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Spread Betting - The Different Months

All financial spread bets have a set time limit and for most financial markets these run on a quarterly basis using the quarterly months of March, June, September and December.

• If the date is currently the 1st May and you wanted to trade the FTSE 100 index then your spread bet broker would quote you the June contract
• If you decide to buy or go long the June FTSE 100 index then it is up to you how long you hold this bet open for
• It may be an hour, a day, a week or even a month
• But all bets will automatically expire on the expiration of the June contract.

This all sounds very complicated but it's not. Spread Bet brokers quote like this because their prices are generally based on the underlying futures contract. In the case of the FTSE 100 index the spread bet broker will price his market off the London International Financial Futures Exchange's (LIFFE) FTSE futures contract.

A spread betting company doesn't usually make money from it's clients by trading against them. It will normally lay off the risk in the corresponding cash market. This means that if a client buys £10 of the FTSE index the spread betting company will buy futures to offset his risk, in effect the spread betting company's profit will be the spread that he charges.

How Do You Know Which Months To Trade?

• You should generally trade the nearest month to expiration
• So if the date is the 1st May then the nearest month to expiry is obviously June
• And this is referred to as the front month
• If in doubt simply ask your spread bet broker for guidance (once you get the hang of which month is the correct month it becomes second knowledge

However, spread bet brokers will also trade what are called weekly or daily bets. These are designed for shorter term trading and details of them can be found later in this website.

What Is The Rollover Period?

• If the front month is presently the June spread bet then at some stage in June this will expire, and the September contract will take over as the front month
• But how do you know when to rollover, what is the correct date?
• Each spread bet contract has a fixed date of expiry and this is well known in advance, again you can simply ask your spread bet broker for the details or check on their website
• For example on the FTSE 100 this is always the 3rd Friday of the expiry month

The rollover period is the window period when the spread betting company will actively quote the two months, in this case both June and September. During the rollover period if you want to initiate a new position then you should trade the September contract. But if you have a position in the June contract then you'll still be able to trade it in order to take your profit or loss. In the rollover period if you call up for a quote then the spread bet broker will make it very clear which month he is quoting you.

If you happen to have say a long position in the June contract and want to stay long then you'll do what is called a rollover trade where the spread bet broker sells June and simultaneously buys September. In effect you started the day long June and ended it long September. It sounds complex but rollover trades are very common in spread betting.

It is not advisable to try and roll the bet over yourself because it is expensive having to sell the June on the bid price and then buy the September on the offer, ie you'll have to pay two sets of bid-offer spreads. The Spread betting companies still charge for a rollover trade but it is at a cheaper rate than if a client attempts to roll his position over himself.

Using the rollover procedure of spread bets it is theoretically possible to stay in a position for a year or so. Just keep rolling the bet over on expiry.