S, you have correctly predicted that the share price will rise. Your original position is closed at the (official mid-close of the share (351), which results in a (profit of £42 ((351 - 346.8) x £10). Your buying position is then re-opened for the next trading day at the mid-price (351p) for the same stake (£10).
You were right to rollover your positon. The share price has moved in your direction and you make a profit of £132, the difference between the new buying price (337.8p) and Tuesday's selling price (351p) multiplied by your stake (£10).
You were wrong to rollover your position. The share price has moved against you and you lose £143, the difference between the new selling price (336.7p) and Tuesday's buying price (351p) multiplied by your stake (£10).
Daily Bets are specifically designed for the short-term trader. If you intend to run a position for only a short period, a rolling share bet has significant advantages over a quarterly bet:
